Econ- Business and Government – Flashcards

Country Q has experienced a rapid increase in its unemployment rate and a sharp decline in its GDP. What might policymakers do in the face of these economic indicators? a. encourage a decrease in purchasing until employment figures increase b. try to trade with other nations to increase production and create new jobs c. increase taxes so the government has more money to spend d. implement controls on wages, forcing employers to pay higher wages

What are economic challenges that governments must face? Check all that apply. 1. threats of war 2. unemployment 3. low production 4. inflation 5. low voter turnout

Which of these policies would a government take when it comes to employment? a. paying employees whether they work or not b. seeing that at least half the workforce has a job c. ensuring that as many workers are employed as possible d. making sure that only skilled workers get jobs

A government's monetary policy is its plan to control a. taxation and spending. b. prices. c. workers' wages. d. the money supply.

Rules ensuring that businesses offer safe products to consumers are part of a nation's a. trade policy. b. monetary policy. c. regulatory policy. d. fiscal policy.

What is the main goal in creating the federal budget? a. managing businesses and increasing spending on all programs b. deciding how to manage the government's tax revenue and expenditures c. finding a way to allow the economy to run on its own d. finding a way to slow down rapid economic growth

What does deficit spending require a government to do? a. lay off workers b. cut taxes c. take on debt d. hire more workers

When revenues are higher than expenditures in a budget, that budget a. shows a deficit. b. is in balance. c. must be discarded. d. shows a surplus.

Which of the following statements most accurately describes the federal government and its employees? a. Millions of Americans work for the federal government. b. The federal government is not allowed to hire employees. c. The majority of Americans are employed by the federal government. d. The number of federal employees is too small to affect government spending.

Which of the following was the highest spending priority for the federal government in 2010? a. labor and transportation b. veterans' affairs c. education/health and human services d. international assistance

Which statements accurately describe debts and deficits? Check all that apply. 1. Debt is free and does not affect a government. 2. A government's budget deficit causes debt to increase. 3. A government's budget deficit causes debt to decrease. 4. Debt requires a government to pay back more than it has borrowed. 5. The deficit is the amount a government spends above what it brings in.

Which of these effects of expansionary spending would a government most want to avoid? a. higher employment b. higher inflation c. growth in production d. growth in consumer spending

If expansionary taxation policies encourage growth, are they always appropriate to implement? a. No, government services could be reduced and cause serious problems for individuals and businesses. b. Yes, the private sector can easily and affordably replace all services and facilities cut by the government. c. No, the government is capable of providing many but not all services individuals and businesses need. d. Yes, the government will still ensure that individuals and businesses continue to receive all necessary services.

How is an excise tax different from a sales tax? a. An excise tax is not deductible. b. An excise tax applies to specific products. c. An excise tax applies only to imported goods. d. An excise tax is an indirect tax.

Which of these is most likely the US government's aim in taxing imported goods? a. to protect domestic businesses b. to decrease international trade c. to end reliance on foreign goods d. to make US markets less desirable

Governments collects taxes to ensure that a. there is sufficient money to fund all government programs. b. citizens contribute to meeting society's needs. c. politicians get paid in a timely manner. d. a government program exists for every need that arises.

Which are examples of programs or projects most likely funded by taxes in the United States? Check all that apply. 1. constructing a highway 2. collecting garbage 3. developing a vacation resort 4. building a shopping center 5. maintaining state parks

Under an expansionary taxation policy, the government tries to stimulate economic growth by a. increasing taxes. b. reducing taxes. c. increasing spending. d. reducing spending.

Which of these best describes income tax? a. regressive tax b. progressive tax c. direct tax d. proportional tax

Which best explains how contractionary policies can hamper economic growth? a. They slow demand. b. They help increase consumer debt. c. They reduce consumer confidence. d. They reduce disposable income.

High government expenditures can lead to a bigger a. revenue. b. stimulus. c. deficit. d. surplus.

A(n) _____ is a tax issued by the federal government on imported goods.

What gives the US government the power to collect taxes? a. the Constitution b. laws passed by Congress c. an executive order d. common law

Property taxes are usually determined based on a. the property owner's income. b. the amount of money invested in the property. c. the earnings generated by the property. d. the value of the property.

