Chapter 4

Question 1

What measures the absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty?

Answer 1

Economic Freedom

Question 2

What kind of countries tend to have higher per-capita income, standards of living, and social stability?

Answer 2

Economically-free countries

Question 3

How did the global financial crisis effect markets?

Answer 3

Challenged the legitimacy of free markets; governments in many countries have expanded their regulation of the economy to manage the consequences

Question 4

In this economy, private interests own resources while price and quantity, conveyed via the invisible hand, determine supply and demand

Answer 4

Market economy

Question 5

In this economy, the government plans what goods and services a country produces, the quantity in which they are produced and the price at which they are sold

Answer 5

Command economy

Question 6

This economy includes some of the elements of market and command economics; both influence investment activities and consumption behavior

Answer 6

Mixed economy

Question 7

This economy endorses the doctrine of capitalism, its principles of the invisible hand and laissez-faire and the goal of maximizing economic freedom

Answer 7

Market economy

Question 8

This economy endorses the doctrine of communism, its principle of an active government that commands and controls most if not all factors of production, and the goal of constraining economic freedom

Answer 8

Command economy

Question 9

This economy endorses the doctrine of socialism, its principle of the partly visible hand of an activist government that commands and controls some factors of production, and the goal of regulating economic freedom

Answer 9

Mixed economy

Question 10

A system whereby the government manipulates market outcomes for political purposes is called:

Answer 10

State capitalism

Question 11

How do managers assess markets?

Answer 11

In terms of size, income, and sustainability

Question 12

What measures of economic performance call for considering ecological aspects that support sustainable development?

Answer 12

Green measures of economic performance

Question 13

Concerns that monetary measures misestimate economic performance leads to what?

Answer 13

Calls to expand the concept of prosperity to include aspects of happiness

Question 14

Managers use several indicators to assess the performance and potential of an economy, including:

Answer 14

Inflation, unemployment, debt, income, distribution, poverty, and the balance of payments

Question 15

What is the next market frontier, according to some analysts?

Answer 15

The base of the pyramid of economic groups

Question 16

The largest but poorest socioeconomic group in the world, in terms of individual wealth, is the:

Answer 16

Base of the pyramid

Question 17

Global indices help managers develop a holistic profile of particular markets in terms of:

Answer 17

Competitiveness, innovation, and quality of life

Question 18

“Let it be”

Answer 18

Laissez-faire

Question 19

Laissez-faire is most closely connected to what type of economy?

Answer 19

Market economy

Question 20

Private ownership confers inalienable property rights that legitimize profits earned by one’s initiative, investment, and risk

Answer 20

Capitalism

Question 21

An economic system whereby individuals, rather than the government, make most decisions

Answer 21

Market economy

Question 22

Government that champions state ownership of resources and control of all economic activity

Answer 22

Communism

Question 23

Estimates the extent to which a government constrains free choice and free enterprise for reasons that go beyond the need to protect property, liberty, safety, and efficiency

Answer 23

Economic freedom index

Question 24

The absolute right of property ownership, fully-realized freedoms of movement for labor, capital, and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself

Answer 24

Economic freedom

Question 25

Economic system in which the government owns and controls resources, taking on the authority to decide what products to make, in what quantity, at what price, and in what way

Answer 25

Command economy

Question 26

Economic system that falls between the market and command economies; it is a system in which economic decisions are principally market driven and ownership is largely private but the government intervenes from a little to a lot in allocating resources

Answer 26

Mixed economy

Question 27

Government that advocates regulating economic activity with an eye toward social equality and fair distribution of wealth

Answer 27

Socialism

Question 28

Efficiently summarize the economic activity of households, business, and government in terms of their consumption, investment, spending, and trading

Answer 28

Gross National Income (GNI) or Gross National Product (GNP)

Question 29

What calls for moving “from the concept of financial prosperity to the idea of emotional prosperity”?

Answer 29

Happynomics

Question 30

The sustained rise in prices measured against a standard level of purchase power

Answer 30

Inflation

Question 31

The opposite of inflation, prices for products go down

Answer 31

Deflation

Question 32

Increasing the money supply and reducing taxes to accelerate economic activity- to combat deflation

Answer 32

Reflation

Question 33

The share of out-of-work citizens seeking employment for pay relative to the total civilian labor force

Answer 33

Unemployment rate

Question 34

The sum of a country’s inflation and unemployment rates

Answer 34

Misery index

Question 35

When misery rate is higher, what happens?

Answer 35

Greater economic misery, the more likely consumers curtail spending companies curb investments, and society confront austerity

Question 36

The total of a governments financial obligations, measures what the state borrows from its citizen’s foreign governments and international institutions

Answer 36

Debt

Question 37

What often defines a market’s performance and potential?

Answer 37

Income distribution

Question 38

This estimates the degree of inequality in a country’s distribution of income

Answer 38

GINI coefficient

Question 39

A multidimensional condition whereby a person or community lacks the essentials for a minimum standard of well-being and life

Answer 39

Poverty

Question 40

Officially known as the statement of international transactions, reports its trade and financial transactions with the rest of the world

Answer 40

Balance of payments (BOP)

Question 41

Who is included in the “Base of the Pyramid” phenomenon?

Answer 41

The nearly four billion people, primarily Asians, who make less than $4 (US) per day