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Exam 2: Understanding Economics and How It Affects Business

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Question 81

True/False

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The nation of Desperia is reporting a significant decline in GDP for four consecutive years,with no relief in sight.With unemployment at record levels and businesses failing faster than at any time in the past century,Desperia is likely experiencing a depression.

A) True
B) False

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Question 82

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Neo-Malthusians followers of Thomas Malthus) believe that the solution to poverty is:

A) Increasing the world population.
B) Increasing taxes on the rich and increasing social programs.
C) Birth control.
D) Educating poor people.

E) A) and C)
F) None of the above

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Question 83

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When describing the state of the U.S.economy,reporters often refer to the nation's GDP,its unemployment rate,and the CPI.Explain what each of these terms means and why each measure is significant.

The CPI is based on the prices of a carefully selected market basket of goods,all of which consumers can purchase at a supermarket.

One reason the CPI is monitored very closely by government,businesses,and workers is that:

Some wages,tax brackets,interest rates,and government benefits are based on the CPI.

The producer price index measures what is happening to prices at the wholesale level.

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.

Recently the U.S.national debt was over:

The presence of competition in free markets:

The greed of businesspeople represents one of the greatest dangers to the operation of a free market system.

A major benefit of socialism is the:

The broadcast that reported a decline in total output for the United States probably got some of its information from the government's measurement of ___________.

If a shortage exists for a good in a free-market economy,the:

Kathleen's company produces computer monitors and other peripheral devices for computers.About six months ago,Kathleen began to keep track of number of hours worked,and the resulting output at her particular work site.Comparing the results,she found that the number of workers and the hours they worked) remained relatively steady over the past six months,however,the work site's output increased significantly.This indicates that:

Subtle differences such as the right to one's religious preference make the command economic system known as communism more like a mixed economy than a socialistic system.

A basic right under capitalism is the right of businesses to receive government funding.

Under the basic principle of supply,as the price goes down,manufacturers and suppliers of a product tend to supply less of the product to the market.

Deflation means prices are declining.

At the onset of the recent economic slowdown,prices at the grocery stores continued to rise.In some cases,products such as milk and bread almost doubled in price.In March 2008,a Boston newspaper reported,"The price of eggs was up 40% and milk was up 26%." Consumers were already being hit with high energy costs,and now their confidence in the economy was further shaken with job cuts and a loss of discretionary income due to increases in food prices.The economy was slowing,but prices were rising,signifying the potential for ___________.