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Exam 2: Understanding How Economics Affects Business

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Question 91

True/False

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Inflation refers to a general rise in the prices of goods and services over time. Level of Learning 1: Knowledge of key terms

A) True
B) False

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Question 92

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Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy,while others remain poor. Level of Learning 1: Knowledge of key terms

A) True
B) False

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Question 93

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Identify and describe the 4 basic rights that form the foundation of capitalism.

The social and economic goals of __________ include private ownership of land and business.

The "invisible hand" in Adam Smith's theory turns self-directed gain into social and economic benefits for all. Level of Learning 1: Knowledge of key terms

The U.S.national debt equals the sum of all recorded years of deficits. Level of Learning 1: Knowledge of key terms

Deanne is a vocal critic of socialism.She likes to point out that in recent years the governments in many socialistic nations have cut back on government services and have reduced taxes.Deanne believes that this trend will ultimately result in all nations adopting pure capitalistic ideals.Recent evidence suggests that Deanne's views are essentially correct. Level of Learning 3: Application of principles

A major distinction between capitalism and socialism concerns the distribution of income. Level of Learning 2: Understanding of concepts and principles

In perfect competition,each firm produces a product that is clearly differentiated from the products of other firms in the same market. Level of Learning 1: Knowledge of key terms

The CPI is based on the prices of a carefully selected market basket of goods,all of which consumers can purchase at a supermarket. Level of Learning 1: Knowledge of key terms

The Fed is concerned that the economy is growing too rapidly.Given these concerns,it is likely to pursue policies to restrict the supply of money and raise interest rates. Level of Learning 3: Application of principles

A basic right under capitalism is the right of businesses to receive government funding. Level of Learning 1: Knowledge of key terms

The total value of a country's output of final goods and services in a given year is known as the gross domestic product (GDP). Level of Learning 1: Knowledge of key terms

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. Level of Learning 3: Application of principles

Which of the following would be a topic emphasized in a macroeconomics course?

Due to the rights and freedoms afforded under capitalism:

The "Reaching Beyond Our Borders" box in Chapter 2,explains the changing business climate in other nations.What kinds of experiences are U.S.based companies facing abroad?

The top tax rate on personal income in most socialist economies is usually lower than the top tax rate on personal income in capitalist economies. Level of Learning 1: Knowledge of key terms

The presence of competition in free markets:

A free market is one in which decisions about what to produce and in what quantities are made by: