1,2, Chapter 3, 13 Review Questions A budget surplus is when government revenue is higher than government expenses TRUE The U.S.A. is an example of a pure capitalistic economic system FALSE- free enterprise An economic system is the way a country allocates its resources to convert them into consumer goods TRUE Government spending is the engine of the economy FALSE- consumer spending Macroeconomics deals with the big picture of a large economic system TRUE GDP is the value of goods produced by companies who are based in the country and whose goods are produced anywhere FALSE- all goods produced within the borders of a country The GDP adjusted for inflation is called the Real GDP TRUE A recession is a windward turn in an economic cycle TRUE Prices are higher when demand is greater than supply TRUE When stocks are increasing at a robust pace over an extended period of time, this is called a bull market TRUE When you multiply the value per share times the number of shares outstanding, the market capitalization of a company is determined TRUE One of the tools of the Federal Reserve will use to slow down inflation is to decrease discount rates FALSE- increase rates Taxes are a form of revenue or government TRUE
The economic classification for a system with only a few sellers is called oligopoly TRUE Business cycles have fluctuations that are normally up and down TRUE The continuous exchange of goods and services for money is known as circular flow TRUE Governments use monetary and fiscal policy to stabilize the economy and foster the economy TRUE Usually the most favorable net credit terms are received from a credit union TRUE For the FDIC to pay for the deposit insurance it provides, the FDIC utilizes tax dollars FALSE- it charges a % of total money a bank has on deposit The rate charged by the Federal Reserve on loans made to its members is called the prime rate FALSE- discount rate The Federal Reserve sells bonds to the public to decrease inflation TRUE Most businesses in the US can be classified as small businesses TRUE Recently in rises oil prices has impacted the cost of almost every product and service in the world (multiplier effect) TRUE The lessening of computer prices has made it easier for small businesses to compete with larger businesses TRUE A market order is selling stocks at the prevailing price TRUE The tools the Federal Reserve utilize to influence the economy are: set discount rates, set bank reserve requirements, and buys & sells government bonds TRUE
High-risk customers usually must utilize finance companies to secure loans TRUE If a company has a CCC credit rating it will cost them less to issue bonds than an A company FALSE- cost them more, lower rates higher interest you must pay When you buy a stock for $10 per share and sell it for $20 per share, the $10 increase you made on a stock will be taxed as normal income tax (capital gain) FALSE- pay capital gains tax, not income tax An investment banker can sell Proctors & Gamble common stock FALSE- stockbroker Manufacturing is the most rapidly growing industry in the US FALSE- service You can insure 5 savings accounts for $100,000 each at one bank with the FDIC FALSE- $100,000 per bank A Limited Liability Corporation has the tax benefits as a sole proprietorship and protection of a corporation TRUE If the Federal Reserve increases interest rates, it is trying to slow the economy TRUE Economists believe that deflation is the best economic position FALSE- small inflation increases An investment banker is more like a new car salesperson where as a stockbroker is like a used car salesperson TRUE Google stock is an example of a blue chip stock FALSE- long-term steady rising stocks of a renowned company Most mergers and acquisitions fail because the human factors is underestimated in importance TRUE The Federal Reserve Policies are the monetary policies of the USA TRUE
Corporate taxes are the majority of the USA federal governments reserve FALSE- individual income tax is the largest The AT&T breakup into smaller company's was because the FTC viewed AT&T as a monopoly TRUE