Chapter 2 BUSI Exam

drive higher quality and lower prices.

A capitalist system depends on fair competition among businesses to:

debt ceiling

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 it plans to implement. In this scenario, the government has asked the Congress to hike its

reserve requirement

Brontsky & Co., a member bank of the Fed, receives a notice from the Fed that notifies that it must hold funds equal to 15% of the deposits held by its customers. In this scenario, the 15% is the

monopoly

Denver wants to start an industrial products manufacturing company, but he finds it difficult to enter the market as it is already dominated by a single producer who controls product quality and product prices. Given this information, Denver is unable to enter the market because of the existence of

expansion

In a business cycle, the__________is a period of robust economic growth and high employment.

It shows the relationship between price and quantity from a customer standpoint.

In the context of fundamental principles of a free market system, which of the following statements is true of a demand curve?

recessions.

In the context of monetary policy, the Fed is most likely to reduce the discount rate during:

When the cost of acquiring funds from the Fed is low, interest rates on bank loans tend to fall.

In the context of monetary policy, which of the following statements is true of the discount rate?

economic contraction

Loger's, a high-end apparel company in Bruslon, an Asian country, cuts back on production as consumers start turning to basic products such as food because of the economic downturn in the country. The company also lays off many of its employees to further cut down expenses. In this scenario, Loger's has implemented these cost-cutting measures to accommodate the phase of _____ in Bruslon.

the gross domestic product of a country.

Macroeconomics involves the study of:

the fiscal cliff

New Tapan, an African country, invested resources in the defense sector, and as a result, its budget deficit grew. To decrease the budget deficit, the government cut down its expenditures in several other sectors and imposed higher taxes. In this scenario, the measures implemented by the government of New Tapan most likely created

seasonal unemployment

Olivia is a part-time worker at a jam-producing company in her village. Her job entails plucking and cleaning grapefruits. Because grapefruits grow only in winter, Olivia is unemployed for most part of the year. The given scenario exemplifies

inflation.

Real gross domestic product (GDP) measures the total value of final goods and services produced within a nation's physical boundaries over a given period of time, adjusted for:

capitalism

Rochester, an Asian country, follows an economic system that facilitates private ownership. The country's economy is based on economic freedom and fair competition. Given this information, the economic system followed by Rochester is

seasonal unemployment

Ronnie works on a part-time basis for a company that provides home repair and maintenance services. Ronnie is specialized in handling the central heating systems in homes and is therefore needed to be at work only during the winter. Other than that, he is mostly unemployed for the rest of the year. In this scenario, the form of unemployment faced by Ronnie is

inflation.

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

banks obtaining funds at a lower cost.

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:

Troubled Assets Relief Program

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

Monopolistic competition

The cosmetics industry in the district of Dunkenburg has many competing companies that sell personal care products. However, each company manufactures products that correspond to different income groups. The products are also different in terms of their uses. Which of the following market structures is existent in the cosmetics industry in Dunkenburg?

cyclical unemployment

The country of Trevanvia goes through a period of recession, which leaves a large number of people unemployed due to extensive layoffs by companies. The companies use the strategy of job termination to cut down their costs and reduce their output as the people are now more cautious with their spending. In the given scenario, the layoffs that take place exemplify

a natural monopoly.

The government in the town of Rodenham has granted exclusive rights to a few telecommunications companies to operate in specific geographic areas. The companies have to provide their services in the areas allotted to them, and no company is allowed to extend its services to the areas allotted to its competitors. This system has been put in place because it would be inconvenient for each company to build its own infrastructure in all areas. The given scenario exemplifies:

privatization

The government of the South Asian nation of Albana is unable to maintain the electronics business effectively because of slack in management and lack of skilled employees. It sells the business to a company called Ramington Electricals. The company has no association with the government and operates on its own terms. The sale of the government-owned electronics business to Ramington Electricals is an example of

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

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

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

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

Open market operations

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