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Exam 2: Understanding How Economics Affects Business

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Question 121

Multiple Choice

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A simple supply curve shows that an increase in the price of a good will cause the quantity supplied to:

A) Decrease.
B) Increase.
C) Remain constant.
D) Fluctuate randomly around its equilibrium value.

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

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Question 122

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A rising GDP,rising unemployment rate,and rising inflation rate signify a healthy economy.

A) True
B) False

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Question 123

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In capitalist countries,the government decides what to produce and how the goods and services will be produced.

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

A major trend in the world today is that:

Productivity of workers in the U.S.is helped by the use of better machinery.

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. -Besides the slowdown in the general economy,Giganeers faces threats of competition from several other companies that provide engineering consulting services.In order to gain more business,Gig tries to convince potential clients that his company offers better service than the competition.He has advertised heavily in professional magazines,often quoting some of his highly satisfied clients.The market Giganeers operates in is an example of:

Product differentiation is a key to success in monopolistic competition.

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

In 2010,the U.S.unemployment rate was at its lowest point in 10 years.

Nick wants to buy a new car,and is planning to borrow the money for his purchase from a bank.He read in the newspapers that the Federal Reserve is likely to implement policies in the next few weeks that are designed to stimulate the economy.Nick would probably get a lower interest rate on his car loan if he waits until after the Fed implements its new policies.

According to the Connecting with Small Business box,small loans do not provide assistance to entrepreneurs in developing nations.

Socialists believe that wealth should be more evenly distributed than what actually occurs in a free-market capitalistic system.

The consumer price index (CPI)measures what is happening to prices at the wholesale level.

Neo-Malthusians (followers of Thomas Malthus) believe that the solution to poverty is:

How is it that people working in their own self-interest produce goods,services,and wealth for others?

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

Over the past decade,socialist economies have proven to be more successful at creating wealth and jobs than capitalist economies.

Fiscal policy involves increases or decreases in:

Over the last decade,six of the world's 10 fastest-growing countries were: