Question 1

Under capitalism, the government prohibits people and businesses from competing with each other.

Accepted Answer

A) True 
 B)False

Question 2

One of the most significant problems faced by communist nations is:

Accepted Answer

A)   inequality in the distribution of wealth and income.
B)   severe inflationary pressures due to rapid economic growth.
C)   too little government regulation of economic activity.
D)   persistent shortages of basic goods such as food and clothing.E) B) and C)
F) All of the above

Question 3

To jump-start the economy, the Fed is likely to lower interest rates, in order to encourage individuals and businesses to spend money.

Accepted Answer

A) True 
 B)False

Question 4

__________ is a condition in which the price increases are slowing.

Accepted Answer

A)   Deflation
B)   Disinflation
C)   Stagflation
D)   UniflationE) B) and D)
F) B) and C)

Question 5

Adam Smith believed that countries would prosper if businesspeople were free to start and run their own businesses. Businesspeople would make a profit by providing the goods, services and ideas that others in the economy wanted, and they would hire others to help increase those profits, leading to social and economics benefits for many. This idea was called the __________.

Accepted Answer

A)   kinked demand theory.
B)   invisible hand.
C)   spending multiplier.
D)   demand accelerator.E) B) and C)
F) All of the above

Question 6

Which of the following statements about capitalism is the most accurate?

Accepted Answer

A)   In capitalist economies, most resources are owned by the government.
B)   A strength of capitalism is its ability to deal with environmental problems.
C)   Capitalism is characterized by unequal distribution of wealth and income.
D)   A drawback of capitalism is that people have little freedom to pursue their own goals.E) B) and C)
F) None of the above

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

A problem with the CPI is that it measures the price changes of only food and clothing, while ignoring what happens to the prices of such important items as medical care and energy.

Accepted Answer

A) True 
 B)False

Question 9

At the equilibrium price, the quantity consumers desire to buy equals the quantity sellers desire to sell.

Accepted Answer

A) True 
 B)False

Question 10

Jorge Martinez is a well-educated entrepreneur who operated a small business in his home country of Fiorentina. At the encouragement of his American relatives, Jorge recently immigrated to the United States and applied for U.S. citizenship. "In Fiorentina, tax rates were very high," Jorge complained. "The government used the taxes I paid to finance all sorts of social programs to help the less fortunate. While this is a noble goal, it has really undermined the profit incentive of individuals such as me. I really feel that these high taxes have stifled economic growth." Jorge's comments illustrate the reason many socialist countries are experiencing a(n) :

Accepted Answer

A)   antitrust problem.
B)   depression.
C)   brain drain.
D)   budget surplus.E) None of the above
F) All of the above

Question 11

In recent years, countries with communist economic and political systems have:

Accepted Answer

A)   enjoyed periods of great prosperity.
B)   experienced severe economic depression.
C)   placed even more importance on individual ownership of businesses.
D)   grown very slowly, but have avoided the severe problems that have plagued some capitalist economies in Asia and Europe.E) B) and D)
F) None of the above

Question 12

A basic right under capitalism is the right of businesses to receive government funding.

Accepted Answer

A) True 
 B)False

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

One reason the CPI is monitored very closely by government, businesses, and workers is that:

Accepted Answer

A)   it indicates whether we are running a budget surplus or a deficit.
B)   some wages, interest rates, tax rates, and government benefits are tied to changes in the value of the CPI.
C)   it is the best measure of worker productivity in the service sector.
D)   the gross domestic product is computed from the reported increases in the CPI.E) None of the above
F) A) and D)

Question 15

Core inflation figures omit healthcare prices, but not energy prices.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following people would tend to favor a communist economy?

Accepted Answer

A)   John wants to live in a country with low marginal tax rates.
B)   Robin wants to live in a country that encourages rapid economic growth.
C)   Liz wants to live in a country where the government makes almost all of the economic decisions.
D)   Fred prefers to live in a country with limited government regulation.E) B) and C)
F) C) and D)

Question 17

Three important economic indicators of the United States are the unemployment rate, the price indices, and the:

Accepted Answer

A)   debt to equity ratio (DER) .
B)   gross resource utilization index (GRUI) .
C)   gross domestic product (GDP) .
D)   index of capital formation.E) C) and D)
F) All of the above

Question 18

Colin just landed a job working for a major online gaming company in Silicon Valley. In a lot of ways, this is his dream job come true - the chance to work for a company that makes gaming software and live in California at the same time. As his plane lands at San Jose International, he pictures a snazzy apartment with a palm tree right outside the front door. A few hours later, as he meets a property manager of a large apartment complex, his heart sinks. The price of apartments is out of sight! Back at the hotel, he logs on to the Bureau of Labor Statistics to try to get a better picture of why the cost of housing is so high in this region of the U.S. Which factors may be causing the rise in the price of housing?

