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Economics Quiz Chapter 10 – Flashcards 25 terms

Andrew Hubbs

25 terms

Preview

Economics Quiz Chapter 10 – Flashcards

question

Which of the following statements are true? A) A bank's assets are its sources of funds. B) A bank's liabilities are its uses of funds. C) A bank's balance sheet shows that total assets equal total liabilities plus equity capital. D) A bank's balance sheet indicates whether or not the bank is profitable.

answer

C. A bank's balance sheet shows that total assets equal total liabilities plus equity capital

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Bank capital is listed on the ________ side of the bank's balance sheet because it represents a ________ of funds. A) liability; use B) liability; source C) asset; use D) asset; source

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B. liability; source

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The amount of checkable deposits that banks are required by regulation to hold are the A) excess reserves. B) required reserves. C) vault cash. D) total reserves.

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B. required reserves

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Bank's make their profits primarily by issuing A) equity. B) negotiable CDs. C) loans. D) NOW accounts.

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C. loans

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Banks may borrow from or lend to another bank in the Federal Funds market. A loan of excess reserves from one bank to another bank is recorded as a(n) ________ for the borrowing bank and a(n) ________ for the lending bank. A) asset; asset B) asset; liability C) liability; liability D) liability; asset

answer

D. liability; asset

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Banks earn profits by selling ________ with attractive combinations of liquidity, risk, and return, and using the proceeds to buy ________ with a different set of characteristics. A) loans; deposits B) securities; deposits C) liabilities; assets D) assets; liabilities

answer

C. liabilities; assets

question

When you deposit a $50 bill in the Security Pacific National Bank, A) its liabilities decrease by $50. B) its assets increase by $50. C) its reserves decrease by $50. D) its cash items in the process of collection increase by $50.

answer

B. its assets increase by $50

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When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank, then A) the liabilities of the First National Bank decrease by $10. B) the reserves of the First National Bank increase by $10. C) the liabilities of Citibank decrease by $10. D) the assets of Citibank decrease by $10.

answer

A. the liabilities of the First National Bank decrease by $10

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A deposit outflow results in equal reductions in A) loans and reserves. B) assets and liabilities. C) reserves and capital. D) assets and capital.

answer

B. assets and liabilities

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A $5 million deposit outflow from a bank has the immediate effect of A) reducing deposits and reserves by $5 million. B) reducing deposits and loans by $5 million. C) reducing deposits and securities by $5 million. D) reducing deposits and capital by $5 million.

answer

A. reducing deposits and reserves by $5 million

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If, after a deposit outflow, a bank needs an additional $3 million to meet its reserve requirements, the bank can A) reduce deposits by $3 million. B) increase loans by $3 million. C) sell $3 million of securities. D) repay its discount loans from the Fed.

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C. sell $3 million of securities

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________ may antagonize customers and thus can be a very costly way of acquiring funds to meet an unexpected deposit outflow. A) Selling securities B) Selling loans C) Calling in loans D) Selling negotiable CDs

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C. Calling in loans

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Which of the following statements most accurately describes the task of bank asset management? A) Banks seek the highest returns possible subject to minimizing risk and making adequate provisions for liquidity. B) Banks seek to have the highest liquidity possible subject to earning a positive rate of return on their operations. C) Banks seek to prevent bank failure at all cost; since a failed bank earns no profit, liquidity needs supersede the desire for profits. D) Banks seek to acquire funds in the least costly way.

answer

A. Banks seek the highest returns possible subject to minimizing risk and making adequate provisions for liquidity

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A bank will want to hold more excess reserves (everything else equal) when A) it expects to have deposit inflows in the near future. B) brokerage commissions on selling bonds increase. C) the cost of selling loans falls. D) the discount rate decreases.

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B. brokerage commissions on selling bonds increase

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Which of the following would a bank not hold as insurance against the highest cost of deposit outflow-bank failure? A) Excess reserves B) Secondary reserves C) Bank capital D) Mortgages

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D. Mortgages

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Holding large amounts of bank capital helps prevent bank failures because A) it means that the bank has a higher income. B) it makes loans easier to sell. C) it can be used to absorb the losses resulting from bad loans. D) it makes it easier to call in loans.

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C. it can be used to absorb the losses resulting from bad loans

question

For a given return on assets, the lower is bank capital, A) the lower is the return for the owners of the bank. B) the higher is the return for the owners of the bank. C) the lower is the credit risk for the owners of the bank. D) the lower the possibility of bank failure.

answer

B. the higher is the return for the owners of the bank

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Banks hold capital because A) they are required to by regulatory authorities. B) higher capital increases the returns to the owners. C) it increases the likelihood of bankruptcy. D) higher capital increases the return on equity.

answer

A. they are required to by regulatory authorities

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In one sense ________ appears surprising since it means that the bank is not ________ its portfolio of loans and thus is exposing itself to more risk. A) specialization in lending; diversifying B) specialization in lending; rationing C) credit rationing; diversifying D) screening; rationing

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A. specialization in lending; diversifying

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Long-term customer relationships ________ the cost of information collection and make it easier to ________ credit risks. A) reduce; screen B) increase; screen C) reduce; increase D) increase; increase

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A. reduce; screen

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A bank that wants to monitor the check payment practices of its commercial borrowers, so that moral hazard can be prevented, will require borrowers to A) place a bank officer on their board of directors. B) place a corporate officer on the bank's board of directors. C) keep compensating balances in a checking account at the bank. D) purchase the bank's CDs.

answer

C. keep compensating balances in a checking account at the bank

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When a lender refuses to make a loan, although borrowers are willing to pay the stated interest rate or even a higher rate, the bank is said to engage in A) coercive bargaining. B) strategic holding out. C) credit rationing. D) collusive behavior.

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C. credit rationing

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All else the same, if a bank's liabilities are more sensitive to interest rate fluctuations than are its assets, then ________ in interest rates will ________ bank profits. A) an increase; increase B) an increase; reduce C) a decline; reduce D) a decline; not affect

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B. an increase; reduce

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The difference of rate-sensitive liabilities and rate-sensitive assets is known as the A) duration. B) interest-sensitivity index. C) rate-risk index. D) gap.

