Deck 2: Economics: the Framework of Business

Question 1

In 2011, the foreclosure rate dropped to the lowest level since 2007, when the recession began.

Answer 1

True

Question 2

The study of economics falls into two broad categories called meta­economics and econometrics.

Answer 2

False

Question 3

The unemployment rate hit 9.6% in 2010, leading to total Great Recession job losses of nearly 8 million. Many of these jobs will never come back as the economy continues to change, and old skills become obsolete.

Answer 3

True

Question 4

An economic system is a structure only for measuring gross domestic product.

Question 5

Financial or social systems are not essential to the development of a strong economy.

Question 6

Microeconomics is the study of a country's overall economic dynamics, such as the employment rate, the gross domestic product, and taxation policies.

Question 7

With a new administration, President Obama proposed, and Congress passed, an $825 billion economic stimulus package called the American Recovery and Reinvestment Act.

Question 8

The debt ceiling is the maximum amount Congress lets the government borrow

Question 9

Mbuiscirnoeescsoenso. mics focuses on individual consumers, families, and individual

Question 10

If revenue is higher than spending, the government incurs a budget deficit and must borrow money to cover the shortfall.

Question 11

The debt ceiling is the maximum amount Congress lets the government lend to the public.

Question 12

The government experiences a budget surplus when its tax revenue exceeds its expenditures.

Question 13

Luke is taking an economics class that focuses on decisions made by individual business firms and consumers. Luke's class is concerned with microeconomic issues.

Question 14

In fiscal strategies, most economists agree that higher taxes can boost the economy by leaving more money with the government to spend or invest during economic crisis.

Question 15

Fiscal policy is the government's effort to influence the economy through taxation and spending decisions to encourage growth and boost employment while curbing inflation.

Question 16

The $700 billion economic bailout package passed by Congress in 2008 was an example of monetary policy.

Question 17

Starting in the mid­2000s, amidst many regulation and government policies, financial institutions maintained high reserves in case the mortgage­backed funds lost value.

Question 18

An economy is both a social and a financial system.

Question 19

Economics is the study of the choices that people, companies, and governments make in allocating those resources.

Question 20

Macroeconomics issues directly affect one's day­to­day life, influencing key variables such as what jobs will be available, how much cash one will actually take home after taxes, or how much can one buy with that cash in any given month.

Question 21

The economic system of the United States is called capitalism. Capitalism is based on private ownership, economic freedom, and fair competition.

Question 22

The Federal Reserve does not regulate banks. Only state regulatory agencies perform this function.

Question 23

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Question 24

The 12 Federal Reserve Banks are privately owned by the member commercial banks in their individual districts.

Question 25

The Federal Reserve Bank is in charge of both fiscal and monetary policy.

Question 26

The Federal Reserve provides banking services to member banks and is the central bank of the United States.

Question 27

State governments are actually the owners of the Federal Reserve Banks.

Question 28

The Fed is headed by a 50­member Board of Governors.

Question 29

When the economy is weak, the Fed sells government securities on the open market.

Question 30

Capitalism places paramount importance on the need for the government to intervene in the economy to ensure a fair and equitable distribution of income.

Question 31

Ashley has decided to purchase a dress for the banquet using her credit card. Ashley will be using a form of the money supply most often referred to as M2.

Question 32

When the economy contracts, the Fed typically decreases the money supply.

Question 33

When inflation is a concern, the Fed buys securities.

Question 34

The federal government does not own the Federal Reserve Banks.

Question 35

The discount rate is the interest rate the Fed charges on its loans to commercial banks.

Question 36

Government policies promoting free trade are consistent with the right to free choice, which is fundamental to capitalism.

Question 37

M1 and M2 are commonly used definitions for money supply. If you use the debit card connected to your checking account to make purchases, it would be referred to as M1.

Question 38

The sum of all the money borrowed over the years and not yet repaid is the total fiscal debt.

Question 39

The Fed's decision to buy and sell government securities is decided by the Federal Open Market Committee.

Question 40

Money supply refers specifically to the amount of paper bills and metal coins in the overall economy.

Question 41

Brooklyn's Beachfront Bed and Breakfast loses money due to a sharp drop in the number of guests during the winter months. One way to attract more guests would be to offer lower rates during the off­season.