Accepted Answer

A)   Low unemployment rate and increasing GDP
B)   High consumer's marginal index and low PPI
C)   Low CPI and high state tax rate
D)   Decreasing Disruptive Technologies Index and high unemploymentE) A) and D)
F) A) and C)

Question 19

High tax rates in socialist countries is a major reason these nations have experienced a brain drain.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following strategies may have a net effect on inflation?

Accepted Answer

A)   Decreasing interest rates and decreasing taxes.
B)   Proportionately increasing wages and increasing prices.
C)   Decreasing prices and decreasing taxes.
D)   Proportionately increasing prices and decreasing wages.E) A) and B)
F) C) and D)

Exam 2: Understanding Economics and How It Affects Business

Which of the following people would tend to favor a communist economy?

Correct Answer
verified

A basic right under capitalism is the right of businesses to receive government funding.

Correct Answer
verified

A problem with the CPI is that it measures the price changes of only food and clothing, while ignoring what happens to the prices of such important items as medical care and energy.

Correct Answer
verified

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.

Correct Answer
verified

Which of the following strategies may have a net effect on inflation?

Correct Answer
verified

High tax rates in socialist countries is a major reason these nations have experienced a brain drain.

Correct Answer
verified

Correct Answer
verified

At the equilibrium price, the quantity consumers desire to buy equals the quantity sellers desire to sell.

Correct Answer
verified

One of the most significant problems faced by communist nations is:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following statements about capitalism is the most accurate?

Correct Answer
verified

Core inflation figures omit healthcare prices, but not energy prices.

Correct Answer
verified

Three important economic indicators of the United States are the unemployment rate, the price indices, and the:

Correct Answer
verified

To jump-start the economy, the Fed is likely to lower interest rates, in order to encourage individuals and businesses to spend money.

Correct Answer
verified

One reason the CPI is monitored very closely by government, businesses, and workers is that:

Correct Answer
verified

Under capitalism, the government prohibits people and businesses from competing with each other.

Correct Answer
verified

In recent years, countries with communist economic and political systems have:

Correct Answer
verified

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

Correct Answer
verified

__________ is a condition in which the price increases are slowing.

Correct Answer
verified

Exam 2: Understanding Economics and How It Affects Business

Which of the following people would tend to favor a communist economy?

Correct AnswerverifiedShow Answer

A basic right under capitalism is the right of businesses to receive government funding.

Correct AnswerverifiedShow Answer

A problem with the CPI is that it measures the price changes of only food and clothing, while ignoring what happens to the prices of such important items as medical care and energy.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following strategies may have a net effect on inflation?

Correct AnswerverifiedShow Answer

High tax rates in socialist countries is a major reason these nations have experienced a brain drain.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At the equilibrium price, the quantity consumers desire to buy equals the quantity sellers desire to sell.

Correct AnswerverifiedShow Answer

One of the most significant problems faced by communist nations is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements about capitalism is the most accurate?

Correct AnswerverifiedShow Answer

Core inflation figures omit healthcare prices, but not energy prices.

Correct AnswerverifiedShow Answer

Three important economic indicators of the United States are the unemployment rate, the price indices, and the:

Correct AnswerverifiedShow Answer

To jump-start the economy, the Fed is likely to lower interest rates, in order to encourage individuals and businesses to spend money.

Correct AnswerverifiedShow Answer

One reason the CPI is monitored very closely by government, businesses, and workers is that:

Correct AnswerverifiedShow Answer

Under capitalism, the government prohibits people and businesses from competing with each other.

Correct AnswerverifiedShow Answer

In recent years, countries with communist economic and political systems have:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

__________ is a condition in which the price increases are slowing.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified