Management Chapter 2 4 The Fed is concerned that the economy is growing too rapidly

157. A professor of economics at a prominent university recently urged government policy

makers to cut taxes and increase government spending in order to pull the economy out of its

current downturn. The policy measures called for by the professor are examples of fiscal policy.

158. Joe and Tess McGreen are purchasing their first home in Durham, North Carolina. They

are seeking pre-qualification on a home loan. The unemployment rate for North Carolina is 10.2%

and GDP is declining. Chances are pretty good that the Fed will raise interest rates in order to

loosen the supply of money, resulting in a more expensive loan for Joe and Tess.

159. Katie owns a nail salon. She needs to update her shop with new customer massage

chairs and work stations for her 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 determine that updating her shop would not increase or decrease her financial

position.

160. The Fed is concerned that the economy is growing too rapidly. Given these concerns, it is

likely to pursue policies to restrict the supply of money and raise interest rates.

161. Nick wants to buy a new car, and is planning to borrow the money for his purchase from a

bank. He read in the newspapers that the Federal Reserve is likely to implement policies in the

next few weeks that are designed to stimulate the economy. Nick would probably get a lower

interest rate on his car loan if he waits until after the Fed implements its new policies.

162. Economics is the study of how a society _______________.

163. __________ is the study of how a society employs its limited resources to produce goods

and services and how it distributes them among competing groups and individuals.

164. ___________ studies the operation of a nation’s economy as a whole.

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

markets.

166. Resource development is:

167. The study of how to increase the amount of available resources and create conditions

that will make better use of these resources is known as:

168. Economist Thomas Malthus believed that ______________ would limit economic progress.

169. Neo-Malthusians believe that the solution to poverty is:

170. A key to economic growth and development is to:

171. _________ is considered by some to be the father of modern economics.

172. Which of the following is an important premise of Smith’s conclusions about economic

prosperity?

173. Which of the following would be a topic emphasized in a macroeconomics course?

174. Which of the following would be a topic emphasized in a microeconomics class?

175. The main goal of resource development is to find ways to:

176. Thomas Malthus was pessimistic about the ability of a society to achieve high standards

of living for most of its citizens because he believed that:

177. Economics was known as the “Dismal Science” because:

178. How is it that people working in their own self-interest produce goods, services, and

wealth for others?

179. Adam Smith believed that countries would prosper if businesspeople were free to start

and run their own businesses. Businesspeople would make a profit by providing the goods,

services and ideas that others in the economy wanted, and they would hire others to help

increase those profits, leading to social and economics benefits for many. This idea was called

the ________.

180. Sue is a gifted cook. She plans to open a restaurant in which she will be the head chef.

Sue is willing to work long hours because she believes that her culinary talents and hard work

will allow her business to succeed and earn her sizeable profits. Sue’s efforts are most consistent

with the economic theory developed by:

181. Jake considers himself to be a follower of Thomas Malthus. Which of the following

statements would Jake be most likely to make?

182. Which of the following statements would a follower of Adam Smith most likely make?

183. Fourteen years ago, Sergio noticed that a lot of people who bought personal computers

did not know much about how to use them and frequently suffered system crashes and other

aggravations. He decided he could earn a nice profit by starting a consulting business to help

other people overcome their computer woes. Although the business struggled at first, it has

experienced a good deal of success for the past five years. Sergio has many satisfied customers,

and the business has grown to the point where he now employs several workers. Sergio’s

experience is an example of:

184. For many years, Congressman Ricardo Perez has called for more government regulation

of business. “After all,” the Congressman said recently, “businesspeople are out to make a profit,

not to create jobs or serve their customers. The government must pass more laws to require

businesses to take the interests of consumers and workers into account.” From these comments,

it is clear that Congressman Perez:

185. In the boxed material “Making Ethical Decisions,” the textbook describes corruption

practices in developing nations. These practices include payoffs to government officials in order

to get an edge on competing better in one’s industry. Which of the following statements best

describes the ethical message explained in this box?

186. According to the invisible hand concept, the best way for a society to encourage the

creation of jobs and the production of the products most wanted by consumers would be to:

187. A young couple living in rural west-central Missouri heard about the closing of a local

grocery store. Although a small operation, it served a small community that would now have to

travel another 20 miles to the nearest grocery store. With help from a local realtor and banker,

the couple purchased the store, remodeled it, and re-opened it. As new storeowners, they had to

carefully watch cash flow. As their customer base began to grow, they began offering hot food,

and hired others to help with the operation. The economic benefit created in this story is called:

188. _________ is the name of a free-market economic system in which most of the factors of

production and distribution—such as land, factories, railroads, and stores—are owned by

individuals.

189. Under capitalism:

190. The foundation of the U.S. economic system is based on:

191. Which of the following is a basic right under capitalism?