If a sales tax is the same for all goods sold within a given area, why are sales taxes considered regressive? a. High-income earners avoid paying sales tax through deductions. b. Sales taxes tend to be higher in areas with large low-income populations. c. Sales tax disproportionately affects low-income earners. d. Low-income earners make purchase decisions based exclusively on sales tax.

_____ monetary policy involves decreasing the money supply.

When inflation is _____ , the Fed aims to slow the economy.

If the domino effect occurs as a result of changes in the money supply, what will most likely happen as an immediate result of banks having more money to lend? a. Borrowing will increase. b. Interest rates will decrease. c. Investing will increase. d. Inflation will decrease.

Economists studying the money supply categorize the status of the money based on a. interest rates. b. liquidity. c. inflation rates. d. credit.

Which best describes what a central bank uses monetary policy to do? a. ensure that the government has a balanced budget b. influence financial institutions globally c. ensure that the government is sufficiently funded d. steer the economy away from recession and toward growth

In how many cities are Federal Reserve district banks located? a. 4 b. 12 c. 50 d. 8

Why does the Fed pay interest to banks? a. It is interest on money held in reserve. b. It is interest on credit available to the Fed. c. It is interest on loans taken by the Fed. d. It is interest on government investments.

Which of these is a banking activity of the Fed? a. printing money b. regulating securities markets c. storing money for banks d. funding government programs

The _____ rate is the interest rate banks charge each other for borrowing or storing money.

According to Brooks's article, what was the main effect of entrepreneurship in China? a. Poverty noticeably declined. b. Foreign investment declined. c. New products were invented. d. Product exports exceeded imports.

Why is the Fed often referred to as a "lender of last resort," or the last lender to turn to in a crisis? a. It lends consumers money when other banks will not. b. It keeps all failing banks afloat to avoid economic disruption. c. It helps finance and stabilize central banks internationally. d. It offers banks financial protection to keep consumers from panicking.

What must an entrepreneur assume when starting a business? a. that the correct location guarantees success b. that every product has a customer who wants it c. that clever market strategies may still fail to sell a product d. that raising funds is the most difficult step in starting a business

What is a main reason why entrepreneurs experience daily stress? a. They have considerable responsibility. b. They need to spend time training employees. c. They need to have sufficient income to pay loans. d. They have to contribute both to the market and society.

Successfully starting and running a business requires drive, talent, and clear vision of a long-range _____ .

According to the article by Brooks, successful entrepreneurs are most interested in a. job security. b. financial gain. c. personal fulfillment. d. a flexible working environment.

An entrepreneur would most likely be a a. low risk taker. b. trained manager. c. person who works well alone. d. person who has a brief work week.

An entrepreneur must accept being accountable for the failure of the company because the entrepreneur is a. part of the management team. b. responsible for organizing the business. c. expected to contribute positively to society. d. expected to dedicate the most hours to the business.

A new business should be based on an entrepreneur's individual interests because the entrepreneur must a. have sufficient confidence to succeed. b. be willing to take personal responsibility. c. have enough determination to work alone. d. dedicate as many hours as needed to the work.

What must an entrepreneur do after creating a business plan? a. open the business b. finance the business c. file the right paperwork d. identify an opportunity

What is one way for an entrepreneur to decrease risk? a. by mimicking popular products b. by maintaining personal flexibility c. by creating a strong business strategy d. by developing reliable sources for materials

In the year 2013, which of these fields has the largest percentage of workers? a. entertainment and tourism b. construction industry c. education and health care d. manufacturing industry

What is the most likely reason why many of the New York Factory Investigating Commission's suggestions were not implemented immediately? a. The public did not support new safety regulations until several factory disasters occurred. b. Many of the suggested changes would have negatively affected the quality of products made in factories. c. Most workers outside New York would not have benefited from widespread factory reform. d. Factory owners resisted the suggestions because they would be costly to implement.

What does the author believe about factory owners? a. They struggle just as workers do. b. They earned their privileges. c. They are greedy and selfish. d. They are stubborn but hardworking.

