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Exam 2: Understanding Economics and How It Affects Business

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Question 31

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The _________ is a statistic used to compute the pace of inflation or deflation.

A) consumer price index
B) gross domestic product
C) index of leading indicators
D) index of inflationary trends

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Question 32

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Explain the difference between fiscal policy and monetary policy. Discuss how each of these approaches can be used to influence the state of the economy.

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Fiscal policy refers to changes in the l...

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Question 33

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As you scan the national news online, you read about the BXY Utility Company's latest problems. The story describes an expansive retaining wall that collapsed during a flood last week, spewing toxic coal ash, burying homes, and causing a few fatalities. An editorial claims that the company will not be held accountable to the same standards as the asbestos companies of a few years back that paid severe fines and even went out of business due to their lack of attention to environmental clean-up. You agree with the writer because you recently studied about the various competitive markets and utility companies clearly fall under monopolistic competition.

Patrick lives in a nation whose government embraces capitalism. He owns his own home and car, as well as his own business and building. Patrick maintains ownership due to:

Fiscal policy involves the federal government's efforts to stabilize the economy by increasing or decreasing taxes and/or government spending.

Socialists believe that wealth should be more evenly distributed than what actually occurs in a free-market capitalistic system.

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:

A monopoly occurs when there is a single seller for a product or service.

If the government wants to jump-start the economy resulting in more consumer spending, it will raise taxes.

The best way to avoid national budget deficits is to increase our exports and decrease our imports.

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.

Which of the following is an important premise of Smith's conclusions about economic prosperity?

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 ___________.

Resource development is concerned with finding the best way to utilize the fixed amount of resources a society has available.

When the government runs a continual budget deficit, it increases the:

Government spending on defense decreases the national deficit.

Current measures of productivity in the service sector provide an accurate measure of changes in the quality of output.

The major benefit of socialism is that it creates strong incentives to work hard and take the risks associated with starting and operating a business.

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

There are some restrictions on freedom of assembly and freedom of speech under a ____________ system.