Understanding Business Chapter 2

Question 1

Economics

Answer 1

Study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals

Question 2

Macroeconomics

Answer 2

A part of economics that looks at the operation of a nation’s economy as a whole

Question 3

Microeconomics

Answer 3

The part of economics that looks at the behavior of people and organizations in particular markets

Question 4

Invisible Hand

Answer 4

A phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all.

Question 5

Capitalism

Answer 5

Economic system in which all or most of factors of production and distribution are privately owned and operated for profit

Question 6

Supply

Answer 6

The quantities of products that manufacturers or owners are willing to sell at different prices at a specific time.

Question 7

Demand

Answer 7

The quantity of products that people are willing to buy at different prices at a specific time.

Question 8

Market Price

Answer 8

The price determined by supply and demand.

Question 9

Perfect Competition

Answer 9

Market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product

Question 10

Monopolistic Competition

Answer 10

Market situation in which a large number of sellers produce products that are very similiar but that are perceived by buyers as different

Question 11

Oligopoly

Answer 11

A form of competition in which just a few sellers dominate the market

Question 12

Monopoly

Answer 12

A market in which there is only one seller for a product or service.

Question 13

Socialism

Answer 13

An economic system based on the premise that some. if not most. basic businesses should be owned by the government so that profits can be distributed among the people

Question 14

Brain Drain

Answer 14

Loss of the best and brightest people to other countries

Question 15

Communism

Answer 15

An economic and political system in which the state makes almost all economic decisions and owns almost all of the major factors of production.

Question 16

Free-Market Economies

Answer 16

Economic system in which the market largely determines what goods and services get produced. who gets them. and how the economy grows.

Question 17

Command Economies

Answer 17

Economic system in which the government largely decides what goods and services will be produced. who gets them. and how the economy grows.

Question 18

Mixed Economies

Answer 18

Economic system in which some allocation of resources is made by the market and some by the government.

Question 19

Gross Domestic Product (GDP)

Answer 19

The total value of final goods and services produced in a country in a given year.

Question 20

Unemployment Rate

Answer 20

Number of civilians at least 16 years who have been trying to find a job within the prior four weeks.

Question 21

Inflation

Answer 21

General rise in the prices of goods and services over time.

Question 22

Deflation

Answer 22

A situation in which prices are declining

Question 23

Business Cycles

Answer 23

Periodic rises and falls that occur in all economies over time.

Question 24

Recession

Answer 24

Two or more consecutive quarters of decline in the GDP.

Question 25

Depression

Answer 25

A severe recession.

Question 26

Consumer Price Index (CPI)

Answer 26

monthly statistics that measure the pace of inflation or deflation

Question 27

Disinflation

Answer 27

a situation in which price increases are slowing (the inflation rate is declining)

Question 28

Fiscal Policy

Answer 28

The federal government efforts to keep the economy stable by increasing or decreasing taxes or government spending

Question 29

Keynesian Economic Theory

Answer 29

The theory that a government policy of increasing spending and cutting taxes could stimulate the econemy in a recession.

Question 30

Monetary Policy

Answer 30

The management of the money supply and interest rates by the federal reserve.

Question 31

National Debt

Answer 31

The sum of government deficits over time.

Question 32

Producer Price Index (PPI)

Answer 32

An index that measures prices at the wholesale level.

Question 33

Resource Development

Answer 33

The study of how to increase resources and to create the conditions that will make better use of those resources.

Question 34

Stagflation

Answer 34

A situation when the economy is slowing but prices are going up anyhow.