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Chapter 1 Discussion Questions: 1. Affects on Business Firms: Reduced consumer spending resulting in decreased sales and revenue.Various manufacturers filing for bankruptcy/Increase in business failures.Banks/Financial institutions on verge of collapse.Depressed stock value/decreased value of businesses.Downsizing.Affects on Employees/Individuals: High unemployment.Depressed stock values=decrease in value of investments/retirement/401 accounts.Difficulty getting loans.Decrease in pay/benefits.2. The ‘financial meltdown’ helped move our economy into a mixed one. The governmentbailed out banks and other financial institutions to the tune of $700 million dollars of taxpayermoney increasing the government involvement in economic affairs creating a mix of both capitalism and socialism.3. Yes, but less than in the past as businesses consolidate into large corporations reducing the size of small independent concerns. That individual influence has also decreased as government involvement has increased.4. A better measurement is to utilize the REAL GDP which uses inflation adjusted figures. You can add the use of the CPI and the PPI which together will show a more accurate picture of a nation’s economic health.5. Competition forces businesses to distinguish themselves from each other leading to innovation, increased quality, and decreased prices to the consumer. It also forces them to be more efficientas an organization to keep operating costs down and to react swiftly to changing market conditions.6. Government answers the four basic economic questions through its monetary policies as the federalreserve determines the size of the supply of money and interest rates. Plus, through its fiscalpolicy which influences the amount of savings and expenditures by altering tax structures and changing the levels of government spending. These policies have a great effect on how businesses operate andhow consumers spend.
Government participates in the economic system with effective use of its policies and can interferewith ineffective use of its policies.