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Exam 2: Understanding How Economics Affects Business

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Question 161

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In the small nation of Equalia,the government owns several of the key businesses and provides a wide range of social services.The government places a great deal of emphasis on eliminating large disparities in people's incomes.These features of Equalia's economy are consistent with a socialist economic system.

A) True
B) False

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Question 162

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Lance owns Lance Lawns Irrigation Systems,LLC,a company that installs and maintains underground lawn irrigation systems.Business is down due to new housing starts being negatively impacted by a deep recession.To make things worse,his bank called yesterday to inform him that his credit limit (interest fee of 12.5%) will be cut from $30,000 per year to $15,000 per year,unless he is willing to pay a higher interest rate of 20%.As Lance drives to the first job this morning,he knows that his last task of the day will be to reduce the hours for his two employees.He can't afford to work employees eight hours per day,with only a $15,000 line of credit.Which of the following strategies will help Lance's situation?

A) Increase government spending on public parks.
B) Decrease government spending so that banks can keep more reserves.
C) Fed decreases interest rates.
D) Fed increases the federal funds rates to jump-start the economy.

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

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Question 163

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The foundation of the U.S.economic system is based on:

Which of the following statements most accurately identifies a limitation of the free-market economic system?

During the recent economic crisis,Presidents George W.Bush and Barack Obama increased government spending by $2 trillion,in order to revive the ailing economy.Their strategy followed the economic theory known as:

Joe and Tess McGreen are purchasing their first home in Durham,North Carolina.They are seeking pre-qualification on a home loan.The unemployment rate for North Carolina is 10.2% and GDP is declining.Chances are pretty good that the Fed will raise interest rates in order to loosen the supply of money,resulting in a more expensive loan for Joe and Tess.

Resource development is:

Sweetland is a nation that publicly supports a free market economy with private ownership of businesses.Over time,the government of Sweetland has developed policies designed to help the needy and reduce the level of income inequality.It pays for these programs by levying relatively high taxes on businesses and workers.These arrangements suggest that the economy of Sweetland is trending toward pure capitalism.

Which of the following strategies may have a net effect on inflation?

In command economies,the government plays a major role in deciding which goods are produced and who will get them.

Abby left her native land in Eastern Europe to become a nanny for a family in a western suburb of Chicago,Illinois.One of the benefits of her arrangement was that she could attend the community college near her family's residence.When she arrived at her new job,she experienced some immediate differences.Abby noted that public transportation in northern Illinois was limited and expensive,making it difficult to get to school.For a negligible fee,the government in her native country provided public transportation to everyone.The economic system in Abby's native country was more characteristic of ___________.

Demand refers to the quantity of a good that consumers are willing and able to buy at different prices at a specific time.

____________ in the service sector has not shown the significant improvement that it has in the manufacturing sector.There are significant advances in the quality of service,but workers in this sector are unable to increase the number of persons served in a given time period.

__________ unemployment refers to loss of jobs due to a recession or a similar downturn in the economy.

The market price of apples is currently rising.In a free-market economy,the most likely explanation of this price change is that:

The economic and political system in which the government owns almost all the major factors of production is called:

A major benefit of socialism is the: