Chapter 1

Question 1

Budget Deficit

Answer 1

The condition in which a nation spends more than it takes in from taxes

Question 2

Business

Answer 2

Individuals or organizations who try to earn a profit by providing products that satisfy people’s needs

Question 3

Capital

Answer 3

The funds used to acquire the natural human resources needed to provide products; also called financial resources

Question 4

Capitalism (free enterprise)

Answer 4

An economic system in which individuals own and operate the majority of businesses that provide goods and services

Question 5

Communism

Answer 5

First described by Karl Marx as a society in which the people, without regard to class, own all the nation’s resources

Question 6

Competition

Answer 6

The rivalry among businesses for consumers’ dollars

Question 7

Demand

Answer 7

The number of goods and services that consumers are willing to buy at different prices at a specific time

Question 8

Depression

Answer 8

A condition of the economy in which unemployment is very high, consumer spending is low, and business output is sharply reduced

Question 9

Economic contraction

Answer 9

A slowdown of the economy characterized by a decline in spending and during which businesses cut back on production and lay off workers

Question 10

Economic expansion

Answer 10

The situation that occurs when an economy is growing and people are spending more money; their purchases stimulate the production of goods and services, which in turn stimulates employment

Question 11

Economic system

Answer 11

A description of how a particular society distributes its resources to produce goods and services

Question 12

Economics

Answer 12

The study of how resources are distributed for the production of goods and services within a social system

Question 13

Entrepreneur

Answer 13

An individual who risks his or her wealth, time, and effort to develop for profit an innovative product or way of doing something

Question 14

Equilibrium price

Answer 14

The price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time

Question 15

Financial resources

Answer 15

The funds used to acquire the natural and human resources needed to provide products; also called capital

Question 16

Free-market system

Answer 16

Pure capitalism, in which all economic decisions are made without government intervention

Question 17

Gross domestic product (GDP)

Answer 17

The sum of all goods and services produced in a country during a year

Question 18

Human resources

Answer 18

The physical and mental abilities that people use to produce goods and services; also called labor

Question 19

Inflation

Answer 19

A condition characterized by a continuing rise in prices

Question 20

Mixed economies

Answer 20

Economies made up of elements from more than one economic system

Question 21

Monopolistic competition

Answer 21

The market structure that exists when there are fewer businesses than in a pure-competition environment and the differences among the goods they sell are small

Question 22

Monopoly

Answer 22

The market structure that exists when there is only one business providing a product in a given market

Question 23

Natural resources

Answer 23

Land, forests, minerals, water, and other things that are not made by people

Question 24

Nonprofit organizations

Answer 24

Organizations that may provide goods or services but do not have the fundamental purpose of earning profits

Question 25

Oligopoly

Answer 25

The market structure that exists when there are very few businesses selling a product

Question 26

Open economy

Answer 26

An economy in which economic activities occur between the country and the international community

Question 27

Product

Answer 27

A good or service with tangible and intangible characteristics that provide satisfaction and benefits

Question 28

Profit

Answer 28

The difference between what it costs to make and sell a product and what a customer pays for it

Question 29

Pure competition

Answer 29

The market structure that exists when there are many small businesses selling one standardized product

Question 30

Recession

Answer 30

A decline in production, employment, and income

Question 31

Socialism

Answer 31

An economic system in which the government owns and operates basic industries, but individuals own most businesses

Question 32

Stakeholders

Answer 32

Groups that have a stake in the success and outcomes of a business

Question 33

Supply

Answer 33

The number of products—goods and services—that businesses are willing to sell at different prices at a specific time

Question 34

Standard of living

Answer 34

Refers to the level of wealth and material comfort that people have available to them

Question 35

Unemployment

Answer 35

The condition in which a percentage of the population wants to work but is unable to find jobs