FINAL REVIEW

Question 1

Entrepreneurs weigh the differences between the benefits of starting a business and those things that they are
likely to forego because they choose to work for themselves. Such things they are likely to pass-up on are:

Answer 1

employer paid benefits such as paid vacation and health insurance.

Question 2

Two factors of production that seem to contribute the most to a nation’s ability to create wealth are:

Answer 2

entrepreneurship and knowledge

Question 3

Which of the following statements about factors of production is the most accurate?

Answer 3

Entrepreneurship and knowledge are the most important in creating wealth.

Question 4

The threat of terrorism,

Answer 4

will certainly affect companies that participate in global trade, but most large U.S. companies do their business
domestically

Question 5

A major benefit of socialism is the:

Answer 5

Emphasis on social equality

Question 6

Three important economic indicators of the United States are the:

Answer 6

unemployment rate, the price indices, and the gross domestic product (GDP).

Question 7

A __________ is a very severe recession that is usually accompanied by deflation.

Answer 7

depression

Question 8

____________ refers to the efforts of the federal government to keep the economy stable by increasing or
decreasing taxes and/or government spending.

Answer 8

Fiscal policy

Question 9

In the U.S., the __________ has the role of managing the money supply and interest rates.

Answer 9

Federal Reserve Bank

Question 10

Efforts by the Federal Reserve Bank (the Fed) to control the money supply and interest rates are known as:

Answer 10

monetary policy

Question 11

Casey is typical of many U.S. businesspeople. Casey feels the U.S. culture defines the model for the rest of
the world, and that the “American way” of doing things is the best. Casey is guilty of:

Answer 11

ethnocentricity

Question 12

When studying abroad last year, Blake found that his U.S. dollars did not stretch as far as he had hoped.
Each time he exchanged U.S. dollars for Euros, he gave up more U.S. dollars in exchange for less Euros. The
exchange rate indicates:

Answer 12

the euro is weak against the U.S. dollar.

Question 13

Under a system of floating exchange rates, changes in the value of the U.S. dollar relative to other currencies
are the result of:

Answer 13

changes in the supply of and/or demand for dollars in the global currency market.

Question 14

The “second wave” of offshore outsourcing refers to:

Answer 14

moving skilled service jobs such as those in accounting offshore.

Question 15

The purpose of the General Agreement on Tariffs and Trade (GATT) is to:

Answer 15

facilitate global trade.

Question 16

Under the floating exchange rate system, the value of a country’s currency is determined by:

Answer 16

the currency’s supply and demand in the global market.

Question 17

Which of the following statements is not one of the six steps recommended by experts for improving ethical
behavior at work?

Answer 17

Outsiders should be kept outside. There is no reason to share your firm’s corporate code of ethics. It is an internal
and private document.

Question 18

Corporate social responsibility describes the firm’s:

Answer 18

concern for the welfare of society.

Question 19

What’s the difference between revenue and profit?

Answer 19

Revenue - Total amount of money earned; Gross Income.

Profit - Revenue minus expenses (Labor, Maintenance, etc)

Question 20

What’s the difference between standard of living and quality of life?

Answer 20

Standard of Living - Amount of goods and services a person can buy with their income.
Quality of Life - General Public’s well being in terms of political freedom, environment,
education, healthcare, etc

Question 21

What’s risk? How is it related to profit?

Answer 21

Risk - The chance that time and money put into a business venture will fail.
-If you put risk into a venture and it fails you will lose profit. -Could amount to enormous profit.

Question 22

What do the terms stakeholders, outsourcing and insourcing mean?

Answer 22

Stakeholders are people who have invested either time or money into a business such
as Employees, managers, customers, CEO’s, and actual shareholders. Outsourcing is
when a company hires other companies in other countries to do certain tasks. Insourcing
is when foreign companies hire domestic companies to do a specific task

Question 23

What are some of the advantages of working for others?

Answer 23

Some advantages of working for others is that there’s not as much risk, steady salary,
Healthcare + other benefits.

Question 24

What benefits do you lose as an entrepreneur, and what do you gain?

Answer 24

You have the freedom to make your own decisions, opportunity, and potential for wealth
while sacrificing the benefits working for others often provides.

Question 25

What are the five factors of production? Which ones seem to be the most important for creating
wealth?

Answer 25

The factors of production are: land, labor, capital, entrepreneurship, and knowledge. Of
these, entrepreneurship and knowledge seem to be the most important

Question 26

What are four ways the government can foster entrepreneurship?

Answer 26

The government can foster entrepreneurship by: Allowing private ownership of business.
Passing laws that enable businesses to write enforceable contracts. Establishing a
currency that is tradable in world markets. Minimize corruption in business and in its own
ranks.

Question 27

What’s the difference between effectiveness, efficiency and productivity?

Answer 27

Effectiveness means producing the desired results. Efficiency means producing goods
and services using the least amount of resources. Productivity is the amount of output
you generate given the amount of input, such as the number of hours you work.

Question 28

What’s empowerment?

Answer 28

Empowerment is allowing workers to make decisions essential to producing high-quality
goods and services.

Question 29

What are some of the major issues affecting the economy today?

Answer 29

Technology changes, identity theft, changing demographics, diversity, climate change,
war and terrorism are just several issues

Question 30

What major factor caused people to move from farming to manufacturing and from manufacturing
to the service sector?

Answer 30

Efficiencies in agriculture led to the reduction in farms and growth in industry caused
workers to leave the farm and come to the cities. The growth of efficiencies in production
had the same effect as in agriculture. As factories became more efficient and
technologically driven, workers migrated to the service sector.

Question 31

What does the future look like for tomorrow’s college graduates?

Answer 31

The information-based global revolution will alter all sections of the economy. It will be an
interesting opportunity for college graduates.

Question 32

What’s the difference between macroeconomics and microeconomics?

Answer 32

Macroeconomics studies the operation of a nation’s economy as a whole, and microeconomics studies the behavior of people and operations in particular markets.

Question 33

What’s better for an economy than teaching a man to fish?

Answer 33

Teach man to start a fish farm. This creates jobs and economic growth for employees and communities as well as themselves

Question 34

What does Adam Smith’s term invisible hand mean? How does the invisible hand create wealth for a country?

Answer 34

Adam Smith’s phrase ‘invisible hand’ is used to describe the process that turns self directed gain into social and economic benefits for all. Smith’s phrase ‘invisible hand’ is referring to businesspeople who set out to achieve their financial and mental goals and this overall effects the country. These businesspeople are benefiting the economy and it works almost as an invisible hand, as workers and those in business prosper with goods and services, the rest of the country is benefiting in ways from a sort of invisible help.

