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Exam 2: Understanding Economics and How It Affects Business

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Question 81

Multiple Choice

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A free market is one in which decisions about what to produce and in what quantities are made by

A) the Fed.
B) the president.
C) the market.
D) Congress.

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

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Question 82

Multiple Choice

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The freedom of people to decide where they want to work and live, and what they want to buy or sell are basic capitalist rights under

A) eminent domain.
B) freedom of expression.
C) freedom of choice.
D) freedom of competition.

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

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Question 83

Multiple Choice

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A simple supply curve shows a relationship between the

In the small nation of Evensplitalia, the government owns several of the key businesses and provides a wide range of social services. The government strongly emphasizes income equality and eliminating the great income disparities among its citizens. These features of Evensplitalia's economy are consistent with a socialist economic system.

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

Sasha is a well-educated entrepreneur who operated a small business in her home country of Evensplitia. At the encouragement of American relatives, Sasha recently immigrated to the United States and applied for citizenship. "In Evensplitia, tax rates were very high," Sasha complained. "The government used my taxes to finance all sorts of social programs to help the less fortunate. While I want to help, it has really undermined the profit incentive of individuals such as me. I feel those high taxes have stunted economic growth." Sasha's comments illustrate the reason many socialist countries are experiencing a(n)

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?

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

A(n) ________ curve shows the relationship between the price of a good and the quantity of that good people are willing and able to buy in a given time period.

Which of the following people would tend to favor a communist economy?

The national deficit is the difference between our nation's exports and its imports.

In the service sector of the economy, the influx of machinery such as computers increases output per worker, but does little to improve the quality of services.

GDP figures do not include the value of illegal activities.

High tax rates in socialist countries are a major reason these nations have experienced a brain drain.

Compare and contrast fiscal policy and monetary policy. Discuss how each of these approaches can be used to influence the state of the economy.

The U.S. national debt equals the sum of government deficits over time,.

Which of the following statements most accurately identifies a limitation of the free-market economic system?

Incentive to own and operate businesses is high in nations whose governments are proponents of socialistic practices.

Macroeconomics looks at long-run economic problems while microeconomics examines short-run economic problems.

A key to economic growth and development is to