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Exam 2: Understanding Economics and How It Affects Business

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Question 91

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Over the years, the government of Evensplitia has focused on implementing programs that promote equality. In the short term, though, Evensplitia's legislators are concerned about the very slow rate of growth that has plagued its national economy. In order to address this problem, the government is likely to

A) take control of more major industries.
B) reduce taxes and cut back on some social programs.
C) make sure to balance its budget.
D) avoid the use of fiscal policies and reduce the supply of money in circulation.

E) A) and B)
F) A) and C)

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Question 92

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A problem with the CPI is that it measures the price changes of only food and clothing, while ignoring what happens to the prices of such important items as medical care and energy.

A) True
B) False

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Question 93

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Monetary policy is implemented to ease the up and down swings of business cycles, while fiscal policy is implemented to create swings when the cycle is stalled in an economic boom.

In the past, socialist nations have realized that some of the government-run businesses do not grow as quickly as businesses that operate for a profit.

Today, the economic systems of most nations could most accurately be classified as

Microeconomics is the economic perspective that looks at the operation of a nation's economy as a whole.

Under the ________ system there is very little incentive to work hard or to produce quality goods or services.

The nation of Forlornia is in the middle of a severe financial crisis. The prime minister has increased government spending by trillions, in order to revive the ailing economy. Her strategy followed the economic theory known as

In one of her weekly live videos, the Federal Reserve Chairman remarked that inflation had begun to tick upward. However, unemployment in the U.S was still quite high and economic growth had slowed. With short-term interest rates close to 0 (zero) , the Chair did not visualize that ________ policy would be able to do anything for the high unemployment problem. She felt that ________ policy would be more useful for bolstering employment, but that would require local and state governments and the federal government to provide tax breaks for corporations.

A major distinction between capitalism and socialism concerns the distribution of income.

Several years ago, the nation of Equalia had a government-owned telecommunication system that lagged far behind other nations. In several rural areas, there was only a single landline phone for an entire village. The taxes collected for the purpose of maintaining the telephone system were very meager, so the notion of expanding service was almost impossible. The government of Equalia decided to sell the phone company to a private firm. The private firm expanded rapidly. It reported that even poor consumers were willing to pay for a private landline. This government decision and subsequent sale demonstrates move toward

Gabby and Gus Malloy recently got preapproved on a loan for their first house purchase. They are speculating on how much they should bid on their number one choice-a small, three-bedroom bungalow near a major college town. Which of the following indicators may be an important factor in whether they are able to successfully put in a low bid?

In order to restrict spending by businesses and households, the Fed would take measures designed to lower interest rates.

The U.S. economic system relies on

Governments that were predominantly capitalist are moving toward socialism, while governments that were predominantly socialist are moving toward capitalism.

Which of the following statements about government deficit spending is most accurate?

The quantity of a good or service that producers are willing to sell at different prices during a specific time period is known as the

Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy, while others remain poor.

As indicated by the "World Population is Popping" box, the predicted population increase in some of the world's poorest countries will present economic challenges.

The freedom for people to buy, sell, and use land, buildings, machinery, and inventions are basic capitalist rights under