Intro to Business - Chapter Two

The country of Ukanturk has been facing an economic downturn for two consecutive years. To revive the financial condition of the country, its government tries to influence the economy through taxation and spending decisions that are designed to encourage growth and increase employment. In this scenario, the government of Ukanturk is implementing its

Fiscal Policy

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.

Identify a true statement about pure market economies.

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

Identify a true statement about the debt ceiling.

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

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

buys government securities on the open market.

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

contraction and expansion.

The Board of Governors of the Federal Reserve holds a meeting to discuss its concern over the decreasing gross domestic product of the country. All members agree that the situation can be brought under control and the economy can be stimulated if they use the discount rate as a tool. In this scenario, the Fed is most likely to:

reduce the discount rate.

Economics is

study of the choices made by people, companies, and governments to allocate society's resources

Troboli is a North American country. The total value of all final goods and services produced in Troboli in the last fiscal year was 3.3% more than the year before that. This growth placed Troboli in a better position than most of its allies. In this scenario, the total value of all final goods and services through which the economic condition of Troboli was assessed is known as _____.

Gross Domestic Product

Irkholm, a South American nation, experiences an economic downturn that leads to an increase in average prices across the country. The situation becomes more serious when average prices increase more than 50% per month. In the given scenario, Irkholm is experiencing _____.

Hyperinflation

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.

Identify a true statement about the Federal Reserve.

It manages the monetary policy of the United States.

Prior to formulating its annual budget, the government of the Asian country of Florenesia employs a number of individuals to look into the overall productivity of the country. These individuals are also responsible for studying and revising some of the taxation policies and gauging the employment rate. Given this information, these individuals are studying

Macroeconomics

Which is the part of economics concerned with single factors and the effects of individual decisions

Microeconomics

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

In the context of monetary policy, the _____ is a rule set by the Fed, which specifies the minimum amount of funds a bank must hold, expressed as a percentage of the bank's deposits.

Reserve Requirement

The government of Bakhraan, an Asian country, owns key industries that directly affect public welfare, such as healthcare and telecommunications. To fund public welfare schemes, such as free childcare and free education, the government levies high taxes on its citizens. In the given scenario, the economic system followed by Bakhraan is _____.

Socialism

The economy of Sutanvia is under severe financial distress. However, over the last few months, the economy has gradually picked up, and employment levels are slowly rising back to normal levels. Consumers are also beginning to engage in regular buying activities. In this scenario, the economy of Sutanvia is currently in the _____ phase of its business cycle.

recovery

Gregory was a typist at a corporate firm. When the company adopted a special voice recognition software for the purpose of documentation, Gregory's job became redundant. Therefore, he was laid off. The increased use of technology in most companies has made Gregory's skills inessential, and he remained unemployed for a long time. In the given scenario, Gregory is facing _____.

structural unemployment

During a period of grave financial crisis in the United States, Congress is pressurized to raise the limit on the maximum amount of money the government can borrow. Congress increases the limit on the condition that it will implement sharp tax hikes and across-the-board spending cuts to compensate for the raise and to ensure that the overall budget deficit decreases. In this scenario, the measures implemented by Congress will most likely create:

the fiscal cliff.

The central banking system in the country of Darmos issues a notice to all its commercial banks stating that they must hold funds that are equal to 48% of the deposits held by their customers. In the given scenario, the central banking system's notice exemplifies _____.

the reserve requirement