Question 35

What are the four basic rights that people have under free-market capitalism?

Answer 35

Under free-market capitalism, people have four basic rights: The right to own private property, the right to own a business and keep all that business’s profits, the right to freedom of competition, and the right to freedom of choice.

Question 36

How do businesspeople know what to produce and in what quantity?

Answer 36

businesspeople know how to produce to match the quantity because they are able to see what the economy wants and doesn’t want. as long as merchandise is being bought, they produce more and if it increases dramatically they increase making products. the stores will let them know how much is selling and what the economy is demanding

Question 37

How are prices determined?

Answer 37

Prices are determined by the buyers and sellers negotiating in the marketplace.

Question 38

What are the four degrees of competition and what are some examples of each?

Answer 38

the four degrees of competition: 1) perfect competition, when there are many sellers in the market and none is large enough to dictate the price of a product. ex: farming. 2) monopolistic competition, a large number of sellers produce very similar products that buyers nevertheless perceive as different. ex: tshirts. 3) oligopoly, just a few sellers dominate the market. ex: gasoline, automobiles, tobacco. 4) monopoly, one seller controls the total supply of a product or service, and sets the price. ex: natural gas, water, electric power

Question 39

What led to the emergence of socialism?

Answer 39

Socialists believe that the distribution of wealth should be more evenly distributed than in free-market capitalism. Government should be empowered to carry out the distribution of wealth

Question 40

What are the benefits and drawbacks of socialism?

Answer 40

A major benefit of socialism is social equality. A drawback of socialism is the promised create more equality than capitalism, this takes away some of business people’s incentives.

Question 41

What countries still practice communism?

Answer 41

China, North Korea, Vietnam, Laos, and Cuba still practice communism today

Question 42

What are the characteristics of a mixed economy?

Answer 42

ownership of goods by both private and government or state owned entities. another characteristic of a mixed economy is the protection of private property and allows free market.

it protects private property, allows the free market and the laws of supply and demand to determine prices.

Question 43

Name the three economic indicators and describe how well the U.S. is doing based on each indicator

Answer 43

The three key economic indicators are the Gross Domestic Product (GDP), the unemployment rate, and the price indexes.
The U.S. GDP is approximately about $14 trillion. Our high GDP allows citizens to enjoy a high standard of living.
In 2000, the U.S. reached it lowest unemployment rate in over 30 years. However, the recession of 2008-2009 may lead unemployment to at least 10 percent.
The consumer price index (CPI) has not risen to high levels keeping inflation in check. However the recession has caused fears of deflation.

Question 44

What’s the difference between a recession and a depression?

Answer 44

The only difference between a recession and a depression is that depression is usually accompanied by deflation.

Question 45

How does the government manage the economy using fiscal policy?

Answer 45

The government manages fiscal policy by increasing or decreasing taxes or government spending.

Question 46

What does the term monetary policy mean? What organization is responsible for monetary policy?

Answer 46

Monetary policy is the management of money supply and interest rates by the Federal Reserve Bank. The Fed is responsible for monetary policy.

Question 47

What are two of the main arguments favoring the expansion of U.S. businesses into global markets?

Answer 47

There is not a nation that can give their goods and services to everyone’s needs, and 2. Cheap imports and global trading keep the goods prices down

Question 48

What’s comparative advantage, and what are some examples of this concept at work in global markets?

Answer 48

Comparative advantage is the theory that a country should sell their products that they can produce most effectively to those countries who cannot produce the products effectively or at all. An example of comparative advantage would be the fact that the U.S. has an advantage with produces technology and engineering

Question 49

How are a nation’s balance of trade and balance of payments determined?

Answer 49

The balance of trade and payments are determined by, trades: the total of the nations compared to imports over a time period, and payments: which is the money coming in and out of the country with tourism, foreign aid and the military.

Question 50

What’s meant by dumping in global trade?

Answer 50

What is meant by ‘dumping’ is when products are sold in another country at lower prices than the original country where it’s made.

Question 51

What are four major hurdles to successful global trade?

Answer 51

1. Dealing with differences in sociocultural forces
2. economic and financial forces
3. legal and regulatory forces
4. physical and environmental forces

Question 52

What does ethnocentricity mean and how can it affect global success?

Answer 52

Ethnocentricity is the attitude that one’s own culture is better than another culture or someone else’s views. This may affect the global success because outside of the united states there are many other cultures as well and services may be stunned or stopped if something is done to offend another culture in the nation

Question 53

How would a low value of the dollar affect U.S. exports?

Answer 53

A low value of the dollar would affect U.S. exports because you would be spending more money to produce the product than you will be making. Products need to be listed for lower prices.

Question 54

What does the Foreign Corrupt Practices Act prohibit?

Answer 54

The Foreign Corrupt Practices Act prohibits questionable payments to foreign officials to help secure business contracts

Question 55

What are the advantages of using licensing as a method of entry in global markets? What are the disadvantages?

Answer 55

Advantages: A firm can gain revenues it would not have generated at its home market Licensors spend little or no money to produce and market their products because the licensees are required to do it. Disadvantages: Licensors must grant the licensing rights to the licensees for extended periods of time. If a product becomes successful, the bulk of the profits will go to the owner.

Question 56

What services are usually provided by an export-trading company?

Answer 56

The services provided from an export-trading company will match buyers and sellers from different countries, deal with foreign customs offices, and weight and measurement conversions. It also assists exporters with warehousing, billing, and insurance.

Question 57

What’s the key difference between a joint venture and a strategic alliance?

Answer 57

A joint venture is when two or more companies join to undertake a major project . A strategic alliance is a long-term partnership between two or more companies that helps each company build up a competitive market advantage.

Question 58

What makes a company a multinational corporation?

Answer 58

To be multinational you must manufacture and market products in many different countries and have multinational stock ownership and management

Question 59

What are the major threats to doing business in global markets?

Answer 59

1. Terrorism 2. Nuclear proliferation 3. income inequality

Question 60

What key challenges must India and Russia face before becoming global economic leaders?

Answer 60

Russia must solve it’s political, financial and social problems before becoming a global economic lead. India must address it’s difficult trade laws and inflexible bureaucracy.

Question 61

What does the acronym BRIC stand for?

Answer 61

Brazil, Russia, India, China

Question 62

What are the two primary concerns about offshore outsourcing?

Answer 62

1. Loss of jobs 2. Safety

Question 63

What are the advantages and disadvantages of trade protectionism and of tariffs?

Answer 63

Trade protectionism and tariffs are supposed to be used to regulate the imports and exports of goods. The disadvantage is that the goods sometimes cost more to purchase due to the cost of the tariffs.