Question 42

In capitalist economies, central government planning is paramount.

Question 43

In a planned economy, the government plays only a minor role in the operation of the economy.

Question 44

Socialism is an economic system based on the principle that the government should own and operate key enterprises that directly affect public welfare.

Question 45

Market equilibrium identifies the price at which quantity supplied is equal to quantity demanded.

Question 46

Demand refers to the quantity of products that consumers are willing to buy at different market prices.

Question 47

Consumers will see prices fall when the quantity demanded exceeds quantity supplied.

Question 48

In the U.S. economy, various branches of government own major enterprises such as the postal service, schools, parks, libraries, universities, and the military.

Question 49

Communism is an economic and political system in which a strong central government owns and controls almost all productive enterprises.

Question 50

Karl Marx envisioned communism as a system that would improve the lot of the common worker.

Question 51

Morgan's Moped and Bicycle Store is located on the property of a five­star resort in southern Florida. Rental cost of the mopeds and bikes is based on one­hour increments. Morgan lowers his standard prices to attract patrons during daily rainstorms in June and August. This is an example of decreasing supply.

Question 52

Everlene's Bakery competes against many other bakeries in the same city. However, each bakery uses different recipes and each claims to offer better products than their rivals. For example, Everlene's advertises that it produces the "World's Best" chocolate chip cookies. This suggests that Everlene's Bakery shows an example of pure competition.

Question 53

The price paid for goods and services will rise when the quantity demanded exceeds quantity supplied.

Question 54

By the end of the 1980s, communism began to collapse across the Soviet Union and its satellite nations.

Question 55

One problem that plagued many communist economies was that the absence of free markets resulted in crippling shortages and surpluses of goods and services.

Question 56

An entrepreneur, with limited funds, who wants to start a new business would probably be most successful in a monopolistic market because the amount of competition in such markets is very limited.

Question 57

A typical supply curve shows that an increase in the price of a good will cause producers to decrease the quantity they supply.

Question 58

The few nations that still rely on a communist economic system have actually seen major improvements in their economic performance over the past decade.

Question 59

Federal law has made all types of monopolies illegal in the United States.

Question 60

The North Korean and Cuban governments still own most of their nations' enterprises and actively control the performance of their nations' economies.

Question 61

Individuals who quit their jobs experience structural unemployment.

Question 62

Cyclical unemployment results from layoffs during recessionary periods.

Question 63

The unemployment rate includes only individuals over the age of 21 who were involuntarily laid off or fired from their previous jobs.

Question 64

Competition encourages companies to operate efficiently and responsively. The government does its part to stimulate fair competition by creating regulations to protect consumers and workers.

Question 65

The unemployment rate measures individuals 16 years of age and older without jobs who are actively seeking employment.

Question 66

Privatization is the conversion of government­owned enterprises to private ownership.

Question 67

The U.S. federal government is the nation's largest employer.

Question 68

Gross Domestic Product (GDP) includes the value of output produced within a nation even if that output is produced by a foreign­owned company.

Question 69

GDP tends to overstate the amount of output produced by a nation's economy.

Question 70

Many countries that have restructured to become more market­oriented have seen an increase in the standard of living for most of their people.

Question 71

The federal government creates regulations that prohibit competition and stimulate consumers to work.

Question 72

The economic restructuring necessary to move toward greater reliance on markets has proven to be relatively easy for most previously planned economies to achieve.

Question 73

The four basic types of unemployment are natural, cyclical, voluntary, and induced.

Question 74

GDP, as the measurement of the total value of goods and services, includes the output produced within households and output produced by illegal activities.

Question 75

While the U.S. relies heavily on free markets, it is actually a mixed economy in which the government owns several major enterprises and regulates many aspects of business operations.

Question 76

Frictional unemployment may occur even when the economy is healthy and may ultimately result in a better match between workers and jobs.

Question 77

Less expensive labor pools overseas might create layoffs at a U.S.­based engine plant. This is an example of structural unemployment.

Question 78

Gross Domestic Product (GDP) measures the total value of all final goods and services produced within a nation's physical boundaries over a given period of time.

Question 79

Privatization is an important element of the movement toward a greater market orientation in many nations.

Question 80

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