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Exam 2: Understanding Economics and How It Affects Business

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Question 31

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The market price of apples is currently rising. In a free-market economy, the most likely explanation of this price change is that:

A) The government has decided to set a higher price so that firms competing in the market make an adequate profit.
B) There is a shortage in the market for apples.
C) The supply of money has decreased.
D) The equilibrium price is lower than the market price.

E) None of the above
F) All of the above

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Question 32

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

A) True
B) False

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Question 33

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exists when the entire supply of a good is controlled by a single seller.

is the name of a free-market economic system in which most of the factors of production and distribution - such as land, factories, railroads, and stores - are owned by individuals.

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.

Which of the following statements about the Federal Reserve Bank (the Fed) is most accurate?

Demand refers to the quantity of a good that consumers are willing and able to buy at different prices at a specific time.

studies the operation of a nation's economy as a whole.

Sue is a gifted cook. She plans to open a restaurant in which she will be the head chef. Sue is willing to work long hours because she believes that her culinary talents and hard work will allow her business to succeed and earn her sizeable profits. Sue's efforts are most consistent with the economic theory developed by:

Efforts by the Federal Reserve Bank (the Fed) to control the money supply and interest rates are known as:

A monopoly occurs when there is a single seller for a product or service.

Recently, Hugo Chavez, the Prime Minister of Venezuela, announced that he is standing behind the concept of state owned utilities, public schools, and the communications industry of his nation. Although not all industry is owned and managed by the government, his ideas would lead one to believe that he has a preference for:

In the U.S., the percentage of GDP that the government collects through taxes is approximately 28.2%.

Ben recently lost his job at a major U.S. auto plant in one of the rust belt states. After looking unsuccessfully for work in a similar industry for several months, he plans to start interviewing with road and bridge repair companies. He speculates that if the government begins to contract with companies that repair highways and bridges, he may find steady work, at least in the short-term. Which of the following statements best describes the strategy behind his thoughts?

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. -The broadcast cited forecasts that national output might continue to fall in the future. If total output shows decline for two consecutive quarters, economists would classify this as a .

Fiscal policy refers to the federal government's efforts to keep the economy stable by controlling the amount of money in circulation.

A contemporary economic challenge is creating profitable businesses by selling goods and services that contribute toward a healthier environment.

Countries that wish to avoid shortages and surpluses of goods should adopt a communist system.

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

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