Question 64

What’s the primary purpose of the WTO?

Answer 64

To mediate trade disputes among nations.

Question 65

What’s the key objective of a common market like the EU?

Answer 65

The key objective of a common market is being able to trade regionally without having a tariff and a set couple of laws to facilitate the exchanges.

Question 66

Which three nations comprise NAFTA?

Answer 66

United States, Canada, Mexico

Question 67

What are ethics?

Answer 67

Ethics are the moral behavior of the people or one person. This behavior is seen as morally right by the world or by their people in the same culture, group, and more.

Question 68

How do ethics differ from legality?

Answer 68

Ethics is the moral behavior accepted by society whilst legality is more formal, more limiting. Legality only applies to laws.

Question 69

When faced with ethical dilemmas, what questions can you ask yourself that might help you
make ethical decisions?

Answer 69

1. Is my action legal? 2. Is it balanced? 3. How will it make me feel about myself?

Question 70

What are compliance-based and integrity-based ethics codes?

Answer 70

Compliance based ethics codes emphasize preventing unlawful behavior by increasing control and penalizing wrongdoers. Integrity based ethics codes define the organization’s guiding values, create an environment that supports ethically sound behavior, and stress shared accountability.

Question 71

What are the six steps to follow in establishing an effective ethics program in a business?

Answer 71

1. Top management must adopt and unconditionally support an explicit corporate code of conduct. 2. Employees must understand that expectations for ethical behavior begin at the top and that senior management expects all employees to act accordingly. 3. Managers and others must be trained to consider the ethical implications of all business decisions. 4. An ethics office must be set up with which employees can communicate anonymously. Whistleblowers must feel protected from retaliation. 5. Outsiders such as suppliers, subcontractors, distributors, and customers must be told about the ethics program. 6. The ethics code must be enforced with timely action if any rules are broken.

Question 72

What’s corporate social responsibility, and how does it relate to each of a business’s major
stakeholders?

Answer 72

A business’s concern for the welfare of society. Businesses demonstrate responsibility to stakeholders b 1. satisfying customers with goods and services of real value; 2. making money for investors; 3. creating jobs for employees, maintaining job security, and seeing that hard work and talent are fairly rewarded; and 4. creating new wealth for society, promoting social justice, and contributing to making the businesses’ own environment a better place.

Question 73

What’s a social audit, and what kinds of activities does it monitor?

Answer 73

A systematic evaluation of an organization’s progress towards implementing socially responsible and responsive programs.

A social audit monitors corporate social responsibility efforts, industrial projects that might have a negative impact on the environment, and violations.

Question 74

How are U.S. businesses demanding socially responsible behavior from their international
suppliers?

Answer 74

Many U.S. businesses are demanding socially responsible behavior from their international suppliers by making sure their suppliers do not violate U.S. human rights and environmental standards.

Question 75

Why is it unlikely that there will be a single set of international rules governing
multinational companies soon?

Answer 75

It’s unlikely there will be a single set of international rules governing multinational companies because of the widespread disparity among global nations as to what constitutes ethical behavior.

Question 76

This company has a program it calls Social Service Leave that allows employees to take up to
a year off to work for a nonprofit organization while earning their full salary and benefits,
including job security. What is the name that company?

Answer 76

The companies that provide paid service leave is a lengthy list like places like Netflix.

American Income Life.

And more.

Question 77

Most people who start businesses in the U.S. are sole proprietors. What are
the advantages and disadvantages of sole proprietorships?

Answer 77

Advantages of sole proprietorships: the ease of starting and ending the business, being your own boss, pride of ownership, leaving a legacy, retention of company profits, no special taxes. Disadvantages: unlimited liability, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span.

Question 78

Why would unlimited liability be considered a major drawback to sole
proprietorships?

Answer 78

unlimited liability is a drawback to sole proprietorships because if the business stops profiting the owner of the business is solely responsible for the debt.

Question 79

What’s the difference between a limited partner and a general partner?

Answer 79

a limited partner invests money in the business but has no management responsibility or liability for losses beyond investment, while a general partner (owner) has unlimited liability.

Question 80

What are some of the advantages and disadvantages of partnerships?

Answer 80

some advantages of partnerships: more financial resources, shared management and pooled/complementary skills and knowledge, longer survival, and no special taxes. some disadvantages: unlimited liability, division of profits, disagreements among partners, and difficulty of termination.

Question 81

What are the major advantages and disadvantages of incorporating a
business?

Answer 81

the advantages include more money for investment, limited liability, size, perpetual life, ease of ownership change, ease of drawing talented employees, and separation of ownership from management. the disadvantages include initial cost, paperwork, size, difficulty in termination, double taxation, and possible conflict with a board of directors.

Question 82

What’s the role of owners (stockholders) in the corporate hierarchy?

Answer 82

Stockholders do not have to be employees of the corporation. They are investors who have limited liability. they elect the board of directors of a company who select the management to control the company.

Question 83

If you buy stock in a corporation and someone gets injured by one of the
corporation’s products, can you be sued? Why or why not?

Answer 83

Stockholders in a corporation have limited liability meaning as owners they are responsible for its losses only up to the amount they invested. The corporation could be sued and forced out-of-business but the stockholder would only lose what he/she invested.

Question 84

Why are so many new businesses choosing a limited liability company (LLC)
form of ownership?

Answer 84

Limited liability companies have become a popular way to form a business since all fifty states now recognize LLCs. Some of the advantages of LLCs are: Limited liability, choice of taxation (can be taxed as a partnership or corporation), flexible ownership rules, flexible distribution of profit and losses, operating flexibility.

Question 85

What are some of the factors to consider before buying a franchise?

Answer 85

some factors to consider before buying a franchise are: home based or not, price of name for franchise, risk, running the business correctly, location of franchise.

Question 86

What opportunities are available for starting a global franchise?

Answer 86

Successful franchising in global markets offers the same opportunities as in domestic markets. However, franchisers must be careful to adapt to the region where they wish to expand. McDonald’s for example has more than 33,000 restaurants in 119 countries.

Question 87

What’s a cooperative?

Answer 87

a cooperative is a form of business that is owned and controlled by the people who use it—producers, consumers, or workers with similar needs who pool their resources for mutual gain. Cooperatives are a major force in agriculture and other industries today.

Question 88

Why are people willing to take the risks of entrepreneurship?

Answer 88

Opportunity, profit, independence, and challenge

Question 89

What are the advantages of entrepreneurial teams?

Answer 89

Team members can combine creative skills with production and marketing skills right
from the start. Entrepreneurial teams can also ensure more cooperation and
coordination later among functions in the business.

