Unit 4: Business and Government

If the domino effect occurs as a result of changes in the money supply, what will most likely happen as an immediate result of interest rates being increased? Borrowing will decrease. Investing will decrease. Inflation will increase. Liquidity will increase.

Borrowing will decrease.

How are progressive taxes and regressive taxes similar? Both charge high-income individuals more. Both are considered flat taxes. Both are determined based on income. Both are types of indirect taxes.

Both are determined based on income.

Why does the Fed pay interest to banks? It is interest on money held in reserve. It is interest on credit available to the Fed. It is interest on loans taken by the Fed. It is interest on government investments.

It is interest on money held in reserve.

What is likely to happen if a new aggregate demand curve moves to the right? Prices and output would drop, and the equilibrium point will stay the same. Prices would rise, and output would drop in the short run. Prices and output would rise, and the equilibrium point will change. Prices would rise, and output would drop in the long run.

Prices and output would rise, and the equilibrium point will change.

Which of these best describes income tax? regressive tax indirect tax direct tax proportional tax

direct tax

Which is a function of regulatory agencies? encouraging business compliance creating legislation for businesses encouraging negative externalities creating new business opportunities

encouraging business compliance

Successfully starting and running a business requires drive, talent, and clear vision of a long-range

goal

Which terms best describe sales tax? Check all that apply. direct indirect regressive progressive proportional

indirect regressive

Which best describes a central bank's primary goals? limiting inflation and reducing unemployment reducing unemployment and maintaining cash flow controlling stagflation and reducing unemployment managing credit and ensuring the money supply's liquidity

limiting inflation and reducing unemployment

Milton Friedman argued that consumers are more likely to alter their behavior based on changes in the unemployment rate. short-term changes in the economy. long-term changes in the economy. changes in the inflation rate.

long-term changes in the economy.

Spending that is required by law is known as discretionary spending. deficit spending. mandatory spending. expansionary spending.

mandatory spending.

The Fed's use of open market operations affects banks' interest rates. money available to lend. lending practices. stability.

money available to lend.

Franchises are attractive to business owners because they have a proven business model. they are typically inexpensive to buy. they get to keep all profits. they come with very little risk.

they have a proven business model.

An entrepreneur's first business fails, but their second attempt at the business is succeeding. You can assume that they learned from their mistakes. they are willing to take fewer risks. their products or services were unneeded. they were unwilling to take financial responsibility.

they learned from their mistakes.

Danielle has decided to work with an organization that helps soldiers deployed overseas. The opportunity she chooses is writing letters back and forth to the soldiers. What type of charitable donation is Danielle making to the soldier's organization? volunteering time donating goods donating money volunteering specialized skills

volunteering time

✔ ContractionaryExpansionaryFixed monetary policy involves decreasing the money supply.

Contractionary

What can the reader reasonably conclude from information in the graph? Fewer new businesses were started in 2010 than in other years. The opening of new businesses peaked between 2007 and 2008. More new businesses were started in 2006 than in 2005. The number of new businesses remained constant between 2006 and 2009.

Fewer new businesses were started in 2010 than in other years.

This diagram shows a government's approach to taxing and spending. Which of the following would be a good title for this diagram? Government Spending The National Economy The Federal Debt Fiscal Policy

Fiscal Policy

Why did Friedrich Hayek call expansionary spending dangerous? He felt it could lower the money supply and cause deflation. He felt it could lead to inflation and poor decisions by consumers. He felt it could lead to deflation and poor decisions by consumers. He felt it could lower available credit and cause a drop in prices.

He felt it could lead to inflation and poor decisions by consumers.

Which statement describes how borrowers will most likely benefit when the Fed reduces reserve requirements? Loan requirements will likely be relaxed. Interest rates will likely decrease. Housing prices will likely decrease. Investment opportunities will likely improve.

Interest rates will likely decrease.

Which best describes the difference between sole proprietorships and partnerships? Sole proprietors keep all profits and have unlimited liability, while partners split profits and share liabilities. Sole proprietors share responsibilities, while partners are responsible for only a portion of the business. Sole proprietors split profits and share liabilities, while partners keep all profits and have unlimited liability. Sole proprietors pay taxes only on business profits, while partners do not have to pay taxes on profits.

Sole proprietors keep all profits and have unlimited liability, while partners split profits and share liabilities.