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D. gap

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If the First National Bank has a gap equal to a negative $30 million, then a 5 percentage point increase in interest rates will cause profits to A) increase by $15 million. B) increase by $1.5 million. C) decline by $15 million. D) decline by $1.5 million.

answer

D. decline by $1.5 million

STUDY

Global Financial Crisis Greenhouse Gas Emissions Renewable Energy Sources Triple Bottom Line

Actual International Business: Chapter 5 – Flashcards 39 terms

Jacob Patel

39 terms

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Actual International Business: Chapter 5 – Flashcards

question

The relationships among ecological, social, and economic systems in sustainable environments need to be:

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interdependent

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The stakeholder model requires businesses to think about:

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the network of tensions caused by competing demands

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Stakeholder theory pushes managers to be clear about how they want to do business, so it encourages:

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recognition of and transparency with values and underlying principles

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Physical barriers that have led to the development of separate languages in the same country are known as:

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topographical barriers

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With factor conditions, Porter's diamond model distinguishes between basic factors, those a country inherits, and

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advanced factors, those a country can mold: labor and infrastructure

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Swiss exports are concentrated, high-density products that minimize the need for importing bulky materials because:

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mountain ranges increase transport costs into and out of Switzerland and limit local resources.

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Geographical proximity contributes to:

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(knowledge of the country by its neighbors, lower freight costs, the likelihood of trade relationships) all of the above

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Topography, including mountains, deserts, plains, and bodies of water, greatly influences:

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the physical distribution of products and services

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Nations whose mountains divide them into smaller regional areas include:

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Switzerland, Afghanistan, China, and Colombia

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One example of the effect of topography is:

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isolated language groups, which require special marketing adjustments.

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Climate influences:

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what people can do, physically and economically

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World Bank studies have shown that underdevelopment is often due to:

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factors such as parasites and viruses that are a part of tropical climates and expand unchecked because of the lack of winter temperatures.

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Petroleum, a relatively cheap nonrenewable energy source, is:

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being increasingly depleted and is expected to run out in another 50 years, but in the meantime, improved retrieval techniques are being developed.

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The top four countries in proven reserves are:

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Saudi Arabia, Canada, Iran, and Iraq

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As an energy source, nuclear power:

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(is growing significantly, especially in developing countries, has been growing as the price of oil climbs and cleaner energy sources (nonpolluting) are sought, has been exploited by France, which has one of the lowest greenhouse gas emissions in the industrialized world.) all of the above

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Coal pollutes heavily:

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(B. yet its consumption has increased and is projected to continue on this trend, especially in China and India and C. and contributes to greenhouse gas emissions, especially in China, India, and the United States.) B and C

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Renewable energy sources:

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(A. will replace fossil fuels, due to price, depletion, or carbon emissions and B. are growing at greater rates than the nonrenewables in the United States and Europe) A and B

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Environmental sustainability is both local and global because:

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environmental conditions do not recognize national borders.

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The three characteristics of evolving sustainable business practices are:

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limits, interdependence, and equity

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Stakeholder theory is an understanding of how business works that:

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takes into account all identifiable interest holders

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A way to measure a company's success in sustainable business practices is:

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triple-bottom-line accounting

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Proximity is a factor in explaining:

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the number of a nation's political and trade relationships

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Climate is probably the most important element of the physical forces, as it sets the limits on:

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what people can do physically and economically

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The main transportation artery of Europe is the:

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Rhine waterway

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Bodies of water that provide inexpensive access to interior markets are known as:

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inland waterways

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Every continent has inland waterways that provide inexpensive access to interior markets except:

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Australia

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The North-South divide uses climatic differences to explain:

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differences in human development

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Studies conducted by the World Bank indicate that tropical climates allow for:

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the unimpeded reproduction and growth of weeds, viruses, birds, insects, and parasites.

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Natural resources are:

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anything provided by nature on which people depend

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The marketed energy use has been dominated since 1980 by:

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nonrenewable energy sources.

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Unconventional sources of petroleum such as oil sands and shale are often grouped together and referred to as:

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heavy oil

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This material, when heated to 500°C, will yield 25 liters or more per ton of input:

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shale

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This is the only industrialized country that has not ratified the Kyoto Protocol, a UN convention on climate change:

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the United States

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Wind power is sourced:

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on land and sea

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According to the text, the fastest-growing renewable energy source is:

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solar PV

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China's vast and mountainous terrain leads to:

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many languages and dialects

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Deserts and tropical forests seem opposites, but they have this trait in common:

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they separate markets, increasing transportation costs

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Rare earths are a group of elements used in:

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technology applications

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Which country controls the export market of rare earths?

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China

STUDY

Global Financial Crisis International Business

BUSMHR 2000 Ch. 1 – Flashcards 50 terms

Ben Stevenson

50 terms

Preview

BUSMHR 2000 Ch. 1 – Flashcards

question

The shift toward a more integrated and interdependent world economy is referred to as globalization

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true

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A company does not need a large size to facilitate, and benefit from, the globalization of markets

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true

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Companies hope to lower their overall cost structure or improve the quality of functionality of their product offering through globalization of production

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true

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The most global markets currently are markets for consumer products

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false

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Outsourcing is a process that is limited to manufacturing enterprises

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false

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The World Bank has focused on policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties

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false

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The World Bank is known as the lender of the last result

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false

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One of the UN's central mandates is the promotion of higher standards of living, full employment, and conditions of economic and social progress and development

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true

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The Uruguay Round, finalized in December 1993, reduced protection for patents, trademarks, and copyrights

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true

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Rivers Inc., a U.S. based sports apparel manufacturer, sets up a production unit in China to take advantage of the lower labor costs there. This is an example of foreign direct investment

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true

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World Bank gives an aid of 100 million dollars to Kenya for creating rural health care facilities. This is an example of foreign direct investment

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false

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The lowering of barriers to international trade enables firms to view the world, rather than a single country, as their market

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true

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According to WTO data, the volume of world merchandise trade has grown faster than the world economy since 1950

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true

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The expansion of world trade implies that nations are becoming less dependent on each other for important goods and services

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false

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The globalization of markets and production and the resulting growth of world trade, foreign direct investment, and imports all imply that firms are finding their home markets protected from foreign competitors

