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Exam 2: Understanding Economics and How It Affects Business

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Question 41

True/False

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Quinn owns a local salon. She wants to update her shop with new customer massage chairs and work stations for her nail technicians. If the Fed were to lower interest rates by 1.5 percentage points, at the same time that the government increased the tax rate by 1.5%, she could immediately conclude that updating her shop would not increase or decrease her financial position.

A) True
B) False

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Question 42

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The main goal of resource development is to find ways to

A) increase the amount of resources and create conditions that will make better use of those resources.
B) allocate existing resources more efficiently among competing uses.
C) find the right balance between policies that promote economic growth and policies designed to promote other goals such as a fair distribution of income.
D) promote the central planning of resource utilization so that resources can be allocated to the uses that will benefit society the most.

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

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Question 43

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When the market price of a good is below the equilibrium price, and all other determinants are unchanged

According to the box, "Bad Medicine for Consumers?" the hypothetical pharmaceutical firm you work for recently increased the price of a chemotherapy drug from $300 to $3,000! What concern associated with capitalism best illustrates this ethical dilemma?

Identify and describe the 4 basic rights that form the foundation of capitalism.

Discuss the views of economist Adam Smith. How does the "invisible hand" philosophy suggested by Smith benefit society as a whole?

To be classified as unemployed, a person must be at least 16 years old and trying to find a job within the past four weeks.

Core inflation figures omit healthcare prices, but not energy prices.

The Federal Reserve Bank operates

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

In socialist economies, the government owns some, if not most, basic businesses such as telecommunications systems and utilities.

One of the major ways the Fed influences economic conditions is through its control of interest rates.

Which of the following people would tend to favor a socialist economy?

Frictional unemployment occurs because the economy is experiencing a recession.

Although mixed economies tend to improve economic conditions, moral values prevent communist nations such as North Korea and Vietnam from progressing in this direction. Overall, economic progress continues to be very slow in these nations.

Shelly's company produces computers, phones, and tablets. About six months ago, Shelly began to keep track of number of hours worked at the company, and the resulting output. When she compared the results, she found that the number of workers (and the hours they worked) remained relatively steady over the past six months; however, the work site's output improved considerably. This indicates that

In recent years, U.S. manufacturing sector has experienced ________ productivity.

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

Communism is an economic and political system in which the state makes almost all economic decisions and owns almost all the major factors of production.

Serena is a vocal critic of socialism. She often points out that governments in many socialistic countries have cut back on government services and have thusly reduced taxes. Serena believes that this trend will ultimately result in every country adopting pure capitalistic ideals. Recent evidence shows that her views are essentially correct.