mgmt159

What two outcomes may result if the price of the goods and services in the Consumer Price Index are increasing too rapidly?

- Consumers can buy less for their dollars. - There is a strong chance that inflation is occurring.

What are three benefits of a free market economy?

- the opportunity for people to work their way out of poverty - competition that benefits consumers with better prices and service - encouraging efficiency among competing businesses

An economic system based on freedom of choice and privately owned factors of production is

Capitalism

______ is the study of the operation of a nation's economy as a whole.

Macroeconomics

Use the fundamental accounting equation to solve the following: Assets minus Liabilities equals

Owners' Equity.

The situation in which prices are declining is called:

deflation

Adam Smith believed Blank______ was essential to the survival of any economy.

freedom

When oil prices doubled in 2008, people became more interested in solar power, and businesses started to offer a multitude of solar power products such as outdoor and indoor solar lighting and solar battery, camera, and laptop chargers. This is an example of:

how scarce resources lead to innovation

Equipment in hospitals, such as CAT scanners, PET scanners, and MRI scanners:

improve the quality of services provided, but do not necessarily increase productivity

FIFO and LIFO are two common

inventory valuation methods.

If you are studying the operation of a nation's economy as a whole, you are learning about

macroeconomics

If prices continue to rise as the economy is slowing, then _________ is occurring.

stagflation

Unlike inflation where prices rise even if the economy is not slowing down, the situation when the economy is in fact slowing but prices are going up is called Blank______.

stagflation

When the government computes the cost of goods and services, including housing, food, apparel, and medical care, to see whether or not they are going up or down, they are measuring Blank______.

the consumer price index

According to Adam Smith, as long as farmers, laborers, and businesspeople received economic reward for their efforts, they would work hard. As a result of this self-directed desire to gain, the economy would prosper and everyone would become wealthier. Smith called this process:

the invisible hand

What does the consumer price index measure?

the pace of inflation or deflation

Free trade is the movement of goods and services among nations Blank______.

without political or economic barriers

Which two of the following are correct with regards to a free-market economy?

- Another name for capitalism - An economic system in which economic decisions are made by the market

What two principles did Adam Smith believe essential to the survival of an economy?

- Freedom to own land or property - Freedom to keep a business's profits

What might be two benefits of exporting goods such as snowplows and sand to the Middle East?

- The product may be used differently than in the U.S. - There is likely to be less competition.

In which three ways are taxes used to influence the economy?

- The raising and lowering of tax rates are used to stabilize the economy. - High taxes draw the money away from the private sector. - Low tax rates give the economy a boost.

What are two important reasons to do business globally?

- There are many potential customers in other countries - There are more people and countries in the world markets

What are two characteristics of mixed economies?

- They contain elements of more than one system. - They exist when the distribution of resources involves elements from more than one economic system.

Global trade is measured using two key indicators known as the:

- balance of payments - balance of trade

What are the four different degrees of competition within free markets?

- perfect competition - monopolies - oligopolies - monopolistic competition

Gross Domestic Product refers to the total value of goods and services produced in a country in a given year. The goods and services can be:

- produced by foreign owned companies located in the country - produced by domestically owned companies

Fiscal policy is the federal government's effort to keep the economy stable by increasing or decreasing Blank______.

- taxes - government spending

The unemployment rate refers to the percentage of civilians at least 16 years old who are Blank______ and Blank______.

- unemployed - tried to find a job within the prior 4 weeks

Which economic system is based on free markets, in which the market largely determines what goods and services get produced, who gets them, and how the economy grows?

Capitalism

Which theory states that a country should sell to other countries those products it produces most efficiently and import those it doesn't?

Comparative advantage

The monthly statistic that measures the pace of inflation or deflation is called the:

Consumer Price Index

When prices are decreasing, _____________ is occuring.

Deflation

__________ is the accounting practice of recording each transaction in two places in the accounting journal.

Double-entry bookkeeping

Retailers attempt to sell older merchandise before more recently acquired merchandise is sold. The assumptions made by the __________ method of inventory valuation are most consistent with this approach.

FIFO (first-in, first-out)

Why did Thomas Malthus believe that population growth would surpass the available resources?

Fast population growth seemed to surpass the growth of the food supply.

What is the total value of final goods and services produced in a country in a given year called?

Gross domestic product

__________ measures the speed of inventory moving through the firm and its conversion into sales.

Inventory turnover ratio

______ looks at the behavior of individual people and organizations in specific markets.

Microeconomics

______ help gauge the health of the economy by measuring the levels of inflation, disinflation, deflation, and stagflation.

Price indexes

When the economy is slowing down, but prices are still going up it is called

Stagflation

In free markets the price of a product depends on how much consumers are willing and able to buy and how much the producers are willing and able to sell. What does the market price depend on in a free market?

Supply and demand

Which statement regarding technology and productivity is true?

Technology may add to the quality of the service provided but not to the output per worker.

What is the unemployment rate?

The percentage of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks

Carlyle called economics the "dismal science" after reading the early work of

Thomas Malthus.

According to the "Adapting to Change" box, which professional is best able to detect the financial irregularities that often accompany fraud in an organization?

a forensic accountant

The use of computerized accounting systems

allows firms to generate financial information almost instantly and whenever the organization needs it.

A benefit of free markets is that it

allows for open competition among companies.

When the government spends money on such projects as roads and bridges, it is expected that the money will trickle down to the consumers eventually leading to:

an increase in consumer spending

In a free market, the prices of products exchanged in the market _______.

are negotiated by buyers and sellers

The accounting profession is divided into 5 key working areas, two of which are

auditing and managerial accounting.

