FM 116 Chapter 2 Quiz

EXAMPLE: During the most recent economic crisis caused by the COVID-19 pandemic, Emma and many other workers in the restaurant industry lost their jobs. This job loss increased the unemployment rate. As the economy recovered, some of those workers, including Emma, were able to get their jobs back, which decreased the unemployment rate. The rise and fall of unemployment is one element in the study of _______.

ANSWER: Macroeconomics

EXAMPLE: Each country develops a system that helps determine how resources are allocated: who can start a business, how those business owners should hire and pay workers, and what assistance the government will provide for those who cannot work. These are just a few examples of the decisions that contribute to a country's ________.

Answer: economy

EXAMPLE: Canada espouses many free market principles while also offering some vital social services, like free healthcare, to its citizens. The Canadian government's decision to allocate healthcare in this way is an example of how they structure their _______.

answer: economy

EXAMPLE: Anders and his family make economic decisions on a daily basis: things like where to shop, what prices they are willing to pay, and which brands they prefer. The study of these choices is known as ________.

microeconomics

EXAMPLE: One of the contributing factors to the Great Recession was a lack of ______, which is what allowed banks to issue subprime mortgages without maintaining sufficient cash reserves.

government regulation

EXAMPLE: Jen and her partner decided to purchase a home in 2007 to take advantage of the low interest rate their bank advertised. After submitting a short application that didn't include a credit check, they were surprised that their bank chose to award them a much larger mortgage than they expected or believed they could afford. When the housing market began to decline, they found that their house was suddenly worth less than the total amount they owed the bank. Jen and her wife were likely victims of the ________.

subprime mortgage crisis

EXAMPLE: In 2008, Congress passed the Troubled Assets Relief Program (TARP) to help large financial institutions and automakers that were on the brink of bankruptcy. While this has been referred to as a "bailout", in reality, it functioned more like a _______, which many institutions have been able to repay over time.

loan

EXAMPLE: One way the government can help boost the economy is through large-scale infrastructure projects that create jobs. One famous historical example of this was the construction of the Hoover Dam during the Great Depression under Franklin D. Roosevelt's administration. This is an example of ______.

fiscal policy

EXAMPLE: The U.S. government earns revenues from taxes and fees paid by both citizens and businesses. When the government is able to spend less than it earns through these revenues, there is a _______.

budget surplus

EXAMPLE: When the U.S. government decreases taxes and increases spending, as it did by passing stimulus packages in the wake of the COVID-19 pandemic, it may need to borrow money to cover its expenses. Members of Congress may bring attention to this growing federal debt as a political bargaining chip, especially as the amount the government has borrowed nears the _______.

debt ceiling

EXAMPLE: The rising popularity of cryptocurrencies like Bitcoin, Etherium, and even Dogecoin has forced many consumers to rethink their definition of money. Now that many businesses are willing to use cryptos as their _______, consumers are also becoming more comfortable using it.

medium of exchange

EXAMPLE: Although the U.S. government does control certain enterprises, such as Medicare and Social Security, private enterprises largely rely on the principles of _______.

supply and demand

EXAMPLE: The dairy industry is comprised of many producers who offer nearly identical products, such as whole milk and skim milk, offered at nearly identical prices. Despite this, a large beverage company called Hearts Cola chose to enter the dairy market with YumMilk, its line of premium, ultra-filtered milk products that boast lower sugar and higher protein contents. What kind of competitive market did Hearts Cola enter?

Pure competition

Julia lives in a country where she is free to open her own plumbing business. She is also able to keep any profits she earns after paying taxes. Julia most likely operates in a _______ economy.

free market

Sweden has long been associated with successful socialist policies, but recently the Swedish government has had to cut back on some of the social services it provides its citizens, especially those that benefit older adults. One issue is that the younger working population isn't large enough to support the much larger elderly population. Another is the flight of investors and entrepreneurs, who tend to seek out countries with more favorable tax rates. These latter countries are an example of ______.

The fundamental rights of capitalism

If the U.S. government were to take control of all enterprises that affect the social welfare of its citizens, a likely outcome would be an increase in _______.

taxes

Recently, the Swedish government has had to cut back on some of the social services it provides its citizens, especially those that benefit older adults. One issue is that the aging population is much larger than the younger working population. The younger workers help fund those social services through _______.

taxes

Despite the fact that the United States espouses capitalist economic policies, the government controls certain enterprises, such as Medicare and Social Security. This is an example of the trend toward _______ systems.

mixed market

EXAMPLE: Boun is a farmer in Laos, a landlocked country in Asia that has a single-party government that controls all means of production. This means that even though Laotian farmers like Boun may have a high demand for products like commercial chicken feed, the government will decide which products get made. Laos is an example of a __________ economy.

communist

EXAMPLE: Joon is a successful entrepreneur who lives in Denmark. He started his business in 2010 when the tax rates were higher. He considered moving his business to a country with more favorable tax rates, but then Denmark lowered its corporate tax rate to encourage domestic investment. Joon is encouraged by this move towards a more _______ economic system.

Mixed market

EXAMPLE: Apple sells its popular products, including the iPhone and Apple Watch, around the globe. Currently, most iPhones are assembled in Shenzhen, China. When Apple purchases these finished iPhones from the Chinese factories, which country can count those revenues toward their gross domestic product (GDP)?

China

EXAMPLE: Nevin manages a McDonald's franchise in the middle of Manhattan. He recently oversaw the installation of self-checkout kiosks, which promises to make the ordering process 30% more efficient and 50% faster.

Refer to Scenario 2.1. If all fast food franchises in the United States were able to use the same technology, it would contribute to a(n) ______ in productivity for the country.

Increase

Nevin manages a McDonald's franchise in the middle of Manhattan. He recently oversaw the installation of self-checkout kiosks, which promises to make the ordering process 30% more efficient and 50% faster. This new technology also means that each franchise could operate with fewer cashiers.

Refer to Scenario 2.1. If all fast food franchises in the United States were able to use the same technology, it would contribute to a(n) ______ in unemployment for the country.

increase

In 2021, hackers launched a successful cyberattack against the Colonial Pipeline, effectively halting operations for a week. The attack led to a shortage of gasoline for drivers in the United States, which drove the price for a gallon of gas to its highest rate in six years. Since a gallon of gas is included in the basket of goods used to calculate the ______, we can assume that this higher price would contribute to an increase in that measure for 2021.

Consumer price index (CPI)

EXAMPLE: As many workers were forced to stay home during the COVID-19 pandemic, the demand for home-improvement supplies increased. Homeowners scrambled to secure contractors who would help with remodels and additions, many of which called for the use of lumber. As a result, the price of lumber skyrocketed. The United States could see an increase in the _______ as a result of shortages and supply-chain disruptions throughout the world.

Producer price index (PPI)