1.5.4 The economy and business

• What are economic systems concerned with organizing?

  Production, distribution, consumption
• Market economies depend on individual decisions, while command economies rely on centralized government control.

  True
• High unemployment reduces consumer demand for businesses.


  True
• What are the two primary economic systems?

  Market and command economies
• What is the highest point of economic activity in a business cycle called?

  Peak
• High consumer confidence leads to increased business investment and hiring.


  True
• A market economy is characterized by private ownership, supply and demand, and minimal government intervention
• High inflation reduces the purchasing power of money
• Stages of a business cycle in order:

  1️⃣ Expansion

  2️⃣ Peak

  3️⃣ Contraction

  4️⃣ Trough
• Consumer confidence reflects how optimistic or pessimistic consumers are about the economy
• Fiscal policy uses government spending and taxation to influence economic growth.


  True
• How do rising interest rates affect consumer spending?

  Reduce consumer spending
• Interest rates are the cost of borrowing money
• Which country is an example of a market economy?

  United States
• High consumer confidence leads to increased business profits.


  True
• What does GDP measure?

  Total economic output
• What is the primary goal of fiscal policy?

  Influence aggregate demand
• Monetary policy controls interest rates and the money supply
• Match the interest rate change with its effect on businesses:

  Rising interest rates ↔️ Reduce consumer spending

  Falling interest rates ↔️ Increase consumer spending
• Match the economic system with its characteristic:

  Market Economy ↔️ Minimal government intervention

  Command Economy ↔️ Government control of resources
• High consumer confidence leads to increased business growth.


  True
• Economic forecasting predicts future economic trends
• What type of economic system relies on centralized government control?

  Command economy
• Inflation reduces the purchasing power of money
• Understanding macroeconomic indicators helps businesses assess the broader economic environment
• During the expansion stage of a business cycle, GDP rises and employment increases.

  True
• What happens to business activity when consumer confidence is low?

  Reduced sales and profits
• What are the two primary economic systems?

  Market and command economies
• What does GDP measure?

  Economic growth
• Match the macroeconomic indicator with its impact on business:

  GDP ↔️ Indicates the health of the market

  Inflation ↔️ Reduces consumer spending

  Exchange Rates ↔️ Affect import and export costs
• During a contraction, businesses may lay off employees due to reduced profits.


  True
• Match the government policy with its primary effect:

  Fiscal Policy ↔️ Influences aggregate demand

  Monetary Policy ↔️ Stabilizes prices
• Changes in interest rates can affect the cost of borrowing for business investments
• What may a business do if interest rates rise and they were planning to expand operations?

  Postpone the expansion
• Match the economic system with its characteristic:

  Market Economy ↔️ Minimal government intervention

  Command Economy ↔️ Government control of resources
• What are the two primary tools of fiscal policy?

  Spending and taxation
• Market economies rely on individual decisions and market forces
• Monetary policy controls interest rates and the money supply
• What is fiscal policy concerned with?

  Government spending and taxation
• What are interest rates the cost of?

  Borrowing money