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false

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Globalization of markets has resulted in greater differentiation of consumer tastes and preferences

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false

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a multinational enterprise (MNE) is any business that exports or imports from other countries

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false

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A current trend in international business is the decline of medium-sized and small multinationals, known as mini-multinationals

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false

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The globalization of the world economy has resulted in a relative increase in the dominance of U.S. firms in the global marketplace

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false

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Recent evidence indicates that the solution to the problem of stagnant incomes among the unskilled is to be found in increasing government regulation of markets

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false

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According to supporters of free trade, as countries get richer they commit greater violation of environmental and labor regulations

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false

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According to critics of globalization, today's interdependent global economy limits a nation's national sovereignty

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true

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Critics of globalization suggest that over the last century, the gap between the rich and poor nations of the world has shrunken

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false

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Since the collapse of communism at the end of the 1980s, the erstwhile communist nations have transformed their economies by globalizing their markets. This involves _____. A. regulating markets B. privatizing state-owned enterprises C. decreasing competition D. reducing foreign investment

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Which of the following is a consequence of globalization? A. Decreasing interdependence between national economies B. Increasing outsourcing of services C. Differentiation of material culture D. Increase in barriers to cross-border trade

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Which of the following has enabled globalization of markets? A. Differentiation amongst national markets B. Falling barriers to cross border trade C. Reduced homogeneity of material culture across the world D. Increased government ownership of factors of production

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Which of the following factors hinders globalization of consumer goods market? A. National differences in tastes and preferences B. Higher production costs in developed nations C. Homogenization of material culture D. Increasing outsourcing of goods and services

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Globalization of markets results in markets becoming _____. A. less interdependent B. less diverse C. more protected D. less competitive

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29. A U.S. Investment firm, Fin-Smart, set up a customer service call center in India to take advantage of the lower labor costs. This is called _____. A. homogenizing markets B. vertical integration C. outsourcing D. horizontal integration

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Early outsourcing efforts were primarily confined to _____. A. health care B. service activities C. technological research D. manufacturing activities

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Which of the following is NOT an impediment that makes it difficult for firms to achieve the optimal dispersion of their productive activities to locations around the globe? A. Reduced tariffs on imports of manufactured goods B. Government regulations C. Issues associated with economic and political risk D. Barriers to foreign direct investment

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question

The General Agreement on Tariffs and Trade (GATT) was responsible for _____. A. protecting government owned enterprises B. policing the global marketplace C. limiting nuclear testing D. promoting environment friendly technology

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The ______ is primarily responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties signed by member states. A. International Development Association B. World Bank C. International Court of justice D. World Trade Organization

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The World Trade Organization promotes _____. A. lowering of barriers to cross-border trade and investment B. infrastructural development in poor nations through low-interest loans C. state ownership of major enterprises D. regulation of national economies

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question

Which of the following is true about the International Monetary Fund? A. It is primarily responsible for policing the world trading system. B. It is seen as the lender of last resort to nation-states whose economies are in turmoil. C. It is responsible for establishing multinational treaties to govern the global business system. D. It was established to formulate a coordinated policy response to financial crises in developing nations.

answer

question

The _____ was established on October 24, 1945, by 51 countries committed to preserving peace through international cooperation and collective security. A. World Trade Organization B. United Nations C. G20tx D. World Bank

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_____ occurs when a firm exports goods or services to consumers in another country. A. International trade B. Foreign direct investment C. Inward investment D. Outsourcing

answer

question

Which of the following is NOT a consequence of the reduction in trade barriers and restrictions on FDI since 1950? A. Firms are dispersing parts of their production process to global locations to drive down production costs and increase product quality. B. The economies of the world's nation states are becoming more intertwined. C. Nations are becoming more independent of each other for important goods and services. D. The world has become significantly wealthier since 1950.

answer

question

The relative decline of the United States in the share of world output and world exports reflects _____. A. an increase in the barriers to foreign trade in the U.S. B. the deepening of the global financial crisis C. the reduced industrialization in developing nations D. the growth in the economic development of the world economy

answer

question

Throughout the 1990s, the amount of foreign direct investment directed at both developed and developing nations increased dramatically. This trend reflects: A. a slowdown in global economic activity. B. the increasing share of the U.S. in the total FDI stock. C. the decline in cross-border flows of foreign direct investment. D. the increasing internationalization of business corporations.

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Which of the following countries has been the largest recipient of foreign direct investment and received about $60 billion to $100 billion a year in inflows in 2004-2009? A. Brazil B. Russia C. India D. China

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question

A multinational enterprise (MNE) is a firm that _____. A. exports its products to multiple countries B. has production units in more than two countries C. does most of its business on the Internet D. lists its securities on a public exchange

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question

Which of these statements pertaining to cross-border FDI flows is true? A. There was a growth of FDI between 2004 and 2007. B. A slump in FDI from 1998 to 2000 was followed by a surge from 2001 to 2003. C. Among developing nations, the largest recipient of FDI has been Russia. D. The dramatic increase in FDI reflects the decreasing internationalization of business corporations.

answer

question

In the last two decades, Latin American countries like Brazil, Mexico, and Chile have _____. A. embraced communist principles B. promoted government ownership of enterprises C. experienced increasing debt and inflation D. welcomed foreign investment

answer

question

Which of the following is a risk associated with globalization? A. Restrictions on competition B. Global financial contagion C. Excessive market regulation D. Differentiation of markets

answer

question

Supporters of globalization maintain that the apparent decline in real wage rates of unskilled workers: A. is due to technological changes that create greater demand for skilled workers. B. is due to the migration of low-wage manufacturing jobs offshore. C. can be checked by increasing government ownership of enterprises. D. can be checked by limiting free trade and foreign investment.

answer

question

Globalization is criticized because it increases the power of _____. A. governments to own enterprises B. unskilled labor to form labor unions C. supranational organizations over nation-states D. nation-states to regulate markets and reduce competition

answer

question

An international business, unlike a multinational enterprise, _____. A. needs to have manufacturing units in at least two foreign nations B. needs to manufacture products or provide services that target a global market C. need not customize its products to the requirements of national markets D. need not invest directly in operations in other countries

answer

question

Which of the following statements is true about an international business? A. An international business needs to invest directly in operations in other countries. B. An international business needs to have homogenous practices across countries. C. An international business can be managed in the same way that a domestic business is managed. D. An international business must find ways to work within the limits imposed by government intervention.