The total value of a nation's exports compared to its imports measured over a particular period is the definition of Blank______.

balance of trade

The __________ is an accounting statement that reports the financial condition of a firm at a specific point in time.

balance sheet

The __________ shows how the capital is structured in the business, including the value of assets and the amount the firm owes at a specific point in time.

balance sheet

The periodic rises and falls that occur in economies over time are called:

business cycles

In a free market, prices are determined by Blank______.

buyers and sellers negotiating in the marketplace

Comparing the most developed nations with less developed nations, one could conclude that the foundation of the economic system of most developed nations is:

capitalism

The foundation of the U.S. economic system is based on Blank______. Multiple choice question.

capitalism

Hugo lives in a country where all or most of the factors of production and distribution—such as land, factories, railroads, and stores—are owned by individuals. Based on this, Hugo lives in a ______ country.

capitalist

The most liquid asset is

cash

Perfect, monopolistic, oligopoly, and monopoly are four different degrees of Blank______.

competition

The quantity of products that people are willing to buy at different prices at a specific time is referred to as Blank______.

demand

Mark, the marketing manager of a large U.S. corporation, realizes that Afghanistan has virtually no supply of tomatoes. He conducts a study to see what quantity of tomatoes Afghan customers would be able and willing to buy at different prices. Mark is analyzing Afghanistan's Blank______.

demand for tomatoes

GDP, unemployment rate, and price indexes are considered the three major __ indicators.

economic

The study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals is __.

economics

What is the study of how resources are distributed for production of goods and services within a social system called?

economics

By increasing or decreasing taxes or government spending, the government is affecting Blank______ policy to keep the economy stable.

fiscal

The federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending is called __________ policy.

fiscal

What term refers to the movement of goods and services among nations without economic or political barriers?

free trade

An economic system in which the market largely determines what products get produced, who gets them, and how the economy grows is a ______ economy.

free-market

Mark graduated from college a short time ago and is still looking for his first (dream) job. Mark is part of the unemployment category known as Blank______ unemployment.

frictional

Today's computerized accounting programs are

helpful for small-business owners who lack strong accounting support within their companies.

Many business decisions are made in hopes of improving a firm's bottom line. Which of the following financial statements will reveal a firm's bottom line?

income statement

The supply concept refers to the relationship between the quantity of products produced and price. If the market price of a product increases, quantity supplied will Blank______.

increase

A(n) __________ is an evaluation and unbiased opinion about the accuracy of a firm's financial statements.

independent audit

Microeconomics is the study of Blank______.

individual economic behavior for particular products or services

Fish farms create wealth by providing food and creating jobs. This is an example of:

innovation leading to more resources

There are more than 7 billion potential customers in 195 countries around the globe. Each country possesses unique materials and skills, and as technology advances, communication barriers are being brought down. Because of this, Blank______.

it is important to conduct business globally

Rapidly growing companies often buy increasing amounts of merchandise from suppliers on credit, and then sell the goods to their customers on credit. These companies sometimes have difficulty repaying their suppliers when customers who buy on credit don't pay on time. Firms that experience this difficulty need to do a better job of

managing cash flows.

Over time, as negotiation occurs between buyers demanding products and sellers supplying products, the Blank______ will be determined.

market price

Most countries today are trending toward _______ economies.

mixed

In recent decades, most capitalist countries have added social programs while communist countries have reformed and permitted such liberties as the right to own private property. These developments are an example of the trend toward:

mixed economies

Once a trial balance has been prepared, the next step of the accounting cycle involves

preparing financial statements such as the balance sheet, income statement, and statement of cash flows.

One of the most damaging economic phenomena is a sustained high rate of inflation. That is why economists and the Federal Reserve closely watch:

price indexes

Earnings per share, return on sales, and return on equity are examples of __________ ratios.

profitability

The reports and financial statements prepared by accountants

provide information that can be used by decision makers both inside and outside the organization.

In order to understand if the results of ratio calculations indicate a financially strong company, the results

should be compared to other firms in the same industry.

Mary worked for a GM factory in Detroit all her life. Unfortunately, when GM closed the plant because of restructuring, she could not find any jobs in the automotive industry in or around Detroit. Mary would be counted as an example of:

structural unemployment

The quantity of products that manufacturers or owners are willing to sell at different prices at a specific time is referred to as Blank______.

supply

Prices in a free market economy are determined by Blank______.

supply and demand

John is an economist with a large American Fortune 500 company. While looking over the data, he observes that both the producer price index (PPI) and consumer price index (CPI) have been growing very fast for the last 3 quarters. John is afraid that:

the economy is experiencing inflation

Eduardo owns a farm in a country where taxes are very high and where the government openly considers the possibility of taking over the agricultural sector. Eduardo stopped investing in his farm and only works enough hours to be able to grow the food necessary for him and his family. Eduardo's behavior demonstrates that:

the freedom to own property and keep the profits from work is necessary to the survival of an economy

In a free market system, decisions about what and how much is produced are made by Blank______.

the market consisting of buyers and sellers

When Blank______ determines what goods and services get produced, it is a free-market economy. When Blank______ determines what goods and services get produced, it is a command economy.

the market; the government

What are business cycles?

the periodic rises and falls that occur in economies over time

To effectively run a business, it is necessary to

understand and use accounting information.

The major economic indicators are the GDP, the inflation rate, the _______ rate, and price indexes.

unemployment