Start of Business Structure

Start of Business Structure

Which most likely explains why the costs and benefits shown by the EPA are higher than the other regulatory agencies? The EPA legislates and enforces more regulations that reap greater benefits than the other agencies. The EPA legislates and enforces food regulations that reap greater benefits than the other agencies. The EPA has a larger budget than the other agencies, and its employees work longer hours. The EPA is less efficient than the other agencies, and its employees spend more money.

The EPA legislates and enforces more regulations that reap greater benefits than the other agencies.

Governments collect taxes to ensure that there is sufficient money to fund private businesses. citizens contribute to meeting society's needs. politicians get paid in a timely manner. a government program exists for every need that arises.

citizens contribute to meeting society's needs.

Which are results of regulation in a mixed-market economy? Check all that apply. compliance with laws advantages for producers control of markets advantages for government control of externalities

compliance with laws control of externalities

Franchising is typically done by cooperatives. partnerships. LLC corporations.

corporations.

An organization advertises tax deductions for people donating cars. Its radio commercial mentions the founder of the organization and various endangered wildlife. Which action could be assumed is a major role of this organization? earning a profit for its founder creating a sanctuary for animals running a public service radio station providing rides to people without cars

creating a sanctuary for animals

A new business should be based on an entrepreneur's individual interests because the entrepreneur must have sufficient confidence to succeed. be willing to take personal responsibility. have enough determination to work alone. dedicate as many hours as needed to the work.

dedicate as many hours as needed to the work.

High government expenditures can lead to a bigger revenue. stimulus. deficit. surplus.

deficit

Government regulation is intended to encourage producers to take negative actions. discourage producers from taking harmful actions. encourage producers to follow the Constitution. discourage producers from making a profit.

discourage producers from taking harmful actions.

Which action is an example of a service provided by an organization receiving charitable donations? collecting old cell phones to resell operating a private trash-collection business distributing fliers about the benefits of recycling selling specialized containers for sorting recyclable items

distributing fliers about the benefits of recycling

What must an entrepreneur do after creating a business plan? open the business finance the business file the right paperwork identify an opportunity

finance the business

Classical economics played an important role in helping the United States establish free enterprise government regulation Keynesian economics monetary policy.

free enterprise

A plan for spending money that balances income with spending and shows how money will be spent is a surplus. an expenditure. a budget. a deficit.

a budget.

Which document determines the number of shares in a company? a stock prospectus an annual bill of rights a corporate charter an annual report

a corporate charter

A group of students is researching nonprofit organizations to partner with for their senior project. They have decided that the most important thing is that the organization helps local children. What facts about each organization should they include in their research to make sure it matches their goals? Choose three answers. activities donor list recipients mission statement founding members

activities recipients mission statement

A disadvantage of forming a partnership is that owners can find it tougher to start and stop a business. can find it more difficult to get a bank loan. are only responsible for their own finances. are fully responsible for their partners' losses.

are fully responsible for their partners' losses.

An entrepreneur who opens a franchise must assume debts. keep profits. offer training. select sites.

assume debts.

Entrepreneurs who want to open a franchise buys the rights from the parent company and creates his or her own rules. buy the rights from the parent company and invest in a location approved by the parent company. invest in a location and create a business model for the franchise. invest in a location and develop a trademark for the franchise.

buy the rights from the parent company and invest in a location approved by the parent company.

Read the excerpt from an interview with Peter Drucker. Giving money is basically passive. In the parable of the good Samaritan, the important thing is that the Samaritan went back the next day, to make sure that the victim was treated well. He wasn't just giving money; he was giving care. Lots of people give money; he gave care, he did something. Social entrepreneurs are not satisfied with just giving money. —"A Passion for Performance," Philanthropy Magazine According to the excerpt, which is an example of how a social entrepreneur could gain satisfaction? by spending free time delivering meals to people who are confined to their homes by becoming a paying member of the city's symphony orchestra by donating money when asked by the cashier at a checkout counter by contributing part of a paycheck to an employer's campaign for medical research

by spending free time delivering meals to people who are confined to their homes

Which best describes the idea behind the "invisible hand"? Producers decide what to make for consumers, which guides the economy. Individuals seeking their own self interest benefit the economy as a whole. Government sets policy for producers and consumers, which guides the economy. Consumers decide what they need and want to buy, which guides the economy.

maybe Individuals seeking their own self interest benefit the economy as a whole. not d tho

