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Exam 2: Understanding How Economics Affects Business

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Question 61

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Keynesian economic theory suggests:

A) Reducing government involvement in the free-market economy.
B) Proposing long-term solutions in order to create wider swings in the business cycle.
C) A more permanent government involvement in the banking system,even creating a national banking system that owns and operates most of the global and regional banks.
D) Short-term increases in government spending to stimulate the economy.

E) None of the above
F) A) and B)

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Question 62

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Which of the following is a basic right under capitalism?

A) Freedom of collusion.
B) Freedom from taxation.
C) The right to vote.
D) The right to compete.

E) A) and B)
F) A) and C)

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Question 63

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According to Adam Smith,the "invisible hand" refers to the government's effort to always keep a check on the wealth creation of individuals,so that no one business would control a market for a particular good or service.

_________ is considered by some to be the father of modern economics.

Large educated populations can contribute to an economy by offering knowledge and entrepreneurship.

On its website,Papa John's Pizza compares itself to the competition with the following message: "better ingredients,better pizza".The company wants to achieve:

One strength of a free-market economic system is that it emphasizes the fair and humane treatment of the less fortunate in society.

Macroeconomics looks at long run economic problems while microeconomics examines short run economic problems.

Socialists believe that the primary economic function of the government is to promote rapid economic growth.

We use indicators such as (1)the gross domestic product (GDP), (2)the interest rate,and (3)the price indexes to measure the health of our economy.

The markets for laundry detergents,soft drinks,and automobiles are dominated by just a few sellers.Economists would classify these markets as examples of:

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

Although mixed economies tend to improve economic conditions,moral values prevent communist nations such as China and Vietnam from progressing in this direction.Overall,economic progress continues to be very slow in these nations.

Sam is a recent college graduate with a lot of "firsts": First professional job,first new car,first apartment,and first time making all of his own financial decisions.As he works on his monthly budget,he can't help but wonder why he is barely "making ends meet." Each month,it takes his entire paycheck to pay his rent,his car payment,and buy food.Last month,he told his parents,"I'm sure I had more money when I was a starving student!" You recently learned about key economic indicators in your business class.You inform Sam that his problems are caused by severe deflation and lack of demand for products and services.

Mini-Case Gig Abite is a bright,hard-working engineer who once owned a successful engineering consulting firm in his native country of Frinezia.Gig became discouraged by the high tax rates in Frinezia,so he immigrated to the United States eleven years ago.Soon after moving to the U.S. ,Gig again started his own business,which he named Giganeers Consulting.The company struggled at first,and almost went under midway through its second year.However,Gig never lost faith,the company survived,and it soon developed a growing reputation for quality work and dependable service.Giganeers began experiencing sustained growth early in its fourth year.In fact,Gig hired additional employees over the next few years to keep up with the increasing workload.His company,which started with only Gig and 2 other full time workers,now provides jobs for 43 full-time employees as well as many part time workers. Despite these past successes,some clouds are on the horizon.The company recently suffered its first drop in business since its very early years.Gig is convinced that the problem is not with his company,but rather due to a downturn in the U.S.economy.He heard a national broadcast last week reporting that the value of the total output of final goods and services in the U.S.declined over the last quarter.The news anchor went on to state that many economists believe that this downward trend is likely to continue for several more months.Gig is concerned that he will have to lay off some of his employees if the economy doesn't improve.He hopes that the government does something soon to put the economy back on track. -Gig's native country of Frinezia was much different from the United States.In addition to its higher tax rates,the government offered more extensive social programs that were designed to redistribute income and reduce inequality.Although small businesses were privately owned and operated in Frinezia,many basic industries were owned and operated by the government.From this information,you would classify Frinezia's economic system as ___________.

The PowerHouse Utility Company recently built a nuclear power plant in a southern state and started competing against BXY Utility Company that has served customers in that region for 65 years.Due to deregulation,consumers now have a choice among utility companies in this area.Although PowerHouse has made a sizeable capital investment,if it successfully grows market share,eventually prices for electricity may stabilize or fall.

Which of the following statements would a follower of Adam Smith most likely make?

There are some restrictions on freedom of assembly and freedom of speech under a ____________ system.

_____________ refers to a general rise in the price level of goods and services over time.

Communist values are disappearing because: