Chapter 2 4 The nation of Try land has seen the total value of the goods and services it produces increase rapidly over the past year. This would show up most clearly as a

235. (p. 46) The total value of final goods and services produced within a nation’s borders in a given year is

known as that nation’s:

A. aggregate production quota

236. (p. 46) Three of the major indicators of the economic condition of the United States are the unemployment

rate, the price indices, and the:

A. debt to equity ratio (DER).

237. (p. 46) Three of the major indicators of the economic condition of the United States are the gross domestic

product (GDP), the unemployment rate, and the:

A. debt to equity ratio (DER).

238. (p. 46) Three of the major indicators of the economic condition of the United States are the gross domestic

product (GDP), the price indices, and the:

A. debt to equity ratio (DER).

239. (p. 46) In the early 2000s, the value of the U.S. GDP was about:

A. $700 billion

240. (p. 47, figure 2.6) The four basic types of employment are frictional, structural, seasonal, and:

D. traditional.

241. (p. 47, figure 2.6) __________ unemployment refers to those people who have quite work because they didn’t

like the job, the boss, or the working conditions and who haven’t yet found a new job.

D. Seasonal

242. (p. 47, figure 2.6) __________ unemployment refers to unemployment caused by the restructuring of firms or by

a mismatch between the skills of job seekers and the requirements of available jobs.

D. Seasonal

243. (p. 47, figure 2.6) __________ unemployment refers to unemployment caused by a recession or a similar

downturn in the economy and is the most serious.

A. Frictional

244. (p. 47, figure 2.6) __________ unemployment refers to unemployment where the demand for labor varies over

the year.

245. (p. 48) The ___________ index is an important figure because some wages and salaries, rents and leases, tax

brackets, government benefits, and interest rates are based on it.

A. market price

246. (p. 48) The _________ is a statistic that is used to compute the pace of inflation or deflation.

D. index of inflationary trends

247. (p. 48) The measure used to report price changes at the wholesale level is the:

A. gross domestic product (GDP).

248. (p. 47) _____________ refers to a general rise in the price level of goods and services over time.

A. Acceleration

249. (p. 47) __________ is a condition in which the rate of inflation is declining.

A. Deflation

250. (p. 47) __________ is a condition in which the average level of prices is actually falling.

D. Unflation

251. (p. 49) A __________ is a very severe recession that is usually accompanied by a decline in the average level

of prices.

A. stagflation

252. (p. 48) In recent years, productivity in the manufacturing sector of the U.S. economy has been:

D. falling very rapidly.

253. (p. 46) The nation of Tryland has seen the total value of the goods and services it produces increase rapidly

over the past year. This would show up most clearly as a:

D. decline in the number of workers who are structurally unemployed.

254. (p. 48) One reason the CPI is followed very closely by the government, businesses, and workers is that:

A. it indicates whether we are running a budget surplus or a deficit.

255. (p. 48) An increase in __________ means that a given number of workers can produce more output than

before.

A. the CPI

256. (p. 47) A collapse in the national banking system of Lasia has resulted in a condition where prices are

actually declining. This condition is known as:

D. overproduction.

257. (p. 47) Which of the following results would be the clearest indication that an economy was experiencing

deflation?

258. (p. 49) The nation of Nadiria is in the midst of a terrible economic downturn. The nation’s GDP has been

declining steadily for over five years and is now at its lowest level in over fifty years. Nadiria’s unemployment

rate is at an all time high and the nation’s CPI is falling. Nadiria is experiencing a:

A. period of stagflation.

259. (p. 48) John complained to his buddy, Frank, that the prices of all the goods he and his family buy have

increased a lot over the past year. Frank disagreed, saying that the prices of some goods have gone up a bit, but

other prices have declined. Frank feels that the average price of consumer goods hasn’t changed very much. In

order to resolve their disagreement, John and Frank should look at recent figures for the:

260. (p. 47, figure 2.6) Francine is a bright and talented woman. She recently quit her job at a major corporation

because she and her boss didn’t get along and she saw little chance for advancement. Francine has not yet found

another job, but the economy appears healthy and lots of firms are hiring people with her qualifications. Thus,

Francine is confident that she will find a job in the near future. Which of the following statements about

Francine’s current situation is most accurate? Francine is:

A. not considered unemployed because she voluntarily quit her job.

261. (p. 48) Kathleen manages a manufacturing plant for ScanRite, Inc., a producer of scanners and other input

devices connected to computers. About six months ago, Kathleen asked an assistant to keep track of both work

hours and output at her plant. She has compared these figures, and has found that even though the number of

workers (and the hours they worked) remained relatively steady over the past six months, the plant’s output

increased significantly. This indicates that:

D. Kathleen should hire more workers.

262. (p. 49) Which of the following statements about business cycles in the U.S. is most accurate?

A. Business cycles occur precisely every 5 years.

263. (p. 49) Which of the following statements about productivity in the service sector of the U.S. economy is

most accurate?

A. Productivity in the service sector has increased much more rapidly than productivity in the manufacturing

sector.

264. (p. 50) Recently the U.S. national debt was a little more than:

D. $380 billion.

265. (p. 50) ____________ refers to the efforts of the federal government to keep the economy stable by

increasing or decreasing taxes and/or government spending.

A. Monetary policy

266. (p. 50) Fiscal policy involves increases or decreases in:

A. the money supply.

267. (p. 50) When the federal government spends more in a year than it receives in tax revenues, the result is

called a:

A. federal reserve allowance.

268. (p. 50) When the government runs a budget deficit it increases the:

D. money supply.

269. (p. 51) In the United States, the control of the money supply is the responsibility of the:

D. Federal Deposit Insurance Corporation.

270. (p. 51) Efforts by the Federal Reserve System to control the money supply and interest rates are known as:

A. fiscal policy.

D. as a special agency of the U.S. Treasury.

272. (p. 50) Which of the following statements about government deficit spending is most accurate?

A. The federal government violates the law by running deficits because the U.S. Constitution requires the

government to balance its budget each year.

273. (p. 50) Your local newspaper has a story in its business section that reports that government spending will

again exceed tax revenues. This means that the:

D. monetary policies pursued by the Fed have been too loose.

274. (p. 51) Which of the following statements about the Federal Reserve System (the Fed) is most accurate?

D. The Fed is the agency of the government that ensures the U.S. maintains enough gold reserves to pay any

foreign debts that result from international trade.

275. (p. 50) Senator Bud Jette is alarmed at the state of the economy. Unemployment is high and GDP is low.

Senator Jette has called for Congress to take decisive action to increase its expenditures and cut taxes in order to

stimulate the economy. The actions called for by Senator Jette are examples of the government’s use of:

D. social investment policy.

276. (p. 51) The front-page headline of your local newspaper states that the Fed is becoming increasingly worried

about the rate of inflation and wants to slow the economy. Which of the following policies is the Fed most

likely to pursue?

A. Increase taxes.

277. (p. 50) The income tax code currently allows homeowners to deduct from their taxable income all the

mortgage interest charges and property taxes on their residence. Recently it has been suggested to Senator Bud

Jette that the current individual tax deductions allowed for interest charges on home mortgages should be

eliminated. By eliminating these deductions:

A. tax revenues will be reduced, thus increasing the national debt.

278. Discuss the views of economist Adam Smith. How does the “invisible hand” philosophy suggested by

Smith benefit society as a whole?

279. When describing the state of the U.S. economy, reporters and commentators often refer to figures for the

nation’s GDP, its unemployment rate, and the CPI. Explain what each of these terms means and why each

measure is significant.

280. Explain how prices are determined in a free-market economy.

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

282. Explain the difference between fiscal policy and monetary policy. Discuss how each of these approaches

can be used to influence the state of the economy.

Nickels – Chapter 02

283. (p. 32) Gig started Giganeers to earn a profit, but by doing so he also created many jobs and satisfied many

customers. This is an example of the ______________ concept.

D. social dividend

284. (p. 46) The newspaper article that reported a decline in total output for the United States probably focused

mainly on the economic measure known as the:

D. balance of payments

285. (p. 49) The newspaper article cited forecasts that national output might continue to fall in the future. If total

output does fall for another quarter, the economy would be in a(n):

A. depression.

286. (p. 41) Gig’s native country of Frinezia was much different from the United States. In addition to its much

higher tax rates, the government offered much more extensive social programs that were designed to

redistribute income and reduce inequality. Although small businesses were privately owned and operated in

Frinezia, many basic industries were owned and operated by the government. Frinezia’s economic system

appears to be best classified as:

D. pluralism.

287. (p. 51) Gig also has heard reports that the Fed has decided to change its policies in order to try to help get the

U.S. economy back on track. If the Fed does take action, Gig would be likely to see:

D. an increase in the minimum wage.

288. (p. 39) Giganeers faces competition from many other companies that also provide engineering consulting

services. In order to gain more business, Gig has tried to convince potential clients that his company offers

better service than the competition. He has advertised heavily in professional magazines, often quoting some of

his highly satisfied clients. The market Giganeers operates in is an example of:

A. perfectly competition.

c2 Summary