Question 1

The central banking system in the country of Darmos issues a notice to all its commercial banks stating that they must possess funds that are equal to 48% of the deposits held by their customers. In the given scenario, the central banking system's notice exemplifies _____.
A)full-reserve banking
B)the statutory framework
C)the reserve requirement
D)statutory liquidity ratio

Accepted Answer

The central banking system's notice exemplifies the reserve requirement, which is the percentage of deposits that commercial banks are required to hold in reserve to ensure liquidity and stability in the banking system.

Question 2

Denise is a hard worker, but she has always had differences with her boss, Angela. Angela has recently become more demanding and is often unwilling to provide clarification on project requirements. After many long working days with little job satisfaction, Denise submits her resignation. She knows that her résumé is strong and feels confident that she will find another job. In this scenario, Denise is facing _____.
A)seasonal unemployment
B)structural unemployment
C)frictional unemployment
D)cyclical unemployment

Accepted Answer

Denise is facing frictional unemployment as she voluntarily left her job due to a dissatisfaction with her working conditions and a strained relationship with her boss. She is confident in her ability to find another job quickly.

Question 3

In the context of price levels, which of the following measures is used by the government to evaluate inflation?
A)The seller pricing rank
B)The consumer price index
C)The price-weighted activity index
D)The knowledge pricing rank

Accepted Answer

The consumer price index (CPI) is a commonly used measure of inflation by the government. It is calculated by tracking the changes in prices of a basket of goods and services consumed by households. The CPI reflects the average price level of products and services purchased by consumers and is widely used to set economic policies and make decisions about monetary policy. The other options (seller pricing rank, price-weighted activity index, and knowledge pricing rank) are not commonly used measures of inflation by the government.

Question 4

Anoush used to work for an investment firm. Although she liked her job, she had to resign because it took her a lot of time to commute to work. After resigning, she searched for a job, and within a month, she found a better job that was closer to her home. This scenario exemplifies _____.
A)seasonal unemployment
B)structural unemployment
C)frictional unemployment
D)cyclical unemployment

Accepted Answer

Anoush's situation exemplifies frictional unemployment, which occurs when individuals are between jobs or transitioning to a new job. In this case, Anoush voluntarily left her previous job and then quickly found a new job that better suited her needs. It is not seasonal unemployment, which is caused by changes in demand for labor due to changes in seasons or weather conditions, or cyclical unemployment, which is caused by changes in the overall economy and business cycle. It is also not structural unemployment, which is caused by a mismatch between the skills and qualifications of workers and the job requirements in the market.

Question 5

Denver wants to start an industrial products manufacturing company, but he finds it difficult to enter the market as it is already dominated by a single producer who controls product quality and product prices. Given this information, Denver is unable to enter the market because of the existence of _____.
A)pure competition
B)monopoly
C)monopolistic competition
D)oligopoly

Accepted Answer

A monopoly is a market condition where a single producer or seller dominates the market, making it difficult for new entrants to enter the industry. In this case, the existing producer controls both product quality and price, making it very challenging for Denver to enter the market.

Question 6

Gregory is a typist at a corporate firm. When the company adopted a special voice recognition software for the purpose of documentation, Gregory's job became inessential. Therefore, he was laid off. The increased use of technology in most companies makes Gregory's skills inessential, and he remains unemployed for a long time. In the given scenario, Gregory is facing _____.
A)seasonal unemployment
B)structural unemployment
C)frictional unemployment
D)cyclical unemployment

Accepted Answer

Gregory is facing structural unemployment, which occurs due to a mismatch between the skills of the workers and the requirements of the job market. In this case, Gregory's typing skills were no longer needed due to the introduction of voice recognition software, making his skills inessential. This is a common occurrence in today's job market due to the increasing use of technology.

Question 7

Aidan is a college student. As part of his economics project, he has to collect data on the consumption patterns of the households in his locality. In this scenario, Aidan is most likely involved in the study of _____.
A)heterodox economics
B)complexity economics
C)microeconomics
D)macroeconomics

Accepted Answer

The study of consumption patterns of households falls under microeconomics, which focuses on the behavior of individuals and firms in making economic decisions. Heterodox economics and complexity economics are theoretical approaches within economics, while macroeconomics focuses on the overall performance of the economy.

