MARKETING UNIT 6

What often happens to an economy during a mildly inflationary period?

Increased growth

How does double counting affect the gross domestic product?

It inflates the GDP

Which transaction would be counted in the gross domestic product?

A customer purchases a sweater.

What is one way that price stability indicates the condition of the economy?

Absence of inflation or deflation

If transfer payments were counted in calculating gross domestic product, what would the GDP do?

Appear to be greater than it actually is

To calculate total revenue, a business multiplies the number of units sold by which other component or components?

Average price per unit

Fluctuations in interest rates often have an impact on the use of which factor or factors?

Credit

According to the law of diminishing returns, continuing to hire additional employees will eventually cause the production to change to which situation?

Decrease

What is one reason why the overall unemployment rate understates the actual employment situation?

Discouraged workers are not included.

When inflation levels are low, businesses often consider performing which action?

Expanding their operations

A person who quits one job and spends a short amount of time out of work while looking for a new position is experiencing which type of unemployment?

Frictional

George is trying to decide if his company should increase its production. To get an accurate idea of whether to increase production, he should prepare a graph that illustrates which components?

Marginal cost and marginal revenue

Businesses follow the law of diminishing returns in order to combine the right amount of variable resources to achieve production levels that perform which activity?

Maximize profits

Which situation would occur as a result of discoveries?

New jobs are created.

Major Company hired a fifth employee and production increased by 1,000 units per week, so it hired a sixth employee and production increased by an additional 900 units per week. What should the company expect to happen if it continues to hire more employees and does nothing to the work environment?

Production per employee will decrease.

When inflation rate is low, prices tend to experience which situation?

Remain stable

Past sales records show that sales increased at a clothing store when a 10th rack of clothing was added to the store floor. However, when an 11th rack is added, sales increased by only 1%. In economics, this is explained by which concept?

The law of diminishing returns

Why do governments usually calculate the unemployment rate on a monthly basis?

To detect changes in the economy

Why does the Federal Reserve System raise interest rates?

To fight inflation

Why should a businessperson understand business cycles?

To make plans that will help to level out cycles

The best time for a business to purchase new equipment is during which situation?

When interest rates are low.