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exam review questions... - BUS 101 Exam #1 (Ch. 1 4) Review...

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BUS 101 Exam #1 (Ch. 1 – 4) Review Questions 1. Explain how the basic economic questions are answered in capitalistic and command economies. In a capitalistic economy, the basic questions are answered by individuals and businesses. In a command economy, the government reserves most, if not, all rights to answer all questions. 2. A nation’s economy fluctuates instead of growing at a steady pace every year. These fluctuations are generally referred to as the business cycle. Describe the four different phases of the business cycle. The four main phases are the prosperity, recession, the trough and recovery. When a country faces prosperity, total income is relatively high and unemployment is low. When a recession comes along, a country experiences a drop in its GDP for 2 consecutive quarters in a fiscal year: the trough occurs when the recession is about to face its turning point. Finally, the nation gradually returns to prosperous times and the cycle repeats. 3. What is the difference between monetary and fiscal policies? How does each affect the nation’s economy? Monetary policy is at the discretion of the Federal Reserve, because its members control interest rate levels and the amount of currency in circulation. Fiscal policy is exercised by the federal government via its influence on consumer savings and spending to help boost the economy. Both policies depend on consumer interests and how they satisfy their wants and needs when purchasing
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exam review questions... - BUS 101 Exam #1 (Ch. 1 4) Review...

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