into to business ~ chapter 2 exam

The economic system of the United States is called _____.

a: capitalism

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

b: Both have a strong involvement of the government.

In its role as a regulator, the Fed:

c: oversees mergers and acquistions.

In the context of open market operations, when inflation is a concern, the Federal Reserve _____ government securities.

c: sells

Which of the following is one of the core purposes of the Fed?

d: Influencing the size of the money supply

In the context of monetary policy, the money supply includes credit cards.

false

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

In the context of fiscal policy, which of the following actions by the government helps boost the economy in the long term?

Investing in public assets, such as national renewable energy grid

The _____ was an $825 billion economic stimulus package, passed by Congress, designed to turn the economy by cutting taxes, building infrastructure, and investing in green energy.

a: American Recovery and Reinvestment Act

_____ is a form of unemployment that involves layoffs during recessions.

a: Cyclical

Which of the following statements is true of productivity?

a: Increase in productivity usually gives rise to increase in quality.

Which of the following statements is true of a capitalist economy?

a: Individuals are free to choose how much they are willing to pay for products.

In the context of the fundamental rights of capitalism, which of the following statements is true about capitalism?

a: It doesn't guarantee that anyone will actually earn profits.

Which of the following statements is true of the Troubled Assets Relief Program (TARP)?

a: It ended up costing taxpayers far less than expected

Which of the following statements best describes the role of the government in a capitalist economy?

a: It monitors the competition to ensure compliance to regulations.

Which of the following statements is true about the Fed?

a: It regulates financial institutions.

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

a: Open market operations

In the context of supply and demand, which of the following statements is true of the free market system?

a: People tend to buy more products with lower prices.

_____ refers to the relationship between the goods and services that an economy generates and the resources needed to generate them.

a: Productivity

In a business cycle, the _____ is a period of robust economic growth and high employment.

a: expansion

In its role as the government's bank, the Fed:

a: keps the U.S. currency supply in good condition.

The term _____ refers to a market structure with many competitors selling differentiated products; the barriers to enter such a market structure are low.

a: monopolistic competition

In the context of the free market system, the computer business is an example of _____.

a: oligopoly

In the context of monetary policy, if the Fed decreases the reserve requirement, _____.

a: there will be more loans available

Which of the following statements states a core principle of capitalism?

b: Individuals, innovation, and hard work should be of paramount importance.

Identify a true statement about the Federal Reserve.

b: It manages the monetary policy of the United States.

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

b: Monetary policy

In the context of the free market system, which of the following statements is true of pure competition?

b: No single producer has any control over the price.

In the context of monetary policy, which of the following statements is true of money supply?

b: The M1 money supply includes all currency plus checking accounts and traveler's checks.

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

b: Troubled Assets Relief Program

Identify a true statement about the debt ceiling.

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

When the Fed sells securities, _____.

b: banks cut back on the loans

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 _____.

b: fiscal cliff

Microeconomics focuses on:

b: individual businesses

_____ is a market structure with just a single producer completely dominating the industry.

b: monopoly

In a business cycle, the _____ is the transition period between contraction and expansion.

b: recovery

n the year 2002, Timothy wanted to purchase a house. As he did not have sufficient funds, he decided to take a loan. Given his low credit score, it was highly unlikely that he would be able to repay the borrowed money. However, he was able to secure a loan despite his reduced ability to repay the loan. Timothy most likely applied for a _____.

b: subprime mortgage loan

In the context of monetary policy, which of the following is a result of an increase in the reserve requirement?

c: Interest rates begin to rise.

_____ is a market structure with only a handful of competitors selling products that can be similar or different and has high barriers to entry.

c: Oligopoly

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

c: contraction and expansion

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

c: economic system

Aidan is a college student. As part of his economics project, he has to collect data on the consumption patterns of the households in his locality. In this scenario, Aidan is most likely involved in the study of _____.

c: microeconomics

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.

c: reserve requirement

The term _____ refers to the quantity of products that producers are willing to offer for sale at different market prices.

c: supply

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

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

_____ are market structures with one company as the supplier of a product because the nature of that product makes a single supplier more efficient than multiple, competing ones.

d: Natural monopolies

Which of the following is a feature of capitalism?

d: Private-sector businesses are free to make their own choices regarding what they will produce.

The Fed directly stimulates spending by:

d: buying government securities.

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

d: buys government securities on the open market.

Gross Domestic Product (GDP) measures the total value of all the imports and exports of a nation on a quarterly basis.

false

In the context of federal debt, if spending is lower than revenue, the government incurs a budget deficit.

false

A drawback of communism, which was adopted by some countries in the 1900s, was the inability of people to make basic choices such as where to work or what to buy.

true

Fiscal strategies are closely tied to political philosophy.

true

In a capitalist economy, private-sector businesses are free to decide how much they will charge for their products.

true

In the context of capitalist economy, the right to free choice directly feeds competition.

true

Social security taxes are a source of revenue for the U.S. federal government.

true

The clothing industry is an example of monopolistic competition.

true