Question 90

How do micropreneurs differ from other entrepreneurs?

Answer 90

While other entrepreneurs are committed to the quest for growth, micropreneurs know
they can be happy even if their companies never appear on a list of top-ranked
businesses.

Question 91

What are some opportunities and risks of web-based businesses?

Answer 91

Make enterprise zones (specific geographic areas to which governments try to attract
private business investment by offering lower taxes and other government support).

Question 92

What are the sections of a business plan as outlined in the text?

Answer 92

Section 1: Executive Summary (two to three page summary of the proposed venture).
Section 2: Company Background (describe company operations to date, potential legal
considerations, and areas of risk and opportunity). Section 3: Management Team
(include and organization chart, job descriptions of listed positions, and detailed resumes
of the current and proposed executives). Section 4: Financial Plan (provide five-year
projections for income, expenses, and funding sources). Section 5: Capital Required
(indicate the amount of capital needed to commence or continue operations, and
describe how these funds are to be used.

Question 93

Why do many small businesses avoid doing business globally?

Answer 93

Financing is often difficult to find. Many people don’t know how to get started and do not
understand the cultural differences in foreign markets. The bureaucratic red tape is often
overwhelming.

Question 94

What are some of the advantages small businesses have over large businesses
in selling in global markets?

Answer 94

Foreign buyers enjoy dealing with individuals rather than large corporations because (1)
small companies provide a wider variety of suppliers and can chip products more quickly
and (2) small companies give more personal service.

Question 95

Describe the changes occurring today in the management function.

Answer 95

Past- managers jobs consisted of telling people what to do, watch over
Today- managers are more progressive, emphasize team building, tend to
guide, motivate and coach

Question 96

Describe the four functions of management.

Answer 96

Planning- determine the best strategies and tactics to achieve organizational
goals and objectives
Organizing- design structure and create conditions and a system to achieve
goals
Leading- communicating, guiding, training, coaching and motivating others
Controlling- measuring what actually occurs to meet organizations goals

Question 97

Relate the planning process and decision making to the accomplishment of company
goals

Answer 97

Goals- broad long-term achievements, Objectives- specific short-term plans,
SWOT: strengths weaknesses opportunities threats, Strategic- 5+ years
planning, Tactical- monthly/yearly planning, Operational- day-to-day planning,
Contingency- plan b

Question 98

What are some of the changes happening in management today?

Answer 98

Some changes in management today are that leaders tend to be younger,
more of them are female, and fewer of them were educated at elite
universities. They tend to put more emphasis on motivation, teamwork, and
cooperation.

Question 99

What’s the definition of management used in this chapter?

Answer 99

The process used to accomplish organizational goals through planning,
organizing, leading, and controlling people and other organizational
resources.

Question 100

What are the four functions of management?

Answer 100

(1) Planning, (2) organizing, (3) leading, and (4) controlling.

Question 101

What’s the difference between goals and objectives?

Answer 101

Goals are broad, long-term achievements that organizations aim to
accomplish, whereas objectives are specific, short term plans made to help
reach the goals.

Question 102

What does a company analyze when it does a SWOT analysis?

Answer 102

Companies analyze the strengths and weaknesses of the firm and
opportunities and threats facing it

Question 103

What are the differences between strategic, tactical and operational planning?

Answer 103

Strategic planning is broad, long range planning that outlines the goals of the
organization, while tactical planning is specific, short term planning that lists
organizational objectives. Operational planning is more like tactical planning
and sets specific timetables and standards.

Question 104

What are the seven Ds in decision making?

Answer 104

The 6 D’s of decision making are (1) define the situation; (2) describe and
collect needed information; (3) develop alternatives; (4) decide which
alternative is best; (5) do what is indicated (begin implementation); and (6)
determine whether the decision was a good one, and follow up.

Question 105

How does enabling help achieve empowerment?

Answer 105

Enabling is giving the workers the education and tools they need to assume
their new decision making powers

Question 106

What are the five steps in the control process?

Answer 106

(1) setting clear standards, (2) monitoring and recording performance, (3)
comparing performance with plans and standards, (4) communicating results
and deviations to employees, and (5) providing positive feedback for a job well
done and taking corrective action if necessary

Question 107

What’s the difference between internal and external customers?

Answer 107

External customers are dealers who buy products to sell to others, and
ultimate customers who buy products for their own personal use. Internal
customers are individuals and units within the firm that receive services from
other individuals or units.

Question 108

What do the terms division of labor and job specialization mean?

Answer 108

Division of labor is the assignment of different parts of a manufacturing process or task to different people in
order to improve efficiency. Job specialization is the process of focusing one’s occupational
concentration on a specific area of expertise.

Question 109

What are the principles of management outlined by Fayol?

Answer 109

Fayol introduced principles such as unity of command, hierarchy of authority, division of labor, subordination of
individual interests to the general interest, authority, clear communication channels, order, and
equity

Question 110

What did Weber add to the principles of Fayol?

Answer 110

Weber added principles of bureaucracy such as job descriptions, written rules and decision guidelines, consistent
procedures, and staffing and promotions based on qualifications.

Question 111

Why are organizations becoming flatter?

Answer 111

To quickly respond to customer demands. A flatter organization gives lower-level employees the authority and responsibility to make decisions directly affecting customers.

Question 112

What are some reasons for having a narrow span of control in an organization?

Answer 112

The span of control narrows at higher levels of the organization, because work becomes less
standardized and managers need more face-to face communication.

Question 113

What are the advantages of departmentalization?

Answer 113

1-Employees can develop skills within a department as they master more skills
2-The company can achieve economies of scale by centralizing all the resources it needs and locate experts in that area
3-Employees can coordinate work within the function, and top management can easily direct and control various departments’ activities

Question 114

What are some disadvantages of departmentalization?

Answer 114

1-Departments may not communicate well
2-Employees may identify with their department’s goals rather than the organization’s
3-The company’s response to external changes may be slow
4-People may not be trained to take different managerial responsibilities
5-Department members may engage in groupthink and may need input from outside to become more creative

Question 115

What’s the difference between line and staff personnel?

Answer 115

Line personnel are responsible for directly achieving organizational goals (workers, distribution people, and
marketing personnel) Staff personnel advise and assist line personnel in meeting their goals.

Question 116

What management principle does a matrix-style organization challenge?

Answer 116

The flexibility inherent in the matrix-style organization directly challenge the rigid line and
line-and-staff organization structures

Question 117

What’s the main difference between a matrix-style organization’s structure and the use
of cross-functional teams?

