CH2

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The amount of input divided by the amount of output equals productivity.

False

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.

__________refers to Federal Reserve decisions that shape the economy by influencing interest rates and the supply of cash.

Monetary policy

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

Open market operations

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

They are both strongly involved with the government.

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

True

The consumer market basket of goods and services, in which the consumer price index (CPI) measures the change in weighted-average price over time, is created by the U.S. Bureau of Labor Statistics.

True

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 economic system of the United States is called _____.

capitalism

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.

During an especially difficult year of weakening financial conditions, the government of Geriva, a European nation, borrows money to meet its legal obligations. However, once the borrowed amount reaches a certain limit, the government is not allowed to borrow more money. This is because the government has hit the _____.

debt ceiling

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

economic system

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

Denise is a hard worker, but she has always had differences with her boss, Angela. Angela has recently become more demanding and is often unwilling to provide clarification on project requirements. After many long working days with little job satisfaction, Denise submits her resignation. She knows that her résumé is strong and feels confident that she will find another job. In this scenario, Denise is facing _____.

frictional unemployment

Microeconomics focuses on:

individual businesses.

A giant telecommunications company that was previously owned by the government of Sunzabia, a European country, is sold to an independent industrialist to ensure that the company is handled in a more efficient way. This scenario exemplifies _____.

privatization

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

recessions.

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

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.


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