answer

question

A number of econometric studies have found consistent evidence of a hump-shaped relationship between income levels and pollution levels. According to this, as an economy grows and income levels rise: A. initially the pollution levels remain low B. after a while the pollution levels decrease C. the pollution levels also rise in proportion to the economic growth D. there is increasing industrialization which leads to greater pollution

answer

STUDY

Business Business Management Federal Deposit Insurance Corporation Free Market System Global Financial Crisis

Intro to Business Chapter 2 – Flashcards 47 terms

Niamh Mitchell

47 terms

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Intro to Business Chapter 2 – Flashcards

question

Economy

answer

A financial and social system of how resources flow through society, from production to distribution, to consumption.

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Economics

answer

The study of the choices that people, compaines, and governments make in allocating society's resources

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Macroeconomics

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The study of a countrys overall economic issues, such as the employment rate, the gross domestic products and taxation policies

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Microecomonics

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The study of smaller economic units such as individual consumers, families and individual businesses.

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Financial policy

answer

goverment efforts to influence the economy through taxation and spending.

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Budget Surplus

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Overage that occurs when revenue is higher than expenses over a given period of time.

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Budget deficit

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Shortfall that occurs when expenses are higher than revenue over a given period of time.

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Federal debt

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The sume of all the money that the Federal Goverment has borrowed over the years and not yet repaid.

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Monetary policy

answer

Federal Reserve decisions that shpe the economy by influencing interest rates and the supply of money.

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Money supply

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The total amount of money within the overall economy.

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M1 Money supply

answer

Includes all currency pluch checking accounts and traveler's checks.

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M2 Money Supply

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Includes all of M1 money supply plus monst savings accounts, money market accounts, and certificates of deposit.

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Open Market Operations.

answer

The Federal Reserve function of buying and selling government securities which include treasury bonds, notes and bills.

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discount rate

answer

The rate of interest that the Federal Reserve charges when it loans funds to banks.

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Federal Deposit Corporation (FDIC)

answer

A federal agency that insures deposits in banks and thirt institutions for up to $100,000 per customer, per bank.

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Reserve requirment

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A rule set by the Fed, which specifies the minimum aomount of reserves (or funds) a bank must hold, expressed as a percentage of the bank's deposits.

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economic system

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A structure for allocating limited resources.

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capitalism

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An ecomonic system - also known as the private enterpise or free market system based on private ownership, econmomic freedom, and fair competition.

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Pure Competition

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A market structure with many competitors selling virtually identical products. Barriers to entry are quite low.

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Monompolistic competition

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A market structure with many competitors selling differentiated products. Barriers to entry are low.

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Oligopoly

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A markt structure with only a handful of competitors selling products that are either similar or different. Barriers to entry are typically high.

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Monopoly

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A market structure with one producer completely dominating the industry, leaving no room for any significatnt competitors. Barirers to entry tend to be virtually insurmountable.

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natural monopoly

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A market structure with one company as the supplier of a product because the nature of that product makes a single supplier more efficient than multiple, competing ones. Most natural monopolies are goverment sanctioned and regulated.

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Supply

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The quantity of products that producers are willing to offer for sale at different market prices.

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Supply Curve

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The graphed relationship between price and quantity from a supplier standpoint.

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demand

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The quantitiy of products that consumers are willing to buy at different market prices.

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demand curve

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The graphed relationship between price and quantity from a customer demand standpoint.

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equilibrium price

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The price associated with the point at which the quantity demanded of a product equals the quantity supplied.

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socialism

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An economic system based on the principle that the goverment should own and operate key enterprises that directly affect public welfare.

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Communism

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An economic and political system that calls for public ownership of virtually all enterprises, under the direction of a strong central goverment.

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Mixed economies

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Economies that embody elements of both planned and market-based economic systems.

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privatization

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The process fo converting govmerment owned businesses to private ownership.

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Gross Domestic Product (GDP)

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The total value of all final goods and servides produced within a nation's physical boundaries over a given period of time.

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Unemployment rate

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Teh percentage of people in the labor force over age 15 wo do not have jobs and are actively seeking employment.

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Business cycle

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The periodic contraction and expansion that occur over time in virtually every economy.

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Contraction

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a period of ecomonic downturn, marked by rising unemployment and falling business production

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Recession

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An economic downturn marked by a decrease in the GDP for two consecutive quarters.

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Depression

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An especially deep and long lasting recession.

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recovery

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A period of rising economic growth and employment.

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expansion

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a period of robust ecomonic growth and high employment.

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inflation

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a period of rising average prices accross the economy.

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hyperinflation

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an average montly infalation rate of more than 50%

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disinflation

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A period of slowing average price increases across the economy.

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Deflation

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a period of falling average prices accross the economy.

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Consumer price index (CPI)

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A measure of inflation that evaluates the change in the weighted-average price of goods and services that the average consumer buys each month.

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Producer price Index (PPI)

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A measure of inflation that evaluates the change over time in the weighted-average wholesale prices.

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Productivitiy

answer

The basic relationship between the production of goods and services (output) and the resources needed to produce them (input) calculated via the following equation: output/input = productivity

STUDY

Global Financial Crisis Long Run Aggregate Supply Macroeconomics Principles Of Economics: Macroeconomics Real Interest Rate Short Run Phillips Curve

Macro- CH 12 – Flashcards 43 terms

Robert May

43 terms

Preview

Macro- CH 12 – Flashcards

question

Keynes used the term "animal spirits" to represent

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fluctuations in business confidence

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Both the new classical and new Keynesian business cycle theories agree that

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the money wage rate is influenced by rational expectations of the price level

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In real business cycle theory, all of the following events can be sources of fluctuation in productivity except___. 1. climate fluctuations 2. changes in the growth rate of money 3. the pace of technological change 4. natural disasters

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2. changes in the growth rate of money