Answer 117

Cross-functional teams tend to be long-lived as compared to

the temporary and fluid nature of teams in a matrix-style organization

Question 118

What’s an inverted organization?

Answer 118

An organization that has contacted people at the top and the chief executive officer at the bottom of the organization chart

Question 119

Why do organizations outsource functions?

Answer 119

To keep up with market and technology advances

Question 120

What’s organizational culture?

Answer 120

Organizational culture is a system of shared assumptions, values, and beliefs, which governs how people behave in organizations. These shared values have a strong influence on the people in the organization and dictate how they
dress, act, and perform their jobs.

Question 121

Briefly explain the managerial attitudes behind Theories X,

Answer 121

X - 1. Employees dislike work and will try to avoid it.

2. Employees prefer to be controlled and directed.
3. Employees seek security and responsibility.
4. Must be intimidated by managers to perform.
5. Motivated by financial rewards.

Question 122

Briefly explain the managerial attitudes behind Theory Y

Answer 122

Y - 1. Employees view work as a natural part of life.

2. Prefer limited control and direction.
3. Will seek responsibility under proper work conditions.
4. Perform better in work environments that aren’t intimidating.
5. Employees are motivated by many different needs.

Question 123

Briefly explain the managerial attitudes behind Theory Z

Answer 123

Z - 1. Employee involvement is the key to increased productivity.

2. Employee control is implied and informal.
3. Employees prefer to share responsibility and decision making.
4. Employees perform better in environments that foster trust and cooperation.
5. Employees need guaranteed employment and will accept slow evaluations and promotions.

Question 124

Explain goal-setting theory

Answer 124

Setting ambitious but attainable goals that can motivate workers and improve performance if
the goals are accepted, accompanied by feedback.

Question 125

Evaluate expectancy theory. When could expectancy theory apply to your
efforts or lack of effort?

Answer 125

During a review - if you didn’t meet the standards that were previously set for you there could
be consequences. If you exceeded them you could be rewarded.

Question 126

Explain the principles of equity theory.

Answer 126

Employees try to maintain equity between inputs and outputs compared to others in similar
positions. So basically they compare themselves to other employees in their same or similar
positions. When people think they are not being treated equally they will change their
productivity habits in a negative way.

Question 127

What are several steps firms can take to increase internal communications and
thus motivation?

Answer 127

Create an organizational culture that rewards listening - providing feedback, adopting
employee suggestions, etc.
Train supervisors and managers to listen.
Use effective questioning techniques.
Remove barriers to open communication - do not have separate areas for managers, dress
code, etc.
Avoid vague and ambiguous communication - using general phrases that leave people
wondering if they did something wrong (ex. “mistake were made”)
Make it easy to communicate - encouraging employees to do lunches together and hold
meetings/discussion groups.
Ask employees what is important to them - holding “stay interviews” rather than asking what
they could have done better during an exit interview

Question 128

What problems may emerge when firms try to implement participative
management?

Answer 128

The issues that may arise will be people and workers not following that rule. They wouldn’t
follow it because they believe their own opinions matter more and they would refuse.

Question 129

Why is it important to adjust motivational styles to individual employees? Are
there any general principles of motivation that today’s managers should
follow?

Answer 129

It is important to tailor motivational styles to specific generations because different
generations communicate differently and are looking to get different things out of their
career/place of employment. General principles of motivation that can be used all around
generation to generation is giving people the right tools to complete the job properly and
recognizing those who are putting in effort and doing a good job. Not punishment or rewards.

Question 130

What are the major laws that affected union growth, and what does each
one cover?

Answer 130

1. Norris-LaGuardia Act-courts can’t order injunctions for nonviolent activities.
   National Labor Relations Act (Wagner Act)- right to unionize.
   Fair Labor Standards Act-minimum wage and maximum hours.
   Labor-Management Relations Act (Taft-Hartley Act)-amended Wagner prohibiting required union membership.
   Labor-Management Reporting and Disclosure Act (Landrum-Griffin Act)-guaranteed individual rights of union members when dealing with their union.

Question 131

How do changes in the economy affect the objectives of unions?

Answer 131

Unions and their objectives have frequently shifted with social and economic trends. In the
1970s the primary objective was additional pay and benefits; while in the 1980s unions focused
on job security. During the 1990s and 2000s job security remained a key issue as unions tried to
cope with global competition and outsourcing.

Question 132

What are the major tactics used by unions and by management to assert
their power in contract negotiations?

Answer 132

lockouts, injunctions and bringing in strikebreakers

Question 133

What types of workers do unions need to organize in the future?

Answer 133

To remain relevant, unions must attract new members. This includes more professional,
female and foreign born workers. Both the Teamsters Union and Service Employees
International Union have started to target workers in health care, technology and finance.

Question 134

How does top-executive pay in the U.S. compare with top-executive pay in
other countries?

Answer 134

Executive pay in the U.S. is significantly higher than in other countries. For example, the
typical European CEO earns only about 40 percent what their U.S. counterpart makes.

Question 135

What’s the difference between pay equity and equal pay for equal work?

Answer 135

The Equal Pay Act of 1963 provides that workers revive equal pay for equal work (with
exceptions for seniority, merit, or performance). Pay equity is the demand for equivalent pay for
jobs requiring similar levels of education, training, and skills

Question 136

How is the term sexual harassment defined and when does sexual behavior
become illegal?

Answer 136

7. Sexual harassment refers to any unwelcome sexual advance, requests for sexual favors, and
   other verbal or physical conduct of a sexual nature that creates a hostile work environment. This
   behavior is considered illegal if the conduct unreasonably interferes with a workers’ job
   performance or creates an intimidating, hostile, or offensive work environment. It is also
   considered illegal if the sexual harassment constitutes a quid pro quo.

Question 137

What are some of the issues related to childcare and elder care and how
are companies addressing those issues?

Answer 137

Responsive companies are providing child care on the premises, emergency care when
scheduled care is interrupted, discounts with child care chains, vouchers to be used at the
employee’s chose care center, and referral services. Workers who need to provide elder care for
dependent parents or others are generally more experienced and vital to the mission than
younger workers are. The cost to business is very large and growing.

Question 138

What does it mean to “help the buyer buy?”

Answer 138

Websites that help buyers find the best price, identify product features, and question
sellers

Question 139

What are the three parts of the marketing concept?

Answer 139

A customer orientation - find out what consumers want and provide it for them
(2) A service orientation - customer satisfaction/customer-oriented
(3) A profit orientation - focus on those goods and services that will earn the most profit and enable the
organization to survive and expand to serve more consumer wants and needs

Question 140

What are the Four P’s of the Marketing Mix?