A nonprofit organization posted an article in the local newspaper about a recent marathon. The marathon raised money for vaccinations to be given to children in a certain neighborhood. The brief article included the number of runners, the amount raised, and the intended use of the funds. For a person researching this organization, what information does this article provide? a list of ongoing donors an original funding source a confirmation of the nonprofit status a description of the group receiving help

not a/c

Which best describes the difference between preferred and common stocks? Preferred stock allows shareholders to vote for a board of directors, while shareholders of common stock do not have voting rights. Common stock gives shareholders one vote per share owned, while shareholders of preferred stock do not have voting rights. Preferred stock gives shareholders priority for dividends distributed, while shareholders of common stock are not allowed dividends. Common stock allows shareholders to get priority for dividends distributed, while shareholders of preferred stock are not allowed dividends.

not c

An entrepreneur would most likely be a low risk taker. spontaneous person with an unclear vision. person who works well alone. person who has a brief work week.

person who works well alone.

An entrepreneur would most likely be interested in job security. financial gain. personal fulfillment. a flexible working environment.

personal fulfillment.

Economist Friedrich Hayek argued that producersconsumersgovernment✔ prices can serve as signals in an economy.

prices

The Food and Drug Administration sets standards for advertising. product labeling. the environment. traffic safety.

product labeling.

Which action is an example of a service provided by an international organization receiving charitable donations? organizing campaigns for politicians taking direction from government officials promoting government initiatives to help the poor working with large corporations on trade policies to increase profits

promoting government initiatives to help the poor

According to the chart, the citizens are being taxed ✔ proportionallyprogressivelyregressively.

proportionally

Regulatory policy requires a balance between protecting safety and protecting constitutional rights. improving corporate profits. improving environmental conditions. protecting states' rights.

protecting constitutional rights.

Which action is an example of a service provided by an organization that receives charitable donations? researching vaccinations advertising new medications contracting to install waiting area carpeting selling hospital supplies for a privately owned company

researching vaccinations

To protect consumers, the SEC requires brokers and dealers to ✔ revealregulateprotectconceal information about securities.

reveal

When revenues are higher than expenditures in a budget, that budget shows a deficit. is in balance. must be discarded. shows a surplus.

shows a surplus.

The most common business organizations in the United States are partnerships. sole proprietorships. corporations. franchises.

sole proprietorships.

An entrepreneur is someone who starts and runs a business. is an employee of a business. invents products for other businesses. works for multiple developing businesses.

starts and runs a business.

In how many cities are Federal Reserve district banks located? 4 12 50 8

12

The graph shows the federal budget from 1980 to 2010. In which period did the federal budget show the greatest deficit? 1980 to 1990 1980 to 2000 1990 to 2000 2000 to 2010

2000 to 2010

Which statements accurately describe debts and deficits? Check all that apply.

A government's budget deficit causes debt to increase. Debt requires a government to pay back more than it has borrowed. The deficit is the amount a government spends above what it brings in.

How is an excise tax different from a sales tax? An excise tax is not deductible. An excise tax applies to specific products. An excise tax applies only to imported goods. An excise tax is an indirect tax.

An excise tax applies to specific products.

Which best summarizes the philosophical difference between economists John Maynard Keynes and Adam Smith? Keynes said government was the key to solving economic issues, while Smith believed government should take a hands-off approach. Smith said government was the key to solving economic issues, while Keynes believed government should take a hands-off approach. Smith believed in an "invisible hand" with which government pushes the economy, while Keynes did not agree with this idea. Keynes believed in an "invisible hand" with which consumers push the economy, while Smith did not agree with this idea.

Keyes said government was the key to solving economic issues, while Smith believed government should take a hands-off approach.

What makes enforcing safety standards a challenge for the Food and Drug Administration? Many foods are imported from other countries, and the FDA must ensure those foods meet the same standards as US goods. The FDA faces competition from the EPA, which sets standards for product labeling. The FDA has no control over advertising laws, which may conflict with safety standard laws. Many raw materials are exported to other countries, and the FDA must ensure those materials meet the same standards as international goods.

Many foods are imported from other countries, and the FDA must ensure those foods meet the same standards as US goods.

Which describes the process of how a business incorporates? -The business must gain government permission and issue a stock sale, followed by a shareholder vote. -The business must issue a stock sale and take a shareholder vote, followed by government permission. -The business must take a shareholder vote and gain government permission, followed by a stock sale. -The business may gain government permission, followed by writing a charter to shareholders and issuing a stock sale.