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Using the monetarist model, place the following events in order in which they occur in the business cycle. 1. Money wages fall and the SAS curve shifts rightward 2. The Federal Reserve decreases the growth rate of the quantity of money 3. The AD curve shifts leftward

answer

2, 3, 1

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What theory maintains that the money wage rate always adjusts freely?

answer

real business cycle theory

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The key ripple effect in real business cycle theory is the ____ decision and it depends on the ____.

answer

when-to-work; real interest rate

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According to the new Keynesian cycle theory of the business cycle, which of the following can trigger a business cycle expansion? 1. an unexpected increase in the quantity of money 2. an expected increase in the quantity of money 3. an expected increase in government expenditures

answer

1, 2, & 3

question

According to the real business cycle theory, the immediate effects from a change in productivity include which of the following? 1. Investment demand changes 2. Demand for labor changes 3. Government expenditures change

answer

1 & 2

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Which of the following describes the Keynesian approach to the business cycle? 1. Unanticipated shocks to aggregate supply drive expansions and recessions 2. The Keynesian theory is a real business cycle model of the economy 3. A decrease in business confidence can trigger a recession

answer

3 only

question

According to RBC theory, the main source of economic fluctuations is a decrease in ___, which ___ investment demand, ___ the demand for loanable funds, and ___ the real interest rate.

answer

productivity growth; decreases; decreases; lowers

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The decrease in productivity growth also ___ the demand for labor, ___ the supply of labor, ___ employment, and ___ the real wage rate.

answer

decreases; decreases; decreases; lowers

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According to mainstream business cycle theory, ____ grows at a steady rate and ____ grows at a fluctuating rate.

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potential GDP; aggregate demand

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Critics of the real business cycle theory claim that

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the intertemporal substitution effect is too weak to account for changes in labor supply.

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"Intertemporal substitution" in labor supply describes changes in labor supply in response to changes in

answer

the real interest rate.

question

Which of the following pieces of evidence is most consistent with monetarist theory? 1. productivity and GDP move closely together 2. Changes in real GDP and the quantity of money move closely together 3. Money wage rates take some time to adjust to price changes 4. Labor supply decisions do not seem to depend on real interest rates

answer

2. Changes in real GDP and the quantity of money move closely together

question

According to mainstream business cycle theory, the money wage rate is sticky and consequently if aggregate demand grows faster than potential GDP, an

answer

inflationary gap emerges.

question

A larger than expected increase in aggregate demand will lead to ____ to the ____ of the business cycle.

answer

an expansion; new classical cycle theory

question

Which of the following are business cycle theories that regard fluctuations in aggregate demand as a factor creating business cycles? 1. Keynesian cycle theory 2. real business cycle theory 3. monetarist cycle theory

answer

1 & 3

question

Based on the Keynesian theory of the business cycle, if the economy is at its full-employment equilibrium and aggregate demand increases then

answer

the price level and real GDP both increase.

question

Which of the following is TRUE regarding the monetarist theory of the business cycle? 1. Monetarists assume that the quantity of money increases at a constant rate 2. Fluctuations in interest rates cause business cycles 3. Changes in the growth rate of the quantity of money affect aggregate demand

answer

3 only

question

In 2008, when a recession started, the growth of government expenditures on goods and services doubled from its growth in 2007. According to aggregate demand theories of the business cycle

answer

government expenditure was not a cause of the recession.

question

According to the RBC theory, the source of the business cycle is ___, which result mainly from ___.

answer

fluctuations in productivity; fluctuations in the pace of technological change

question

They key difference between the new classical theory of the business cycle and the new Keynesian theory of the business cycle is that the new classical theory believes that ____ while the new Keynesian theory believes that ___.

answer

only unexpected changes in aggregate demand will change real GDP; both expected and unexpected changes in aggregate demand will change real GDP

question

New Keynesian economists believe that ___ is influenced by ___.

answer

today's money wage rate; yesterday's rational expectations of the price level

question

The new classical theory predicts that an unexpected increase in aggregate demand ____ create a business cycle and an expected increase in aggregate demand ___ create a business cycle.

answer

will; will not

question

In an expansion, an increase in the rate of technological change ___ investment demand. The real interest rate ___.

answer

increases; rises

question

Suppose that the business cycle in the US is best described by the RBC theory. An advance in technology increases productivity. The when-to-work decision depends on the real interest rate. The ___ the real interest rate, mother things remaining the same, the ___ is the supply of labor today. RBC theorists believe the when-to-work effect is ___.

answer

higher; larger; large

question

The main criticisms of RBC theory include all of the following except: 1. the money wage rate is sticky, and to assume otherwise is at odds with a clear fact 2. real business cycle theory relies too heavily the role of money in the economy to make its predictions 3. intertemporal substitution is too weak a force to account for large fluctuations in labor supply and employment with small real wage rate changes 4. productivity shocks are as likely to be caused by technological change

answer

question

Defenders of RBC theory claim ___. 1. RBC theory is consistent with investment demand decisions and information on the distribution of income between labor and capital 2. RBC theory is consistent with labor supply and labor demand decisions 3. RBC theory explains the macroeconomic facts about the business cycle and is consistent wtih the facts about economic growth

answer

ALL

question

The mainstream business cycle theory is that ___ grows at a steady rate while ___ grows at a fluctuating rate.

answer

potential GDP; aggregate demand

question

In mainstream business cycle theory, the money wage rate is ___.

answer

sticky

question

If aggregate demand grows faster than potential GDP, ___ gap emerges and if it grows more slowly than potential GDP, ___ gap emerges.

answer

an inflationary; a recessionary

question

One assumption of the new classical model is that

answer

people make rational expectations about aggregate demand

question

Suppose the growth rate of the quantity of money increased from 5% per year to 8% per year. According to the ____, this event would trigger a business cycle expansion.

answer

monetarist cycle model

question

According to the ___ theory, technological change can be so rapid that some existing capital becomes obsolete and ___.

answer

real business cycle; productivity falls

question

According to the real business cycle theory, technological change

answer

happens at an uneven pace.

question

The Keynesian explanation of the business cycle rests on several concepts, including

answer

rigid money wage rates.

question

In ___ cycle theory, fluctuations in investment driven by fluctuations in business confidence are the main source of fluctuations in aggregate demand.