Answer 140

price, product, promotion, and place

Question 141

What are the four steps in the marketing research process?

Answer 141

Defining the problem or opportunity and determining the present situation,
Collecting research data,
Analyzing the data,
Choosing the best solution and implementing it.

Question 142

What’s environmental scanning?

Answer 142

The process of identifying factors that affect marketing success

Question 143

What factors are included in environmental scanning?

Answer 143

Global factors, 
Technological factors, 
Sociocultural factors, 
Competitive factors,
Economic factors

Question 144

Define the terms consumer market and business-to-business market

Answer 144

Consumer Market: All the individuals or households that want goods and services for
personal use and have the resources to buy them.

Business-to-business: Individuals and organizations that buy goods and services to use in production or to sell, rent, or
supply to others.

Question 145

Name and describe five ways to segment the consumer market.

Answer 145

Geographic Segmentation, Demographic Segmentation, Psychographic Segmentation,
Benefit Segmentation, Volume (Usage) Segmentation

Question 146

What’s niche marketing and how does it differ from one-to-one marketing?

Answer 146

Niche marketing Identifies small but profitable market segments and designs or finds
products for them. One-to-one marketing focuses on Developing a unique mix of goods
and services for each individual consumer

Question 147

What are four key factors that make B2B markets different from consumer
markets?

Answer 147

There are relatively few customers. Customers tend to be large buyers. Markets are
geographically concentrated. Buyers are more rational than emotional. Sales are direct.
Promotions focus heavily on personal selling

Question 148

What value enhancers may be included in a total product offer?

Answer 148

Some value enhancers that may be included in the total product offering include: brand
name, warranty, service, store surroundings, and speed of delivery.

Question 149

What’s the difference between a product line and a product mix?

Answer 149

Product line refers to the group of products that are physically similar or intended for a
similar market. These products may face similar competition.. The product mix is the
total of the product lines offered by a particular company

Question 150

Name the four classes of consumer goods and services and give examples
of each

Answer 150

Convenience goods and services - candy, gum and milk.
Shopping goods and services - clothes, shoes and appliances.
Specialty goods and services - fur coats, imported chocolates and business consultants.
Unsought goods and services - burial service, insurance and emergency drain cleaning.

Question 151

Describe three different types of industrial goods.

Answer 151

Capital items are expensive products that last a long time. Accessory equipment
consists of capital items that are not quite as long-lasting or expensive as installations
and include computers, copy machines, and various tools

Question 152

What functions does packaging now perform?

Answer 152

(1) attract the buyer’s attention, (2) protect
the goods inside, (3) be easy to open, (4) describe and give information, (5) explain the
benefits of the good inside, (6) provide information on warranties, warnings and other
consumer matters, and (7) give some indication of price, value, and uses.

Question 153

What’s the difference between a brand name and a trademark?

Answer 153

Brand names consist of a word, letter or group of words or letters that set it apart from
other goods and services. A trademark is a brand that has exclusive legal protection for
both its brand name and design.

Question 154

Explain the difference between a manufacturers’ brand, a dealer brand,
and a generic brand.

Answer 154

A manufacturers’ brand represents manufacturers that distribute their products nationally such as Xerox or Dell.

A dealer brand is often referred to as a private label and will not carry the manufacturers name, but rather carries the name of the distributor instead. For example, Kenmore is a dealer brand sold via Sears.

A generic brand is the name of an entire product category.

Question 155

What are the key elements of brand equity?

Answer 155

Brand equity is the value of the brand name and associated symbols. The elements of
brand equity include: brand loyalty, brand awareness, and brand association

Question 156

What are the six steps in the new-product development process?

Answer 156

Idea generation, development, product screenings, testing, product analysis, and commercialization

Question 157

What’s the difference between product screening and product analysis?

Answer 157

During the product screening process the number of new-product ideas a firm is working
on is reduced, so that it may focus on the most promising ideas. Product analysis occurs
after screening and involves making cost estimates and sales forecasts to get a feeling
for the profitability of new-product ideas.

Question 158

What are the two steps in commercialization?

Answer 158

promoting the product to distributors and retailers, and the development of strong advertising and sales campaigns.

Question 159

What’s the theory of the product life cycle?

Answer 159

The product life cycle is a theoretical model which explains what happens to sales and
profit for a product over a particular period of time. This model has four stages:
introduction, growth, maturity, and decline.

Question 160

List two short-term and two long-term pricing objectives. Can the two be
compatible?

Answer 160

Short-term pricing objectives include loss leaders and is designed to build traffic as well
as achieving greater market share.

Long-term pricing objectives include achieving a target return on investment and creating a certain image.

It is important that marketing managers set pricing objectives in context of other marketing decisions, since the pricing
objectives may differ greatly.

Question 161

What are the limitations of a cost-based pricing strategy?

Answer 161

The limit of a cost-based pricing system is that in the long run it is not the producer that
establishes price but rather the market place. To effectively establish price, the producer
must take into account competitor prices, marketing objectives, actual cost, and the
expected cost of product updates

Question 162

What’s psychological pricing?

Answer 162

Psychological pricing involves setting the price of goods or services at price points that
make the product appear less expensive.

Question 163

What’s a channel of distribution and what intermediaries participate in it?

Answer 163

consists of agents, brokers, wholesalers, and retailers that join together to transport and
store goods in their path or channel.

Question 164

Why do we need intermediaries? Illustrate how intermediaries create
exchange efficiency.

Answer 164

Perform tasks such as transporting, storing, selling, advertising and relationship building.
They are able to perform these tasks faster and more cheaply than most manufacturers
creating a cost savings.

Question 165

How would you defend intermediaries to someone who said getting rid of
them would save consumers millions of dollars?

Answer 165

The reason that marketing intermediaries have not been eliminated is they add value
that greatly exceeds their cost.

Question 166

Describe the activities of rack jobbers and drop shippers?

Answer 166

Furnish racks full of merchandise like toys, health and beauty aids to retailers. They
display the items and sell them on consignment, keeping title to the goods until they are
sold.
Drop shippers solicit orders and have the merchandise shipped directly from
producer to the buyer. They own the merchandise but do not handle it, stock it or deliver
it

Question 167

What kinds of products would call for each of the different distribution
strategies: intensive, selective, and exclusive?

Answer 167

Intensive distribution includes convenience items such as gum, magazines, candy and
cigarettes.

Selective distribution includes items such as appliances, furniture, and
clothing.

Exclusive distribution includes specialty products such as fly-fishing gear or
equipment for snow skiing.

Question 168

What four systems have evolved to tie together members of the channel of
distribution?