Question 8

The economy of Sutanvia is under severe financial distress. However, over the last few months, the economy has gradually picked up, and employment levels are slowly rising back to normal levels. Consumers are also beginning to engage in regular buying activities. In this scenario, the economy of Sutanvia is currently in the _____ phase of its business cycle.
A)recovery
B)relapse
C)expansion
D)contraction

Accepted Answer

The economy of Sutanvia is currently in the recovery phase of its business cycle because it has shown signs of gradual improvement after a period of contraction. Employment levels are rising, and there is a gradual increase in consumer spending activities. This phase is characterized by economic growth, increased demand, and rising employment rates.

Question 9

Over the past 30 years, most economies of the world have begun moving toward the market end of a spectrum that ranges from pure planned economy at one extreme to pure market economy at the other. This has led to:
A)more investments on human services such as free healthcare and education subsidies.
B)a reduction in incentives for both domestic and foreign investment.
C)stronger centralized government control over businesses.
D)reduced red tape in socialist governments.

Accepted Answer

The answer of Over the past 30 years, most economies...

Question 10

Danny is a citizen of Finiz, a North American country. He is able to run his handicraft business without any intervention from the government because Finiz has an economic system that encourages private ownership. He is able to make independent decisions for his business and has the freedom to decide the prices of his products. In this scenario, Finiz most likely has a _____.
A)socialist economy
B)totalitarian economy
C)capitalist economy
D)communist economy

Accepted Answer

The economic system described in the scenario is capitalist, as it encourages private ownership and allows individuals to make independent decisions for their businesses. This type of system is characterized by a free market and competition. Socialism and communism, on the other hand, involve significant government ownership and control of the means of production, while totalitarianism is a form of government that exercises complete and total control over individuals and society.

Question 11

In the context of monetary policy, which of the following statements is true of the discount rate?
A)The Fed increases it during recessions.
B)When the cost of acquiring funds from the Fed is low, interest rates on bank loans tend to fall.
C)When the Fed increases it, banks can obtain funds at a lower cost.
D)It is the interest rate that the Fed charges on its loans to individuals.

Accepted Answer

The discount rate is the interest rate at which banks can borrow money from the Federal Reserve. When the discount rate is low, banks can borrow funds at a lower cost which reduces the interest rates on bank loans. Option A is incorrect because the Fed reduces the discount rate during recessions to encourage banks to lend more. Option C is incorrect because an increase in the discount rate leads to an increase in the cost of borrowing for banks. Option D is incorrect because the Federal Reserve does not lend to individuals.

Question 12

The government of Lenzerbia, a country in South Asia, monitors its inflation rate using an index that measures change over time in the prices that businesses pay to each other for goods and services. In this scenario, the Lenzerbian government most likely uses the _____ to evaluate inflation.
A)prices received index
B)consumer price index
C)cost-of-living index
D)producer price index

Accepted Answer

The scenario mentions that the government of Lenzerbia monitors the prices that businesses pay to each other for goods and services. This suggests that they are using the Producer Price Index (PPI) which measures the average change in prices received by domestic producers for their output. The other options, such as the Consumer Price Index (CPI) and Cost-of-living Index (COLI), are typically used to measure the price changes that consumers face, while the Prices Received Index (PRI) measures changes in prices received by farmers for their produce.

Question 13

Irkholm, a South American nation, experiences an economic downturn that leads to an increase in average prices across the country. The situation becomes more serious when average prices increase more than 50% per month. In the given scenario, Irkholm is experiencing _____.
A)disinflation
B)hyperinflation
C)asset price inflation
D)deflation

Accepted Answer

Irkholm is experiencing hyperinflation, which is a situation where there is an extremely rapid increase in prices across the economy, typically exceeding 50% per month. Disinflation refers to a situation where the rate of inflation slows down, but prices are still increasing. Asset price inflation refers to a situation where the prices of assets, such as stocks or real estate, are increasing at a faster rate than the general level of prices in the economy. Deflation refers to a situation where there is a sustained decrease in the general level of prices in the economy.

Question 14

The gross domestic product (GDP) of Trelinberg, a South American nation, has been decreasing for the past eight years. The long period of consecutive decreases in the GDP has led to high unemployment rates in Trelinberg. In the given scenario, the economy of Trelinberg is most likely in _____.
A)a recession
B)a depression
C)deflation
D)hyperinflation

Accepted Answer

A depression is characterized by a prolonged period of economic downturn, typically marked by a significant decline in GDP and high unemployment rates, which aligns with Trelinberg's situation.

Question 15

__________refers to Federal Reserve decisions that shape the economy by influencing interest rates and the supply of cash.
A)Fiscal policy
B)Monetary policy
C)Revenue policy
D)Deficit policy

Accepted Answer

Monetary policy refers to actions taken by the Federal Reserve to influence the economy through interest rate adjustments and the supply of cash. The goal of monetary policy is to promote stable prices, maximum employment, and moderate long-term interest rates.

Question 16

The Kingsabode Daily is a community news agency that distributes newspapers to the residents of Kingsabode County. To meet the demand and to ensure that there is zero wastage of resources, the news agency prints 250 newspapers that are distributed in the 250 homes in the county. The price associated with such a demand and supply pattern is called the _____.
A)parity price
B)producer price
C)equilibrium price
D)basic price

Accepted Answer

The price associated with a demand and supply pattern where the quantity supplied is equal to the quantity demanded is called the equilibrium price. In this scenario, the news agency prints exactly the number of newspapers that are demanded by the community, resulting in an equilibrium in supply and demand. Therefore, the correct answer is option C, equilibrium price.

Question 17

Timothy, a staff member at a university, wants to purchase a house. As he does not have sufficient funds, he is forced to take a loan. Given his low credit score, it is highly unlikely that he will be able to repay the borrowed money. In this scenario, Timothy should apply for a(n) _____.
A)subsidized loan
B)subprime mortgage loan
C)endowment mortgage loan
D)concessional loan

Accepted Answer

A subprime mortgage loan is typically offered to individuals with low credit scores who may not qualify for conventional loans.

Question 18

In the context of the various degrees of competition, which of the following statements is true of oligopoly?
A)It is a market structure that has many competitors selling virtually identical products.
B)Oligopolies typically avoid intense price competition.
C)The agriculture industry is an example of oligopoly.
D)It has a single producer completely dominating the industry, leaving no room for competitors.

Accepted Answer

Oligopolies are characterized by a small number of large firms dominating the industry, which often leads to collusion and avoiding intense price competition. The agriculture industry is not an example of oligopoly as there are many small and medium-scale producers. Option A describes perfect competition, while option D describes a monopoly.

Quiz 2: Economics: the Framework for Business

The central banking system in the country of Darmos issues a notice to all its commercial banks stating that they must possess funds that are equal to 48% of the deposits held by their customers. In the given scenario, the central banking system's notice exemplifies _____.

In the context of price levels, which of the following measures is used by the government to evaluate inflation?

Anoush used to work for an investment firm. Although she liked her job, she had to resign because it took her a lot of time to commute to work. After resigning, she searched for a job, and within a month, she found a better job that was closer to her home. This scenario exemplifies _____.

Aidan is a college student. As part of his economics project, he has to collect data on the consumption patterns of the households in his locality. In this scenario, Aidan is most likely involved in the study of _____.

Over the past 30 years, most economies of the world have begun moving toward the market end of a spectrum that ranges from pure planned economy at one extreme to pure market economy at the other. This has led to:

In the context of monetary policy, which of the following statements is true of the discount rate?

The government of Lenzerbia, a country in South Asia, monitors its inflation rate using an index that measures change over time in the prices that businesses pay to each other for goods and services. In this scenario, the Lenzerbian government most likely uses the _____ to evaluate inflation.

Irkholm, a South American nation, experiences an economic downturn that leads to an increase in average prices across the country. The situation becomes more serious when average prices increase more than 50% per month. In the given scenario, Irkholm is experiencing _____.

The gross domestic product (GDP) of Trelinberg, a South American nation, has been decreasing for the past eight years. The long period of consecutive decreases in the GDP has led to high unemployment rates in Trelinberg. In the given scenario, the economy of Trelinberg is most likely in _____.

__________refers to Federal Reserve decisions that shape the economy by influencing interest rates and the supply of cash.

Timothy, a staff member at a university, wants to purchase a house. As he does not have sufficient funds, he is forced to take a loan. Given his low credit score, it is highly unlikely that he will be able to repay the borrowed money. In this scenario, Timothy should apply for a(n) _____.

In the context of the various degrees of competition, which of the following statements is true of oligopoly?