answer

Keynesian

question

In ___ cycle theory, fluctuations in both investment and consumption expenditure, driven by fluctuations in the growth rate of the quantity of money, are the main source of fluctuations in aggregate demand.

answer

Monetarist

question

In ___ cycle theory, the rational expectation of the price level, which is determined by potential GDP and expected aggregate demand, determines the money wage rate and the position of the SAS curve.

answer

New Classical

question

In ___ cycle theory, past rational expectations of the current price level influence the money wage rate and the position of the SAS curve.

answer

new Keynesian

question

T/F: Economists have not been able to isolate the RBC theory impulsive.

answer

False

question

In the monetarist business cycle theory, increases in money growth temporarily ___ real GDP and ___ the price level.

answer

increase; rise

STUDY

Business Business Management Economic Model Of Social Responsibility Economy Global Financial Crisis Goods And Services Tax Exempt Status

Flashcards and Answers – Test 1 145 terms

Gabriela Compton

145 terms

Preview

Flashcards and Answers – Test 1

question

Approximately 70 percent of U.S. production consists of goods and services purchased by individuals for personal or household consumption.

answer

True

question

Material resources include sand, water, wood, dump trucks, and computers.

answer

True

question

In a socialist economy, the distribution of goods and services - who gets what - is controlled by the government however some smaller businesses may be privately owned.

answer

True

question

If a company's sales are higher than its expenses, the company has earned what is known as revenue.

answer

False

question

The "invisible hand" was a term coined by Adam Smith.

answer

True

question

Approximately 45 percent of small businesses fail within the first seven years.

answer

False

question

When a firm is lacking financing, inventory, or time, it is dealing with issues of scarcity.

answer

True

question

Generally, the business cycle consists of four phases: the peak, recession, the trough, and recovery.

answer

True

question

A system of business where the key industries are owned and controlled by the government with private ownership of some business is known as capitalism.

answer

False

question

The ________ for a particular product is the quantity that buyers are willing to purchase at each varying price.

answer

demand

question

The health of a nation's economy is actually quite unrelated to the amount of interest consumers pay for homes, automobiles, and credit card purchases.

answer

False

question

Information is the resource that managers use to effectively combine human, financial, and material resources.

answer

True

question

Microeconomics is the study of the economy of an entire nation as well as the global economy.

answer

False

question

Best Buy, an electronics retailer, could be considered a marketing intermediary.

answer

True

question

People do not simply buy goods and services to just own them; they buy goods and services to satisfy a specific need.

answer

True

question

Bushels of corn, wheat, or barley that have no unique characteristics are part of a perfect competition market.

answer

True

question

The only current example of a command economy is capitalism.

answer

False

question

When an economy is at its highest point and unemployment is low, the economy is in a peak period.

answer

True

question

Manufacturers in the auto industry operate in a monopoly setting.

answer

False

question

Studies show that the incidence of innovation among small-business workers is ________ than among workers in large businesses.

answer

b. significantly higher

question

Airplanes manufactured by Boeing, cars manufactured by Nissan, and Kellogg's cereal are all examples of

answer

oligopolies

question

Since we assume producers are rational people, we would expect them to offer more of a product at a higher price than to offer the product at a lower price.

answer

True

question

The ability to deal effectively with individual employees as well as other managers and people outside the organization are known as conceptual skills.

answer

False

question

Large emerging economies like China, Mexico, and India illustrate which of the following business environments?

answer

a. All of these choice are correct.

question

Which of the following is an example of a risk an entrepreneur takes when starting a business?

answer

a. Losing whatever investments are in the business.

question

Travis Henry recently started a small retail business offering specialty items from China. He realizes that economic freedom in a largely capitalist society includes which of the following rights?

answer

d. The existence of new competitors to enter his market

question

John Garcia was born in the United States to parents that came from rural Oaxaca, Mexico, a community with high rates of poverty, few public services, and even fewer economic opportunities. John merged his passion for healthy food with his love of his family recipes for Mexican food and in 1998 opened Natural Mexican, the first Mexican restaurant in Portland, Oregon, that specialized in using all organic, local products. In 2005, with a favorable economic outlook and low national unemployment, John decided it was a prime time to launch two additional restaurants. Currently, all three restaurants are more profitable than their competitors. Nevertheless, increased competition from several other organic restaurants and vendors at local farmers' markets is starting to worry him. John has narrowed his options down to two: (1) reduce his current expenses by 10 percent to increase profit margin, or (2) start looking into packaging some of his salsa and guacamole products for sale in local grocery stores. John's use of family recipes in his restaurants as well as the traditional tools used to authentically create them could be considered

answer

a. material resources.

question

John Garcia was born in the United States to parents that came from rural Oaxaca, Mexico, a community with high rates of poverty, few public services, and even fewer economic opportunities. John merged his passion for healthy food with his love of his family recipes for Mexican food and in 1998 opened Natural Mexican, the first Mexican restaurant in Portland, Oregon, that specialized in using all organic, local products. In 2005, with a favorable economic outlook and low national unemployment, John decided it was a prime time to launch two additional restaurants. Currently, all three restaurants are more profitable than their competitors. Nevertheless, increased competition from several other organic restaurants and vendors at local farmers' markets is starting to worry him. John has narrowed his options down to two: (1) reduce his current expenses by 10 percent to increase profit margin, or (2) start looking into packaging some of his salsa and guacamole products for sale in local grocery stores. In 2005 John chose to open two additional restaurants during a(n) ___ in the U.S. economy.

answer

c. peak period

question

The resources required to organize a business include __________ resources.

answer

c. material, human, financial, and information

question

Required questions for determining the type of economic system a country will follow include

answer

a. what to produce, how to produce, and for whom to produce.

question

Which fundamental issue is not basic to capitalism?

answer

e. The government controls the major factors of production.

question

Business ethics is the application of legal and regulatory standards to business situations.

answer

False

question

The Clean Air Amendments, the Water Pollution Control Act Amendment, and the National Environmental Policy Act were all instituted in the

answer

1970s

question

The EPA is a federal agency charged with enforcing laws intended to protect the environment.