The business must gain government permission and issue a stock sale, followed by a shareholder vote.

The graph shows the federal budget from 1980 to 2010. What conclusion can be drawn from this graph? Federal law requires the budget to be balanced. Republicans do a good job in balancing the budget. In most years, the federal budget shows a surplus. The federal budget is usually unbalanced.

The federal budget is usually unbalanced.

Which statements describe what this graph indicates about government spending? Check all that apply. The government needs to raise taxes or cut spending. The government spends too much money. The government should produce more money to cover spending. The government almost always spends more than it collects. The government needs to lower taxes to cover spending.

The government needs to raise taxes or cut spending. The government spends too much money. The government almost always spends more than it collects.

What happens to earnings in a cooperative? They are used to pay middlemen for services. They are shared with member owners. They are used to buy more stock for members. They are shared with customers through dividends.

They are shared with member owners.

How are Bill Gates and Henry Ford similar? Check all that apply. They both streamlined factory production. They both became wealthy and successful. They both helped better the lifestyles of others. They both developed products that filled a human need or needs. They both founded a company when they were very young.

They both became wealthy and successful. They both helped better the lifestyles of others. They both developed products that filled a human need or needs.

Which best explains how contractionary policies can hamper economic growth? They increase consumer demand. They can increase inflation. They reduce taxes which raises deficits. They reduce disposable income.

They reduce disposable income.

Which of these effects of expansionary spending would a government most want to avoid? higher employment higher inflation growth in production growth in consumer spending

higher inflation

A government might enact expansionary spending when it is trying to increase aggregate demand for goods. decrease aggregate demand for goods. slow an economic expansion. lower a budget deficit.

increase aggregate demand for goods.

John Maynard Keynes believed that governments should increase spending in order to increase prices. increase supply. decrease demand. increase demand.

increase demand.

What is a potential negative effect of an expansionary policy? decreased borrowing increased interest rates increased inflation decreased available credit

increased inflation

Monetarism plays a role in economic growth by expanding government intervention. influencing the supply of goods. expanding government spending. influencing the supply of money.

influencing the supply of money.

Which best describes what a central bank uses monetary policy to do? ensure that the government has a balanced budget influence financial institutions globally ensure that the government is sufficiently funded steer the economy away from recession and toward growth

steer the economy away from recession and toward growth

Which of these is a banking activity of the Fed? printing money regulating securities markets storing money for banks funding government programs

storing money for banks

What role does a fast-food corporation play when it agrees to franchise its business? Check all that apply.

supply training select a location supply advertising collect most profits

What does deficit spending require a government to do? lay off workers cut taxes take on debt hire more workers

take on debt

A disadvantage of corporations is that shareholders have to pay fees: (taxes, insurance, interest,) on profits.

taxes

What must an entrepreneur assume when starting a business? that the correct location guarantees success that every product has a customer who wants it that clever market strategies may still fail to sell a product that raising funds is the most difficult step in starting a business

that clever market strategies may still fail to sell a product

Which regulatory agencies provide general oversight for the banking industry? the Fed and the FDIC the Fed and OSHA the FDIC and the EPA the FDIC and the FDA

the Fed and the FDIC

A local food bank announces in the newspaper that it needs people to donate canned goods, which will be delivered to people with limited mobility. Marcella would rather volunteer her time than donate canned goods. What tool should Marcella use to find a list of current volunteer opportunities? a news article a regulatory agency an informative website the organization's website

the organization's website

Isabella wants to do something for others around the holidays. She fills three boxes with things she does not need, and donates them anonymously to a nonprofit organization that provides for families who can no longer live in their homes. Which giving factor influences Isabella's actions? the time of year the donor's age a direct request for contributions a personal connection to an issue

the time of year

Marcus volunteers for an organization that cleans up the neighborhood park. Each volunteer is assigned to a different section of the park to pick up trash and pull weeds. Which motivation for giving is described in this paragraph? to gain recognition to develop new skills to support an institution to give back to the community

to give back to the community

Which of these is most likely the US government's aim in taxing imported goods? to protect domestic businesses to decrease international trade to end reliance on foreign goods to make US markets less desirable

to protect domestic businesses

A mixed-market economy is best defined as an economy with some government intervention. without government intervention. with some externalities. without corporate compliance.

with some government intervention.