Deck 3: Economics: The Framework for Business

Question 1

Broad economic trends in employment, inflation, and economic growth provide a context that has an important impact on your day-to-day life.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

False

Question 4

The Bank of Canada attempts to reduce the money supply when prices begin to rise.

Question 5

The federal government experiences a budget deficit when its revenue from taxes is higher than its expenditures.

Question 6

The devaluation of the Canadian dollar means that American tourists will come in increasing numbers to Canada.

Question 7

The bank rate is the interest rate the Bank of Canada charges on its loans to commercial banks.

Question 8

The study of economics focuses on how people, businesses, and governments choose to allocate resources.

Question 9

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 10

The M1 money supply consists solely of currency (coins and paper money) issued by the government.

Question 11

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 12

An economy is both a social and a financial system.

Question 13

Two factors that will have real impact on the Canadian economy going forward are the Canadian dollar and the low price of oil on the world market.

Question 14

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

Question 15

The Bank of Canada helps guide the economy by depositing funds at specific annual intervals into citizens' personal bank accounts.

Question 16

Macroeconomic conditions impact day-to-day life by influencing variables such as the availability of jobs, the amount of take-home pay households have available after paying taxes, and the buying power of those incomes.

Question 17

The devaluation of the Canadian dollar means that Canadians will vacation more often in the United States.

Question 18

Fiscal policy helps control interest rates and the supply of money.

Question 19

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

Question 20

Microeconomics is the study of broad, economy-wide issues such as the unemployment rate, gross domestic product, and inflation.

Question 21

Equilibrium price is the point at which the supply curve intersects the demand curve.

Question 22

The fundamental rights of capitalism guarantee that businesses will be profitable and taxes will be low, thus providing a strong motivation to start a business.

Question 23

Freedom of choice directly feeds competition.

Question 24

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

Question 25

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

Question 26

Marian's Moped and Bicycle Store is located on the property of a five-star resort in Alberta. The mopeds and bikes are rented based on one-hour increments. Marian lowers her standard prices to attract patrons during daily rainstorms in June and August. This is an example of decreasing supply.

Question 27

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

Question 28

Many countries that have restructured to become more market-oriented have seen dramatic increases in the standard of living for most of their people.

Question 29

Balmy Beachfront Bed and Breakfast loses money due to a sharp drop in the number of guests during the winter months. If Balmy's demand curve is like most demand curves, one way to attract more guests would be to offer lower rates during the off-season.

Question 30

M2 money supply includes all of M1 money supply plus most savings accounts, money and market accounts, and certificates of deposit.

Question 31

Federal law has made many types of monopolies illegal in Canada.

Question 32

Capitalism is based on private ownership, economic freedom, and fair competition.

Question 33

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

Question 34

Equilibrium quantity occurs when the quantity supplied is equal to quantity demanded.

Question 35

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

Question 36

An economic system is a structure for allocating limited resources.

Question 37

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 38

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 market is an example of pure competition.

Question 39

The social economy is considered the perfect economic system.

Question 40

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

Question 41

The Canadian government is the nation's largest employer.

Question 42

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

Question 43

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 44

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

Question 45

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

Question 46

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

Question 47

Gross domestic product (GDP) includes the value of output produced within a nation even if that output is produced by a foreign-owned company.

Question 48

Countries from France to China have experienced sometimes violent demonstrations in response to economic restructuring toward a more mixed economy.

Question 49

In capitalism, what gets produced is largely determined by central government planning.

Question 50

While Canada 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 51

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

Question 52

Privatization is the conversion of government-owned enterprises to private ownership.

Question 53

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 54

A strength of communist economies is that it is likely to grow rapidly and produce enough products and services to support its people in the long term.

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

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

Question 57

The unemployment rate includes everyone who doesn't have a job, such as stay-at-home parents and retired persons.

Question 58

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

Question 59

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 60

The two most common types of real-world economies are pure capitalism and pure socialism.

Question 61

The unemployment rate includes the percentage of people in the labour force of employment age who do not have jobs and are actively seeking employment.

Question 62

Inflation occurs as the average prices of goods and services rise.

Question 63

The Consumer Price Index (CPI) is a measure of inflation that evaluates the change in the weighted-average price of goods and services that the average consumer buys each month.

Question 64

Gross domestic product (GDP) tends to overstate the amount of output produced by a nation's economy.

Question 65

An economy is said to be in a recession when the GDP decreases for two consecutive quarters.

Question 66

Contraction is a period of economic downturn marked by rising unemployment, business cutbacks, and decreases in consumer spending.

Question 67

In some areas of the country, construction and agricultural workers are seasonally unemployed.

Question 68

The value of a Hyundai Sonata built in Ontario would be included in Canadian GDP even though Hyundai is actually a Korean corporation.

Question 69

Recovery is a period of increasing employment, business expansion, and increased consumer spending.

Question 70

The predictable nature of the business cycle makes it easy to forecast when the next upturn or downturn in business activity will occur.

Question 71

Cyclical unemployment results from layoffs during recessionary periods.

Question 72

Gross domestic product (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 73

When average prices increase more than 50 percent per month, it is known as disinflation.

Question 74

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

Question 75

During the peak season, retail workers are hired in great numbers to meet the demands of holiday shoppers. At the end of the holiday season many of those workers are released from their jobs, thus creating seasonal unemployment.

Question 76

The two key terms relating to the business cycle are contraction and expansion.

Question 77

Less expensive labour pools overseas might create layoffs at a Canadian-based engine plant. This is an example of structural unemployment.

Question 78

To measure productivity, multiply the number of inputs by the cost of each input.

Question 79

Individuals quitting their jobs experience structural unemployment.

Question 80

Unfortunately, depressions are a common problem in most free-market economies.