chapter 2 business study guide

Which of the following is a similarity between socialism and communism?

Both have a strong involvement of the government.

The economic system of the United States is called

Capitalism

_______ is a form of unemployment that involves layoffs during recessions.

Cyclical

In its role as a regulator, the Fed

oversees mergers and acquisitions.

The Fed:

performs banking services for commercial banks in districts where it operates.

Which of the following statements is true of a capitalist economy?

Individuals are free to choose how much they are willing to pay for products

In the context of the right to private property, identify a true statement about capitalist economy.

Individuals have the right to will property to family members.

To bring inflation under control, the Fed:

reduces the money supply

the term _____ refers to the quantity of products that producers are willing to offer for sale at different market prices.

supply

Macroeconomics involves the study of:

the gross domestic product of a country.

Which of the following statements is true of productivity?

A high level of productivity typically correlates with healthy gross domestic product growth.

The ______ was an $825 billion economic stimulus package, passed by Congress, designed to turn the economy by cutting taxes, building infrastructure, and investing in green energy.

American Recovery and Reinvestment act

Which of the following is a negative factor that interferes with the effectiveness of socialist economic systems?

Excessive private ownership of healthcare services

Which of the following statements states a core principle of capitalism?

Individuals, innovation, and hard work should be of paramount importance.

In the context of monetary policy, which of the following is a result of an increase in the reserve requirement?

Interest rates begin to rise

In the context of the free market system, which of the following statements is true of pure competition?

No single producer has any control over the price.

________ is a market structure with only a handful of competitors selling products that can be similar or different and has high barriers to entry.

Oligopoly

Which of the following is a feature of capitalism?

Private-sector businesses are free to make their own choices regarding what they will produce

Which of the following statements is true about socialist economy?

Tax revenues fund services that citizens in free enterprise systems would have to pay for themselves.

When the Fed sells securities,

banks cut back on the loans

The United States goes through a period of recession because of the continuous decrease in the nation's gross domestic product. The Fed intervenes and improves the situation by reducing the discount rate. This move by the Fed will result in:

banks obtaining funds at a lower cost.

The government of Laslow, an Asian nation, earned more revenue than its total expenditure in the last fiscal year. Given this information, the government of Laslow incurred a:

budget surplus

In the context of economic systems, the two key phases of a business

contraction and expansion.

During a period of inflation in the United States, the Federal Reserve sells treasury bonds. Buyers of these bonds write checks to the Fed, and the Fed cashes these checks from banks. Given this information, the banks will most likely:

cut back on the loans they make

A newly appointed government in the United States requests Congress to raise the amount of money that the government can borrow. This borrowed money is intended to be used to cover the costs of the major policies that the government plans to implement. In this scenario, the government has asked the Congress to hike its:

debt ceiling

A capitalist system depends on fair competition among businesses to:

drive higher quality and lower prices.

A(n) ______ is a structure for allocating limited resources.

economic system

In the context of the fundamental principles of a free market system, the _____ is associated with the point at which the quantity demanded of product equals the quantity supplied.

equilibrium price

In a business cycle, the _______ is a period of robust economic growth and high employment.

expansion

When Congress agreed to raise the debt ceiling during the economic meltdown in the United States in 2011, it temporarily averted a shutdown crisis, but the deal they reached to do so created the:

fiscal cliff

In response to inflation, the Fed is likely to:

increase the discount rate

Microeconomics focuses on

individual businesses and consumers

In the context of the free market system, the computer business is an example of

oligopoly

Which of the following tools is most frequently used by the Fed to expand and contract the money supply in the economy?

open market

______ refers to the relationship between the goods and services that an economy generates and the resources needed to generate them.

productivity

Which of the following is an example of a natural monopoly?

public utilities

In a business cycle, the _______ is the transition period between contraction and expansion.

recovery

The repayment of the debt by the U.S. federal government is likely to result in an increase in:

taxes

Giovani, a baker, makes exactly 20 loaves of brown bread each day. These loaves of bread are delivered to the 20 individuals who have placed an order with him. The quantity associated with such a demand and supply pattern is called _______

the equilibrium quantity

The controversial $700 billion economic bailout plan passed by Congress in early October 2008 was called the

troubled assets relief program

In the context of the business cycle, which of the following statements is true of the period of economic contraction?

Consumers shift their buying patterns to more basic products.

Which of the following is a difference between inflation and deflation?

Inflation is a period of rising average prices across an economy, whereas deflation is a period of falling average prices across the economy.

In the context of mixed economies, which of the following statements is true of the U.S. federal government?

It is part owner in a number of financial institutions.

Which of the following statements best defines the producer price index (PPI)?

It measures the change over time in the prices that businesses pay each other for goods and services

Which of the following statements best describes the role of the government in a capitalist economy?

It monitors the competition to ensure compliance to regulations.

In the context of monetary policy, which of the following statements is true of money supply?

The M1 money supply includes all currency plus checking accounts and traveler's checks.

In the context of monetary policy, which of the following is a result of a decrease in the reserve requirement?

The availability of credit increases.

In the context of price levels, which of the following is used by the government to evaluate inflation?

The consumer price index

Identify a true statement about pure market economies.

They do not make sufficient provision for the old, the young, and the sick.

Which of the following is a recent advancement in the Western European countries that developed powerful socialist economies in the decades after World War II?

They have imposed stiff austerity measures to control government spending.

Which of the following is a difference between the supply curve and the demand curve?

Unlike the supply curve, the demand curve for most goods and services slopes downward as it moves to the right

Identify a true statement about debt ceiling

Voting on the debt ceiling happens separately from voting on taxes and spending.

The Fed directly stimulates spending by:

buying government securities

In the context of monetary policy, when the economy is weak, the Fed:

buys government securities on the open market.

Real gross domestic product (GDP) measures the total value of final goods and services produced

inflation

The U.S. government uses the consumer price index (CPI) and the producer price index (PPI) to evaluate:

inflation

Identify a true statement about the Federal Reserve.

it manages the monetary policy in the united states

________ refers to Federal Reserve decisions that shape the economy by influencing interest rates and the supply of cash:

monetary policy

The term ________ refers to a market structure with many competitors selling differentiated products; the barriers to enter such a market structure are low,

monopolistic competition

_______ is a market structure with just a single producer completely dominating the industry.

monopoly

______ are market structures with one company as the supplier of a product because the nature of that product makes a single supplier more efficient than multiple, competing ones.

natural monopolies