Business Final Review Ch. 2

Socialism is an economic system that encourages privatization and believes that all enterprises should be publicly owned.

False

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

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

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

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

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

Troubled Assets Relief Program

Socialist economies tend to have high taxes, which are designed to distribute wealth more evenly through society.

True

The gross domestic product (GDP) of Trelinberg, a South American nation, has been decreasing for the past eight years. The long period of consecutive decreases in the GDP has led to high unemployment rates in Trelinberg. In the given scenario, the economy of Trelinberg is most likely in _____.

a depression

The economic system of the United States is called _____.

capitalism

Microeconomics focuses on:

individual businesses.

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 responsible for studying the economy in terms of goods and services, revising some of the taxation policies, and gauging the employment rate. Given this information, these individuals are studying _____.

macroeconomics

The Fed:

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

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 _____.

privatization

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

The economic situation in Lanceberg, an African country, slowly picks up after a severe financial downturn. Over a period of 12 months, businesses begin to expand and employment levels begin to rise. The markets in the country are also vitalized as consumers begin to engage in normal buying behavior. In this scenario, the economy of Lanceberg is currently in the _____.

recovery phase

Over the past 30 years, most economies of the world have begun moving toward the market end of a spectrum that ranges from pure planned economy at one extreme to pure market economy at the other. This has led to:

reduced red tape in socialist governments.

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 _____

seasonal unemployment

Timothy, a staff member at a university, wants to purchase a house. As he does not have sufficient funds, he is forced to take a loan. Given his low credit score, it is highly unlikely that he will be able to repay the borrowed money. In this scenario, Timothy should apply for a(n) _____.

subprime mortgage loan

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

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 _____.

the fiscal cliff

In the context of monetary policy, _____ 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.

the reserve requirement

The central banking system in the country of Darmos issues a notice to all its commercial banks stating that they must possess 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