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Exam 2: Understanding Economics and How It Affects Business

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Question 161

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Workers in socialist countries often get longer vacations and more social benefits than workers in free market economies.

A) True
B) False

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Question 162

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Inflation refers to the persistent rise in the purchasing power of money.

A) True
B) False

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Question 163

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The CPI is based on the prices of a carefully selected market basket of goods, all of which consumers can purchase at a supermarket.

Chase is a recent college graduate with a new job as an engineering trainee for a large defense company. Now that he is making good wages, he hopes to start saving for his first house and also contribute toward the company retirement plan. As he looks over his monthly bills, Chase is concerned about ever getting ahead of the game. His food bill, car payment, and mounting gasoline payments keep him in the "just making ends meet" category. As his mind wonders back to the good ol' college days, he reflects on a time when gas and food seemed a lot more reasonable. Chase is experiencing the effects of:

A depression is a severe recession that is often accompanied by deflation.

Larry and Moe are having an argument. Larry believes that over the past year, the economy is experiencing rapid inflation, while Moe says that the economy actually experienced disinflation during this period. The easiest way for Larry and Moe to settle their argument is to look at GDP figures for the past year.

Jake considers himself to be a follower of Thomas Malthus. Which of the following statements would Jake be most likely to make?

__________ unemployment refers to unemployment caused by the restructuring of firms or by a mismatch between the skills of job seekers and the requirements of available jobs.

A surplus currently exists for a product called widgets. In a free market system, the government must step in and buy any widgets that consumers do not buy in order to eliminate the surplus and establish equilibrium.

Under the __________ system there is very little incentive to work hard or to produce quality goods or 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 recently heard a radio report that the Fed will try to help get the U.S. economy back on track. If the Fed takes action, Gig would likely see:

__________ unemployment refers to persons who purposefully quit their jobs and have not yet found a new job.

The foundation of the U.S. economic system is based on:

Most countries throughout the world can be classified as either purely capitalist or purely socialist.