Question 1

Katie owns a nail salon. She needs to update her shop with new customer massage chairs and work stations for her technicians. If the Fed were to lower interest rates by 1.5 percentage points, at the same time that the government increased the tax rate by 1.5%, she could immediately determine that updating her shop would not increase or decrease her financial position.

Accepted Answer

A) True 
 B)False

Question 2

The national deficit is the difference between our nation's exports and its imports.

Accepted Answer

A) True 
 B)False

Question 3

In developing nations of the world, population has leveled off and is not expected to increase dramatically in the future.

Accepted Answer

A) True 
 B)False

Question 4

In the U.S., the __________ has the role of managing the money supply and interest rates.

Accepted Answer

A)   United States Treasury
B)   Federal Reserve Bank
C)   State Department
D)   Federal Deposit Insurance Corporation

Question 5

One of the benefits of a free market is that:

Accepted Answer

A)   businesses provide customers with quality products at fair prices.
B)   businesses all make the same amount of profit.
C)   businesses do better with more government regulation.
D)   the government dictates the number of competitors there are in each industry.

Question 6

Economist Thomas Malthus believed that ______________ would limit economic progress.

Accepted Answer

A)   depletion of gold reserves
B)   overpopulation
C)   the tendency of governments to levy high tax rates
D)   the inability of workers in developed nations to compete against cheap foreign labor

Question 7

Governments that were predominantly capitalist are moving toward socialism, while governments that were predominantly socialist are moving toward capitalism.

Accepted Answer

A) True 
 B)False

Question 8

If a shortage exists for a good in a free-market economy, the:

Accepted Answer

A)   price of the good will rise.
B)   price of the good will fall.
C)   government will order suppliers to increase the production of that good.
D)   government must establish a rationing system to make sure that the good is fairly distributed.

Question 9

The market price of apples is currently rising. In a free-market economy, the most likely explanation of this price change is that:

Accepted Answer

A)   the government has decided to set a higher price so that firms competing in the market make an adequate profit.
B)   there is a shortage in the market for apples.
C)   the supply of money has decreased.
D)   the equilibrium price is lower than the market price.

Question 10

Which of the following statements most accurately identifies a limitation of the free-market economic system?

Accepted Answer

A)   Free-market economies offer little opportunity for the poor to work their way out of poverty.
B)   Free-market economies have been unable to create wealth as rapidly as other types of economic systems.
C)   Free-market economies are generally plagued by shortages of needed consumer goods.
D)   Free-market economies tend to result in unequal distribution of wealth.

Question 11

Most communist countries today are suffering from severe economic problems.

Accepted Answer

A) True 
 B)False

Question 12

A young couple living in rural west-central Missouri heard about the closing of a local grocery store. Although a small operation, it served a small community that would now have to travel another 20 miles to the nearest grocery store. With help from a local realtor and banker, the couple purchased the store, remodeled it, and re-opened it. As new storeowners, they had to carefully watch cash flow. As their customer base began to grow, they began offering hot food, and hired others to help with the operation. The economic benefit created in this story is called:

Accepted Answer

A)   an economic intervention.
B)   an economic crisis control.
C)   the invisible hand.
D)   the deliberate process. Personal freedom is an important premise of wealth creation. Entrepreneurs, acting in their own self-interest need the personal freedom to own property and keep the earning from their hard work.

Question 13

Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy, while others remain poor.

Accepted Answer

A) True 
 B)False

Question 14

Economics is the study of how a society _________________.

Accepted Answer

A)   invests wisely in the stock market.
B)   employs resources to produce goods and services and distribute them among competing groups and individuals.
C)   employs statistical techniques to make predictions about the evolution of society over the long run.
D)   governs itself for the good of its citizens.

Question 15

GDP figures do not include the value of illegal activities.

Accepted Answer

A) True 
 B)False

Question 16

In the newspaper this morning, you read about the downfall of a multi-national entertainment business, and a report that the company's CEO enjoyed a 9% increase in his salary during the same year that the company's profits were down 35%. As you read further, you learn that the company's board of directors approved undeserved salary increases. Clearly, this is an example of how inequality and greed can infiltrate the free-market economic system.

Accepted Answer

A) True 
 B)False

Question 17

A command economic system is characterized by:

Accepted Answer

A)   reliance on the forces of supply and demand to determine what is produced.
B)   reliance on the government to determine what is produced and who gets the output.
C)   an extremely rapid rate of economic growth.
D)   freedom of choice and freedom of competition.

Question 18

Which of the following statements about productivity in the service sector of the U.S. economy is most accurate?

Accepted Answer

A)   Productivity in the service sector has increased much more rapidly than productivity in the manufacturing sector.
B)   Improving productivity in the service sector is much less important than improving productivity in the manufacturing sector, because the service sector does not really produce anything.
C)   Productivity in the service sector is easier to measure than productivity in agriculture.
D)   Measures of productivity in the service sector do a poor job of taking quality improvements into account.

Question 19

Fourteen years ago, Sergio noticed that a lot of people who bought personal computers did not know much about how to use them and frequently suffered system crashes and other aggravations. He decided he could earn a nice profit by starting a consulting business to help other people overcome their computer woes. Although the business struggled at first, it has experienced a good deal of success for the past five years. Sergio has many satisfied customers, and the business has grown to the point where he now employs several workers. Sergio's experience is an example of:

Accepted Answer

A)   socialism at work.
B)   the principle of comparative advantage.
C)   the invisible hand concept.
D)   the multiplier principle.

Question 20

Any output produced by U.S. firms is included in the value of U.S. GDP, even if the output was produced in a foreign country.

Accepted Answer

A) True 
 B)False

Exam 2: Understanding Economics and How It Affects Business

Correct Answer
verified

Correct Answer
verified

Most communist countries today are suffering from severe economic problems.

Correct Answer
verified

Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy, while others remain poor.

Correct Answer
verified

The market price of apples is currently rising. In a free-market economy, the most likely explanation of this price change is that:

Correct Answer
verified

Economist Thomas Malthus believed that ______________ would limit economic progress.

Correct Answer
verified

Governments that were predominantly capitalist are moving toward socialism, while governments that were predominantly socialist are moving toward capitalism.

Correct Answer
verified

Correct Answer
verified

If a shortage exists for a good in a free-market economy, the:

Correct Answer
verified

Which of the following statements most accurately identifies a limitation of the free-market economic system?

Correct Answer
verified

The national deficit is the difference between our nation's exports and its imports.

Correct Answer
verified

In the U.S., the __________ has the role of managing the money supply and interest rates.

Correct Answer
verified

Economics is the study of how a society _________________.

Correct Answer
verified

Correct Answer
verified

A command economic system is characterized by:

Correct Answer
verified

Which of the following statements about productivity in the service sector of the U.S. economy is most accurate?

Correct Answer
verified

GDP figures do not include the value of illegal activities.

Correct Answer
verified

Any output produced by U.S. firms is included in the value of U.S. GDP, even if the output was produced in a foreign country.

Correct Answer
verified

One of the benefits of a free market is that:

Correct Answer
verified

In developing nations of the world, population has leveled off and is not expected to increase dramatically in the future.

Correct Answer
verified

Exam 2: Understanding Economics and How It Affects Business

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Most communist countries today are suffering from severe economic problems.

Correct AnswerverifiedShow Answer

Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy, while others remain poor.

Correct AnswerverifiedShow Answer

The market price of apples is currently rising. In a free-market economy, the most likely explanation of this price change is that:

Correct AnswerverifiedShow Answer

Economist Thomas Malthus believed that ______________ would limit economic progress.

Correct AnswerverifiedShow Answer

Governments that were predominantly capitalist are moving toward socialism, while governments that were predominantly socialist are moving toward capitalism.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a shortage exists for a good in a free-market economy, the:

Correct AnswerverifiedShow Answer

Which of the following statements most accurately identifies a limitation of the free-market economic system?

Correct AnswerverifiedShow Answer

The national deficit is the difference between our nation's exports and its imports.

Correct AnswerverifiedShow Answer

In the U.S., the __________ has the role of managing the money supply and interest rates.

Correct AnswerverifiedShow Answer

Economics is the study of how a society _________________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A command economic system is characterized by:

Correct AnswerverifiedShow Answer

Which of the following statements about productivity in the service sector of the U.S. economy is most accurate?

Correct AnswerverifiedShow Answer

GDP figures do not include the value of illegal activities.

Correct AnswerverifiedShow Answer

Any output produced by U.S. firms is included in the value of U.S. GDP, even if the output was produced in a foreign country.

Correct AnswerverifiedShow Answer

One of the benefits of a free market is that:

Correct AnswerverifiedShow Answer

In developing nations of the world, population has leveled off and is not expected to increase dramatically in the future.

Correct AnswerverifiedShow Answer

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