Business Degree Business Economics 2 — Questions and Answers
Question 1: What is 'fiscal policy'?
- A central bank's management of interest rates and money supply
- Government use of taxation and spending to influence the economy (Correct answer)
- Business pricing decisions in response to market conditions
- Trade agreements between two or more nations
Correct answer: Government use of taxation and spending to influence the economy
Fiscal policy refers to government decisions about taxation and public spending used to influence macroeconomic conditions like employment and growth.
Question 2: What is 'monetary policy' in the United States primarily managed by?
- The US Treasury Department
- Congress through annual budget legislation
- The Federal Reserve (the Fed) (Correct answer)
- The Securities and Exchange Commission (SEC)
Correct answer: The Federal Reserve (the Fed)
The Federal Reserve manages US monetary policy by setting interest rates and controlling money supply to achieve stable prices and maximum employment.
Question 3: What is 'oligopoly' as a market structure?
- A market with thousands of small competing firms
- A market dominated by a few large firms with significant interdependence (Correct answer)
- A market where the government controls all production
- A market with a single buyer rather than a single seller
Correct answer: A market dominated by a few large firms with significant interdependence
An oligopoly is a market structure with a small number of dominant firms whose decisions significantly affect one another and the entire market.
Question 4: What is the 'business cycle'?
- A company's annual financial planning cycle
- The recurring pattern of economic expansion and contraction over time (Correct answer)
- The sequence of events in a product's market life
- A predictable series of quarterly earnings reports
Correct answer: The recurring pattern of economic expansion and contraction over time
The business cycle describes the fluctuating levels of economic activity that an economy experiences over time, cycling through expansion, peak, recession, and recovery.
Question 5: What is 'price discrimination'?
- Illegally setting prices below cost to drive out competitors
- Charging different prices to different buyers for the same product based on their willingness to pay (Correct answer)
- Setting prices based on competitor pricing strategies
- Offering volume discounts for bulk purchases
Correct answer: Charging different prices to different buyers for the same product based on their willingness to pay
Price discrimination involves selling the same product at different prices to different consumers based on their demand elasticity or ability to pay.
Question 6: What is 'economic equilibrium'?
- A state where all workers in an economy are employed
- The point where quantity supplied equals quantity demanded, with no tendency to change (Correct answer)
- A period of zero inflation and stable growth
- A balance of trade where imports equal exports
Correct answer: The point where quantity supplied equals quantity demanded, with no tendency to change
Market equilibrium occurs at the price where the amount suppliers are willing to sell equals the amount buyers want to purchase, creating market stability.
Business Degree Business Economics 2
What is 'fiscal policy'?