Business Principles BUSI 1301
Exam 1 Questions with 100%
Correct Answers
Socialism - Answer- An economic system based on the premise that some basic
businesses, like utilities, should be owned by the government in order to promote social
equality.
Limitation: Brain Drain: Some of a country's best and brightest workers (i.e. doctors,
lawyers and business owners) move to capitalistic countries due to high taxes on
professionals or low pay for professionals compared to capitalist countries.
Communism - Answer- An economic and political system in which the government
makes almost all economic decisions and owns almost all the major factors of
production.
Mixed Economies - Answer- Some allocation of resources is made by the market and
some by the government.
Socialist governments are cutting back on social programs, lowering taxes and moving
toward capitalism.
Capitalist countries are increasing social programs and moving more toward socialism.
Gross Domestic Product (GDP) - Answer- Total value of final goods and services
produced in a country in a given year. As long as a company is within a country's
border, their numbers go into the country's GDP (even if they are foreign-owned).
Unemployment Rate - Answer- The percentage of civilians at least 16-years-old who
are unemployed and tried to find a job within the prior four weeks.
UNEMPLOYMENT Four Types - Answer- Frictional
People who quit a job because of dislike for job, boss, or working conditions (they are
still looking.)
Structural
Created by restructuring of firms or mismatch with skills with available position.
Seasonal
Created by demand for specific skills or industry has seasonal needs e.g. farming, retail.
, Cyclical
Created by business cycle e.g. recession, Most Serious Type.
Inflation - Answer- The general rise in the prices of goods and services over time.
Consumer Price Index (CPI) - Answer- Monthly statistics that measure the pace of
inflation or deflation. The wages, rent/leases, tax brackets, government benefits and
interest rates of some citizens are based upon the CPI.
Producer Price Index (PPI) - Answer- An index that measures prices at the wholesale
level.
Productivity in the U.S - Answer- . has risen due to the technological advances that
have made production faster and easier
Productivity in the service sector grows more slowly because of fewer technologies
Fiscal Policy - Answer- The federal government's efforts to keep the economy stable by
increasing or decreasing taxes or government spending.
Tools of Fiscal Policy:
Taxation
Government Spending
Monetary Policy - Answer- The management of the money supply and interest rates by
the Federal Reserve Bank (the "Fed")
Federal Reserve System Controls - Answer- The Money Supply
Loosen Credit to help Economy
Tighten Credit to slow economy or fight inflation
The Fed has a very hard, if not impossible time controlling long term interest rates...the
MARKET does that
Banking is a "Bluff"
Congress does the spending. The government has a hard time reducing deficits? -
Answer- yes, do to pressure on the Government to expand spending each year.
BUSINESS in the
Exam 1 Questions with 100%
Correct Answers
Socialism - Answer- An economic system based on the premise that some basic
businesses, like utilities, should be owned by the government in order to promote social
equality.
Limitation: Brain Drain: Some of a country's best and brightest workers (i.e. doctors,
lawyers and business owners) move to capitalistic countries due to high taxes on
professionals or low pay for professionals compared to capitalist countries.
Communism - Answer- An economic and political system in which the government
makes almost all economic decisions and owns almost all the major factors of
production.
Mixed Economies - Answer- Some allocation of resources is made by the market and
some by the government.
Socialist governments are cutting back on social programs, lowering taxes and moving
toward capitalism.
Capitalist countries are increasing social programs and moving more toward socialism.
Gross Domestic Product (GDP) - Answer- Total value of final goods and services
produced in a country in a given year. As long as a company is within a country's
border, their numbers go into the country's GDP (even if they are foreign-owned).
Unemployment Rate - Answer- The percentage of civilians at least 16-years-old who
are unemployed and tried to find a job within the prior four weeks.
UNEMPLOYMENT Four Types - Answer- Frictional
People who quit a job because of dislike for job, boss, or working conditions (they are
still looking.)
Structural
Created by restructuring of firms or mismatch with skills with available position.
Seasonal
Created by demand for specific skills or industry has seasonal needs e.g. farming, retail.
, Cyclical
Created by business cycle e.g. recession, Most Serious Type.
Inflation - Answer- The general rise in the prices of goods and services over time.
Consumer Price Index (CPI) - Answer- Monthly statistics that measure the pace of
inflation or deflation. The wages, rent/leases, tax brackets, government benefits and
interest rates of some citizens are based upon the CPI.
Producer Price Index (PPI) - Answer- An index that measures prices at the wholesale
level.
Productivity in the U.S - Answer- . has risen due to the technological advances that
have made production faster and easier
Productivity in the service sector grows more slowly because of fewer technologies
Fiscal Policy - Answer- The federal government's efforts to keep the economy stable by
increasing or decreasing taxes or government spending.
Tools of Fiscal Policy:
Taxation
Government Spending
Monetary Policy - Answer- The management of the money supply and interest rates by
the Federal Reserve Bank (the "Fed")
Federal Reserve System Controls - Answer- The Money Supply
Loosen Credit to help Economy
Tighten Credit to slow economy or fight inflation
The Fed has a very hard, if not impossible time controlling long term interest rates...the
MARKET does that
Banking is a "Bluff"
Congress does the spending. The government has a hard time reducing deficits? -
Answer- yes, do to pressure on the Government to expand spending each year.
BUSINESS in the