Who benefits most from workplace safety regulations? a. employers, who are less likely to lose income and productivity due to serious employee injuries b. qualified workers with disabilities, against whom employers may no longer discriminate c. all workers, who are less likely to miss work because of injury or face high medical bills d. rival companies, which gain an advantage by using more cost-effective safety measures

What is the definition of minimum wage? a. the lowest hourly pay that workers can receive b. the average pay for qualified workers c. the starting salary for all new employees d. the required pay when an employee is injured

What is the definition of collective bargaining? a. ongoing salary negotiations between an employee and a factory owner b. an agreement among a group of factory owners to raise worker wages c. a written set of guidelines about legal and illegal workplace conditions d. labor union and employer negotiations about wages and other issues

Which workers are most likely to be in demand in the future? a. those with high-tech skills b. those with construction skills c. those in government jobs d. those in manufacturing jobs

What is one benefit for US workers who have a college degree rather than a high school diploma? a. More than 80 percent of jobs require a college degree. b. Those with a college degree report higher job satisfaction. c. Most workers with a college degree are immune to layoffs. d. Those with a college degree earn nearly twice as much as those without college.

Why must the government consider companies' needs as well as those of workers? a. Workers often take advantage of safety and wage laws and regulations. b. Company owners can easily vote government officials out of office. c. Employers deserve the same benefits and protections as employees do. d. Regulations can be costly and may drive companies out of business.

If union contracts raise wages above competitive levels, what might be one negative outcome? a. Industries will raise salaries for top-level workers but not entry-level workers. b. Companies will move overseas to escape unions and hire cheaper labor. c. Inexperienced workers will lose their jobs to more experienced workers. d. Employees will be content with their status and thus less likely to join unions.

Which best describes the idea behind the "invisible hand"? a. Producers decide what to make for consumers, which guides the economy. b. Producers and consumers work together, which guides the economy. c. Government sets policy for producers and consumers, which guides the economy. d. Consumers decide what they need and want to buy, which guides the economy.

Why did Friedrich Hayek call expansionary spending dangerous? a. He felt it could lower the money supply and cause deflation. b. He felt it could lead to inflation and poor decisions by consumers. c. He felt it could lead to deflation and poor decisions by consumers. d. He felt it could lower available credit and cause a drop in prices.

Milton Friedman argued that consumers are more likely to alter their behavior based on a. changes in the unemployment rate. b. short-term changes in the economy. c. long-term changes in the economy. d. changes in the inflation rate.

How did Adam Smith's economic ideas help the United States establish a free enterprise system? Check all that apply. 1. They led to freedom of choice for consumers and producers. 2. They led to fixed prices for consumers and producers. 3. They led to open competition for consumers. 4. They led to individual ownership of property. 5. They led to more government spending and increased demand. 6. They led to limited choice and communal ownership of property.

Which economists most likely would have agreed with the US government's intervention during an economic crisis in 2008? a. John Maynard Keynes and Friedrich von Hayek b. Milton Friedman and Adam Smith c. John Maynard Keynes and Milton Friedman d. Adam Smith and Friedrich von Hayek

John Maynard Keynes believed that governments should increase spending in order to a. increase prices. b. increase supply. c. decrease demand. d. increase demand.

The General Theory of Employment, Interest and Money was written by a. John Maynard Keynes. b. Adam Smith. c. Milton Friedman. d. Friedrich August von Hayek.

A government might enact expansionary spending when it is trying to a. increase aggregate demand for goods. b. decrease aggregate demand for goods. c. slow an economic expansion. d. lower a budget deficit.

Which best summarizes the philosophical difference between economists John Maynard Keynes and Adam Smith? a. Keynes said government was the key to solving economic issues, while Smith believed government should take a hands-off approach. b. Smith said government was the key to solving economic issues, while Keynes believed government should take a hands-off approach. c. Smith believed in an "invisible hand" with which government pushes the economy, while Keynes did not agree with this idea. d. Keynes believed in an "invisible hand" with which consumers push the economy, while Smith did not agree with this idea.

What is likely to happen if a new aggregate demand curve moves to the right? a. Prices and output would drop in the short and long run. b. Prices would rise, and output would drop in the short run. c. Prices and output would rise in the short and long run. d. Prices would rise, and output would drop in the long run.

The most common business organizations in the United States are a. partnerships. b. sole proprietorships. c. corporations. d. franchises.

Which best describes the difference between sole proprietorships and partnerships? a. Sole proprietors keep all profits and have unlimited liability, while partners split profits and share liabilities. b. Sole proprietors share responsibilities, while partners are responsible for only a portion of the business. c. Sole proprietors split profits and share liabilities, while partners keep all profits and have unlimited liability. d. Sole proprietors pay taxes only on business profits, while partners do not have to pay taxes on profits.