Answer 168

The four systems that have emerged to tie firms together are: corporate systems,
contractual systems, administered systems, and supply chains

Question 169

How does logistics differ from distribution?

Answer 169

Logistics differs from distribution in many ways. Logistics is the planning, implementing,
and controlling of the physical flow of materials, final goods, and related information from
points of origin to points of consumption to meet customer requirements at a profit.

Distribution is much less complex than logistics and simply involves moving the product
from the manufacturer to the end consumer.

Question 170

What are inbound logistics, outbound logistics, and reverse logistics?

Answer 170

Inbound logistics is the process of bringing raw materials, packaging, other goods and services, and information from suppliers to producers.

Outbound logistics manages the flow of finished products and information to business buyers and them to consumers.

Reverse logistics brings goods back to the manufacturer because of defects or forrecycling.

Question 171

What are the four traditional elements of the promotion mix?

Answer 171

advertising,
personal selling,
public relations,
and sales promotion

Question 172

What are the three most important advertising media in order of dollars
spent?

Answer 172

television, direct mail, and digital.

Question 173

What are the seven steps in the B2B selling process?

Answer 173

(1) prospecting and qualifying,
(2) pre-approach,
(3) approach,
(4) make presentation,
(5) answer objections,
(6) close sale,
(7) follow-up.

Question 174

What are the three steps in setting up a public relations program?

Answer 174

(1) listen to the public,
(2) develop policies and procedures in the public interest,
(3) tell people you’re being responsive to their needs.

Question 175

What are the sales promotion techniques used to reach consumers?

Answer 175

External sales promotions to consumers rely on samples, coupons, cents-off deals,
displays, store demonstrators, premiums, and other incentive

Question 176

What sales promotion techniques are used to reach businesses?

Answer 176

Internal sales promotion activities include sales training, sales aids, audiovisual displays,
and trade shows

Question 177

What’s viral marketing?

Answer 177

a broad term that describes everything from paying customers to say positive things
online to setting up multilevel selling schemes whereby consumers get commissions for
directing friends to specific sites

Question 178

What are blogging and podcasting?

Answer 178

A blog is an online diary that allows the user to create and update with text, photos, or
links to other sties. Podcasting is a means of distributing audio and video programs
online

Question 179

Describe a push strategy, a pull strategy and the pick economy.

Answer 179

the producer uses advertising, personal selling, sales promotion, and all other
promotional tools to convince wholesalers and retailers to stock and sell merchandise.

A pull strategy directs all advertising and sales promotion toward the consumer.

Customers who pick out their products from online outlets or who do online comparison shopping

Question 180

What’s the key difference between managerial and financial accounting

Answer 180

Managerial accounting provides information and analyses to managers within the firm to assist them in decision making.

Financial accounting provides information and analyses to external users of data such as creditors and lenders

Question 181

How’s the job of a private accountant different from that of a public
accountant?

Answer 181

A public accountant provides services for a fee to a variety of companies,
whereas a private accountant works for a single company.

Private and public accountants do essentially the same things with the exception of independent
audits. Private accountants do perform internal audits, but only public
accountants supply independent audits

Question 182

What’s the job of an auditor? What’s an independent audit?

Answer 182

Auditors review and evaluate the standards used to prepare a company’s
financial statements.

An independent audit is conducted by a public accountant
and is an evaluation and unbiased opinion about the accuracy of a company’s
financial statements.

Question 183

How is the job of the bookkeeper different from an accountant?

Answer 183

bookkeepers are responsible for the recording of financial transactions whereas
accountants are responsible for classifying, analyzing, interpreting, reporting, and
summarizing this financial data

Question 184

What’s the purpose of accounting journals and a ledger?

Answer 184

The purpose of a journal is to keep record of transactions as they happen, and
the ledger to show overall changes in business accounts over time.

Question 185

Why does a bookkeeper prepare a trial balance?

Answer 185

The general purpose of producing a trial balance is to ensure the entries in a
company’s bookkeeping system are mathematically correct.

Question 186

How has computer software helped businesses in maintaining and
compiling accounting information?

Answer 186

Computers can record and analyze data and provide financial reports. Software
can continuously analyze and test accounting systems to be sure they are
functioning correctly.

Computers can help decision making by providing
appropriate information, but they cannot themselves make good financial
decisions. Accounting applications and creativity are still human functions.

Question 187

What do we call the formula for the balance sheet? What three accounts
does it include?

Answer 187

The fundamental accounting equation is the basis for the balance sheet. The
equation is Assets = Liabilities + Owners’ equity

Question 188

What does it mean to list assets according to liquidity?

Answer 188

Accountants list assets on a firm’s balance sheet in order of their liquidity, or the
ease with which they can convert them into cash. Speedier conversion means
higher liquidity.

Question 189

What’s the difference between long-term and short-term liabilities on the
balance sheet?

Answer 189

Current liabilities (short-term liabilities), to be paid in one year or less, are higher
on the balance sheet due to more liquidity. Long-term liabilities, not due for one
year or longer, are below current liabilities on the balance sheet due to lower
liquidity.

Question 190

What’s owners’ equity and how do we determine it?

Answer 190

Owners’ equity is the amount of the business that belongs to the owners, minus
any liabilities the business owes. The formula for owners’ equity, then, is assets
minus liabilities.

Question 191

What are the key steps in preparing an income statement?

Answer 191

The income statement reports the firm’s financial operations over a particular
period of time, usually a year, a quarter of a year, or a month. An income
statement includes: revenue, costs of goods sold, gross profit (gross margin),
operating expenses, net income before taxes, taxes, and net income or loss.

Question 192

What’s the difference between revenue and income on the income
statement?

Answer 192

On an income statement, revenue is money received from selling goods and
services. Income is the money received from selling goods and services minus
expenses such as taxes; income = revenue - expenses.

Question 193

Why is the statement of cash flows important in evaluating a firm’s
operations?

Answer 193

Cash flow is simply the difference between cash coming in and cash going out of
a business. Poor cash flow constitutes a major operating problem for many
companies. It can result in defaulting on a loan or bankruptcy

Question 194

What’s the primary purpose of performing ratio analysis using the firm’s
financial statements?

Answer 194

Ratio analysis provides the firm with information about its financial position in key
areas for comparison to other firm in its industry and its own past performance

Question 195

What are the four main categories of financial ratios?

Answer 195

liquidity ratios,
leverage (debt) ratios,
profitability (performance) ratios,
activity ratios

Question 196

What’s the primary purpose of a securities exchange?

Answer 196

Securities exchange’s primary purpose is to serve as a place for businesses to find
long-term funding to finance capital needs.