answer

True

question

All of the following are arguments for increased social responsibility except

answer

b. social problems affect society in general, so individuals businesses should not be expected to solve these problems.

question

The Interstate Commerce Act was the first federal act to regulate business practices.

answer

True

question

Regulations and laws were much stricter in the first quarter of the twentieth century than they are now.

answer

False

question

All of the following are rights of the consumer bill of rights except

answer

d. the right to personalized service.

question

Misleading advertising in print or television is illegal as well as unethical.

answer

True

question

The EEOC has the power to investigate complaints of employment discrimination and can sue firms that practice discrimination.

answer

True

question

A Latin phrase, caveat emptor, summarizes the vulnerable position that consumers were in the early 1900s.

answer

True

question

For more than fifty years, women's salaries have consistently been only about ________ for each dollar earned compared to men's.

answer

question

Which of the following government agencies issues guidelines on the use of labeling that advertisers have an obligation to follow?

answer

d. Federal Trade Commission

question

The ________ investigates illegal trade practices.

answer

a. Federal Trade Commission

question

Cultural norms can play a part in a person's ethical or unethical behavior in the workplace.

answer

True

question

Noise pollution might be addressed by workers being required to wear earplugs to guard against hearing damage.

answer

true

question

Which of the following is not considered a step in developing and implementing a social responsibility program in a company?

answer

c. Incorporating "buy-in" from all employees

question

The courts of the U.S. have ruled that quotas in affirmative action programs are unconstitutional.

answer

True

question

Relationships with customers are not known to cause ethical problems for businesses.

answer

False

question

Trade associations often do provide ethical guidelines for their members.

answer

True

question

A responsibility audit is a comprehensive report of what an organization is going to do in regard to social issues.

answer

False

question

The Wall Street Reform and Consumer Protection Act was passed in 2009.

answer

False

question

Which of the following federal laws was not passed between 1887 and 1914 as were the others?

answer

a. Fair Packaging and Labeling Act

question

Of the following factors, which is the least important in contributing to air pollution?

answer

b. Pollution emitted by individual homes

question

Which of the following acts involving protecting the environment in some way is the most recent?

answer

b. American Recovery and Reinvestment Act

question

Which of the following is the least likely option for funding a social responsibility program in a business?

answer

d. Investors fund the program.

question

Fairness is considered an important ethical concern in business.

answer

True

question

That the consumer was entitled to a "bill of rights" was instituted by President

answer

c. John F. Kennedy.

question

In a recent survey, the majority of employees surveyed assumed that their use of technology in the workplace is not monitored.

answer

False

question

The ________ Act provides sweeping legislation for reporters of corporate misconduct.

answer

d. Sarbanes-Oxley

question

The ________ enlarged the solid-waste disposal program and provided for enforcement by the EPA.

answer

d. Resource Recovery Act

question

Which of the following is false about business and social responsibility in the first quarter of the twentieth century?

answer

b. The average work week was approximately 40 hours.

question

When Maytag provides customers with a booklet describing how to use a washing machine, the company is satisfying the consumer bill of rights to

answer

a. be informed.

question

The traditional concept that businesses are responsible to their investors and that social responsibility is someone else's job is the core of the

answer

e. economic model of social responsibility.

question

Which of the following examples is least likely to be covered by federal legislation passed in the 1960s?

answer

b. Collection agencies with harsh and abusive collection practices

question

Nobel laureate Milton Friedman refers to social responsibility programs as "hypocritical window-dressing". His belief supports which social responsibility philosophy?

answer

d. The economic model

question

A local bank just completed its social audit for the past year. Which statement indicates a valid attempt at responding to social responsibility by the bank?

answer

d. Each employee completed at least 200 hours of service to community functions.

question

Sandra, a purchasing agent for Friday Farms, has just secured a new vendor for tractors, plows, and harrows. The new vendor offers Sandra some small, extra pieces of equipment—rakes, shovels, and hand trowels—knowing that the hand tools are always useful as well. The new vendor also is anxious to secure future bids. Sandra needs a few hand tools for her own garden and decides that doing business with this new vendor is in everyone's best interest. From an ethical standpoint, Sandra needs to be very aware of

answer

d. conflict of interest.

question

By ensuring that products are safe and reliable, the Food and Drug Administration and the Consumer Product Safety Commission are taking part in a movement known as

answer

consumerism

question

A reason against trade restrictions is the higher prices that consumers have to pay.

answer

True

question

Exporting is selling and shipping raw materials or products to other states.

answer

False

question

The balance of trade includes imports, exports, investments, money spent by foreign tourists, and aid to foreign governments.

answer

False

question

Which of the following is true about absolute advantages?

answer

c. Absolute advantage is the ability to produce a particular product more efficiently than any other country.

question

If the tiny country of Antigua ; Barbuda imported $900 million worth of goods and services and exported $800 million worth, it would have a

answer

c. trade deficit of $100 million.

question

Saudi Arabia and Siberia enjoy an absolute advantage in the production of crude oil and petroleum products.

answer

True

question

The NAFTA agreement includes the United States, Canada, and Mexico.

answer

True

question

MDB stands for Monetarily-Developed Bank.

answer

False

question

Protecting new or weak national industries is a reason to institute trade restrictions.

answer

True

question

Exporting is considered simpler than licensing.

answer

False

question

All banks are required to be national banks; it is against international regulations for banks to cross country borders.

answer

False

question

If only 100,000 tons of beef is allowed to enter the U.S. borders, the U.S. government has instituted a(n)

answer

d. import quota.

question

A multinational enterprise may operate in multiple countries but the business is based in one specific country.

answer

False

question

Why are revenue tariffs levied?

answer

c. To generate income for the government

question

One risk of licensing is the possibility that licensees may not adhere to quality standards required and expected by the licensing company.

answer

True

question

Loans by the IMF are primarily provided to fund international trade.

answer

True

question

Despite the global recession, economic growth in Asia remained strong in 2011 and 2012.

answer

True

question

A country's ________ is the total flow of money into a country minus the total flow of money out of the country over a period of time.

answer

b. balance of payments

question

GATT is headquartered in Washington D.C.

answer

False

question

It can be said that the United States has an absolute advantage in research and development as well as high-technology.