People who buy stock in a company are known as _____.

Which best describes the difference between preferred and common stocks? a. Preferred stock allows shareholders to vote for a board of directors, while shareholders of common stock do not have voting rights. b. Common stock gives shareholders one vote per share owned, while shareholders of preferred stock do not have voting rights. c. Preferred stock gives shareholders priority for dividends distributed, while shareholders of common stock are not allowed dividends. d. Common stock allows shareholders to get priority for dividends distributed, while shareholders of preferred stock are not allowed dividends.

Which document determines the number of shares a company can sell? a. a stock prospectus b. an annual bill of rights c. a corporate charter d. an annual report

Franchises are attractive to business owners because a. they have a proven business model. b. they are typically inexpensive to buy. c. they get to keep all profits. d. they come with very little risk.

How do corporations raise money and resources to expand? a. They request a bank loan. b. They save business profits. c. They cash in dividends. d. They agree to sell stocks.

Entrepreneurs who want to open a franchise a. buys the rights from the parent company and creates his or her own rules. b. buy the rights from the parent company and invest in a location approved by the parent company. c. invest in a location and create a business model for the franchise. d. invest in a location and develop a trademark for the franchise.

What role does a fast-food corporation play when it agrees to franchise its business? Check all that apply. 1. The franchisor will supply training. 2. The franchisor will license a trademark. 3. The franchisor will select a location. 4. The franchisor will pay associated fees. 5. The franchisor will supply advertising. 6. The franchisor will collect most profits.

The main advantage that corporations have is a. limiting liability for owners and stockholders. b. giving many owners a say in business decisions. c. being inexpensive and easy to establish. d. requiring fewer state and federal regulations.

Economist Friedrich Hayek argued that _____ can serve as signals in an economy.

Expansionary spending takes place when a government makes the decision to a. put a freeze on the number of its employees. b. raise taxes to balance its budget. c. raise taxes to run a budget surplus. d. raise spending to stimulate the economy.

Which best describes a difference between the views of Milton Friedman and John Maynard Keynes on the economy? a. Friedman said that monetary policy should be used to influence aggregate demand, while Keynes believed the best approach was fiscal policy. b. Friedman said that fiscal policy should be used to influence aggregate demand, while Keynes believed the best approach was monetary policy. c. Keynes believed in little government intervention in the economy, while Friedman said government should play an active role. d. Keynes believed the economy was too complicated to think of aggregates, while Friedman said higher aggregate demand could solve issues.

What is a major factor in the decline of some occupations, such as those in the textiles and clothing industries? a. shifting consumer tastes b. overseas labor costs c. changing technologies d. aging populations

Which describes an example of the economic system known as free enterprise? a. People are free to shop around for products, but manufacturers dictate what is available. b. People are free to shop for the best price on products because there is open competition. c. Government oversight of business gives people freedom to shop for the best deals. d. Government regulations ensure that everyone has the freedom to shop for the best deals.

Two doctors who join forces in business form a _____.

Among the changes that labor reformers wanted after the Industrial Revolution was a. more jobs for untrained workers. b. a ban on child factory workers. c. jobs for women factory workers. d. equal pay for owners and workers.

A business owner would most likely create a cooperative instead of buying a franchise because a. cooperatives give majority owners the most control, while franchises make decisions with a parent company. b. cooperatives make it easy to accumulate supplies, while franchises come with supplier relationships already in place. c. cooperatives are well financed by members, while franchises must raise large sums of money to launch a business. d. cooperatives allow all owners to share profits, while franchises are required to share profits with a parent company.

What part does interest play in deficit spending? a. Governments must pay interest on money they borrow when they take on debt. b. Citizens must pay interest when their governments borrow money. c. Governments may charge foreign countries interest when they borrow money. d. Interest is not a factor when a government's budget is in deficit.

Which best describes why governments collect taxes? a. to control the value of currency b. to keep the government running c. to ensure surplus funds d. to fund government programs

Which best explains why a sole proprietor would want a partner? a. to reduce the number of responsibilities b. to make it easier to raise funds for expansion c. to move into a more favorable tax bracket. d. to take advantage of little government oversight.