Question 197

What does NASDAQ stand for? How does this exchange work?

Answer 197

The NASDAQ (originally know as the National Association of Securities Dealers
Automated Quotations) was the world’s first electronic stock market. The NASDAQ is an
electronic-based network that links dealers so they can buy and sell securities
electronically rather than in person

Question 198

Name at least two advantages of a company’s issuing

stock as a form of equity financing.

Answer 198

(1) the stock price never has to be repaid to the stock holders, since they become owners in the company;
(2) there is no legal obligation to pay stock dividends; and

(3) the company incurs no debt, so it may
appear financially stronger

Question 199

Name at least two disadvantages of a company’s issuing

stock as a form of equity financing.

Answer 199

(1)stockholders become owners of the firm and can affect its management by voting for the
board of directors;
(2) it is more costly to pay dividends since they are paid in after-tax
profits; and
(3) managers may be temped to make stockholders happy in the short term
rather than plan for long-term needs

Question 200

What are the major differences between common stock and preferred
stock?

Answer 200

Holders of common stock have voting rights in the company.
In exchange for having no voting rights, preferred stockholders receive a fixed dividend that must be paid in full
before common stockholders receive a dividend.

Preferred stockholders are also paid back their investment before common stockholders if the company is forced out of
business

Question 201

Why are bonds considered a form of debt financing?

Answer 201

An organization that issues bonds has a legal obligation to make regular interest
payments to investors and to repay the entire bond principle amount at a prescribed
time.

Question 202

What does it mean if a firm issues a 9% debenture bond due in 2025?

Answer 202

The bond is unsecured (has no collateral), has an annual interest rate of 9%, and has a
maturity date of 2025.

Question 203

Explain the difference between an unsecured and secured bond.

Answer 203

Unsecured (debenture) bonds are not supported by any collateral, whereas secured
bonds are backed by tangible assets such as mortgages, buildings, and equipment.

Question 204

Why are convertible bonds attractive to investors?

Answer 204

Convertible bonds can be attractive to investors because common stock value tends to
grow faster than a bond.

Question 205

What is the key advantage of investing through online brokers? What is the
key disadvantage?

Answer 205

One key advantage of investing through online brokers is lower fees, because the
investor does their own research.

The key disadvantage is the lower level of information.

Question 206

What is the primary purpose of diversifying investments?

Answer 206

Diversification means buying several different types of investments (government bond,
corporate bonds, preferred stock, common stock, global stock) with different degrees of
risk. The purpose is to reduce the overall risk an investor would assume by investing in
just one type of security

Question 207

What is a stock split? Why do companies sometimes split their stock?

Answer 207

When a stock splits, stockholders receive two (or more) shares of stock for each share
they own. Each is worth half (or less) of the original share, so while the number of shares
increases, the total value of stockholders’ holdings stays the same.
Stockholders hope the lower per-share price that results may increase the demand for stock.

Question 208

What does buying stock on margin mean?

Answer 208

An investor buying on margin borrow part (the percentage allowed to be borrowed is set
by the Federal Reserve) of the cost of a stock from the broker to get shares of stock
without immediately paying the fully price.

Question 209

What are mutual funds and ETFs?

Answer 209

A mutual fund is an organization that buys stocks and bonds and then sells shares in
those securities to the public enabling individuals to invest in many more companies than
they could otherwise afford. Like mutual funds, ETFs are collections of stocks that are
traded on securities exchanges, but they are traded more like individual stocks.

Question 210

What is the key benefit to investors in investing in a mutual fund or ETF?

Answer 210

Mutual funds and ETF-s lower risk by diversifying investments

Question 211

What does the Dow Jones Industrial Average measure? Why is it
important?

Answer 211

The Dow Jones Industrial Average is the average price of 30 specific stocks that
analysts use to track the directions (up or down) of the stock market.

Question 212

Why do the 30 companies comprising the Dow change periodically?

Answer 212

The Dow changes periodically because the market changes.

Question 213

Explain program trading and the problems it can create.

Answer 213

Program trading is when investors give their computers instructions to sell automatically
to avoid potential losses, if the price of their stock dips to a certain point. This can be
problematic because computers malfunction, and if a key computer is turned off,
program trading halts.

Question 214

What is money?

Answer 214

Anything that people generally accept as payment for goods and services

Question 215

What are the five characteristics of useful money?

Answer 215

1. Durability
2. Portability
3. Divisibility
4. Uniformity
5. Limited Supply
6. Acceptability

Question 216

What is the money supply, and why is it important

Answer 216

Money supply is the amount of money the Federal Reserve Bank makes available for
people to buy goods and services.
An increase in the supply of money typically lowers interest rates, which in turn, generates more investment and puts more money in the hands of consumers, thereby stimulating spending benefiting the economy.
The size of the money supply can affect employment and economic growth or decline.

Question 217

How does the Federal Reserve control the money supply?

Answer 217

The Fed controls the money supply primarily through open-market operations: The
purchase of government bonds increases the money supply, and the sale of government
bonds decreases the money supply

Question 218

What are the major functions of the Federal Reserve? What other functions
does it perform?

Answer 218

The Federal Reserve is responsible for creating an environment that fosters stable
prices and full employment. It attempts to manage these two goals with monetary policy.
The Federal Reserve is also responsible for the clearing of checks.

Question 219

Why did the U.S. need a Federal Reserve Bank?

Answer 219

The U.S Federal Reserve was created after a cash shortage problem in 1907.

Question 220

What is the difference between a bank, a savings and loan association, and
a credit union?

Answer 220

Commercial banks are profit seeking organizations that receive deposits from individuals
and corporations in the form checking and savings accounts, and uses those funds to
make loans.

Savings and loan associations are financial institutions that accepts both
deposits but provides home mortgage loans.

Credit unions on the other hand are
nonprofit financial cooperatives that offer the full variety of banking services.

Question 221

What is a consumer finance company?

Answer 221

consumer finance companies provide financing for customers of retail stores or
wholesalers.

Question 222

What is the role of the FDIC

Answer 222

An independent agency of the U.S government that insures bank deposits up to
$250,000

Question 223

How does a debit card differ from a credit card?

Answer 223

A Debit card withdraws funds from a checking account, while a credit card allows you to
spend borrowed money up to a certain limit.

Question 224

What is the World Bank and what does it do?

Answer 224

The World Bank lends most of its money to less developed nations to improve their
productivity and help raise standards of living and quality of life

Question 225

What is the IMF and what does it do

Answer 225

International Monetary Fund (IMF) fosters cooperative monetary policies that stabilize
the exchange of one national currency for another.