answer

False

question

Which of the following is least likely to be an economic consequence of trade restrictions?

answer

e. Protection of the health of citizens

question

Trade restrictions are applied to products exported to other countries more often than to imports.

answer

False

question

A trading company provides a link between buyers from one country and sellers in another country.

answer

True

question

If several hundreds of thousands of computers are sold on the domestic market for a ridiculously low price, what happens to the price of domestically produced computers?

answer

c. The price of domestic computers will not change.

question

A grocery chain that directly purchases a portion of its products from outside the country rather than using an American distributor is engaging in international business.

answer

True

question

________ is our second largest export customer.

answer

Mexico

question

The Inter-American Development Bank focuses on helping developing countries grow.

answer

True

question

Which of the following statements correctly characterizes changes in trade restrictions since the global financial crisis?

answer

c. There are increases in import licensing and tariffs.

question

Which one of the following reasons might a country have trade restrictions?

answer

b. All of these choices are correct.

question

If Saudi Arabia were to trade crude oil for two 747 jets from U.S.-based Boeing, this international barter transaction would be known as a

answer

countertrade

question

Escribo Services, a small, independent publishing company is ready to expand into international business. Since the company is committed to proceeding slowly and starting at the most simple level, Escribo Services has decided that ___ is the best approach.

answer

licensing

question

In 2 Design, Inc., manufactures and sells unique kitchen and dining room table sets. The headquarters of the company is in Portland, Oregon, with manufacturing facilities in North Carolina. The owners are ready to expand their client base to Canada and Mexico, both logistically manageable with longer-term plans to expand to Europe. After some initial research, the owners of In 2 Design thought that offering their company name and logo to a foreign company to manufacture and sell their product line in return for a royalty would be beneficial for both parties. After more thought and discussion with other company owners who have contemplated doing the same thing, the owners of In 2 Design are even more unsure of what step to take next. The In 2 Design owners have ultimately chosen that a joint venture is their best strategy. All of the following are characteristics a joint venture would offer the company that licensing would not except

answer

e. a much less complex arrangement.

question

What set the stage in 2001 for WTO members to take an important step toward multilateral trade liberalization?

answer

d. The Doha Round

question

A complete halt to trading with a particular nation is known as

answer

b. an embargo.

question

When a South American country produces coffee and exports the coffee to the rest of the world, what type of advantage might it have?

answer

a. Absolute advantage

question

Once a not-for-profit corporation is approved it must meet guidelines of the ______ to obtain tax-exempt status.

answer

c. Internal Revenue Service.

question

At least one general partner must be responsible for the debts of the limited partnership.

answer

True

question

Small businesses generally only issue common stock.

answer

True

question

There are approximately ________ partnerships in the United States.

answer

b. 3 million

question

A joint venture can occur with a minimum of three groups or partners.

answer

False

question

A major disadvantage of sole proprietorships is that profits earned by a sole proprietorship are subject to the special state and federal income taxes that corporations pay.

answer

False

question

A vertical merger occurs between firms that operate at different but related levels of production and marketing.

answer

True

question

Which form of business has unlimited liability for all owners?

answer

b. sole proprietorship

question

The vast majority of economists and financial analysts agree that mergers are good for the U.S. economy.

answer

False

question

Which of the following types of business ownership is the easiest to start?

answer

b. Sole proprietorship

question

A sole proprietorship is usually operated by more than one person.

answer

False

question

Banks are more open to lending money to sole proprietorships than to any other type of business.

answer

False

question

Most businesses incorporate in the states where they do most of their business.

answer

True

question

A syndicate is a long-term, permanent association of individuals or firms.

answer

False

question

In the eyes of the law, the owner of a sole proprietorship and the business are one and the same.

answer

True

question

Limited partners participate in day-to-day business activities and operations.

answer

False

question

Shares of ownership of a corporation are called stock.

answer

True

question

A partnership can have a legal limit of no more than 12 partners.

answer

False

question

Which of the following is not a right of corporations?

answer

d. The right to all profits

question

Corporate officers are appointed by the board of directors.

answer

True

question

Double taxation is a drawback of corporation business ownership.

answer

True

question

Corporations make up about ________ percent of all business and account for ________ of all sales revenues.

answer

c. 19; 82

question

There are approximately ________ million nonfarm sole proprietorships in the United States.

answer

question

If you earn 90 cents for each stock share that you own in XYZ corporation, you have earned a

answer

dividend

question

Most corporations grow by expanding their own present operations.

answer

True

question

A way for a firm to grow is through the takeover of another firm.

answer

True

question

One or more members of a board of directors are required for a corporation.

answer

True

question

A way for the firm to grow is through the takeover of another firm.

answer

True

question

Non-profit laws are only federal and thus, the same laws exist in all fifty states.

answer

False

question

Which of the following is not a disadvantage of a corporation?

answer

a. Raising money

question

Which of the following is not a qualification for S-corporation status?

answer

d. No more than 12 stockholders

question

Which of the following is a false statement regarding limited-liability companies?

answer

a. LLCs are not recognized in all 50 states.

question

One of the two major reasons more than 700 New Hampshire corporations have converted to LLCs is to eliminate:

answer

b. double taxation.

question

All of the following are benefits of the LLC form of ownership except:

answer

a. required annual meetings to provide information to owners.

question

During college, Elyssa Wood earned extra money by using her computer skills to prepare papers for students. After graduation, she decided to turn her part-time job into a full-time business that she plans to expand in the future. In the meantime, she wants to maintain complete control of the business. She will most likely organize the business as a

answer

e. sole proprietorship.

question

How are taxes calculated for a sole proprietorship?

answer

d. As with a partnership, the sole proprietorship pays no income tax but the profit is reported as personal income of the owner.

question

Which item is NOT typically included in the articles of partnership agreement?

answer

d. A description of the target market.

question

Stockholders directly

answer

a. elect the board of directors.

question

Which of the following is true about an LLC?

answer

c. LLCs enjoy pass-through taxation.

question

A country's ________ is the total flow of money into a country minus the total flow of money out of the country over a period of time.

answer

b. balance of payments

question

A country's ________ is the total flow of money into a country minus the total flow of money out of the country over a period of time.

answer

b. balance of payments

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