Inflation occurs because aggregate demand is growing as fast as aggregate supply.
Answer: FALSE
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Multinational Business Chapter 4
- In most cases, if the misery index of a country is high, then consumers and businesses are less likely to spend and invest.
- The Happy Planet Index measures well-being and perceptions of living conditions by assessing areas such as housing, incomes, security, and work-life balance.
- Between 2000 and 2008, China's economy grew at a faster rate than Japan's economy.
- The BRICs are the strongest developed economies in the world.
- In response to the global credit crisis, the United States government took actions that increased economic freedom.
- The collapse of communism in the late 1980s and early 1990s led to a more widespread adoption of the principles of capitalism.
- There is a positive correlation between economic freedom and economic growth.
- A mixed economy is a system where economic decisions are largely market driven and ownership is largely private, but the government intervenes in many private economic decisions.
- In a mixed economy, all dimensions of economic activity, including pricing and production decisions, are determined by a central government plan.
- The government considers itself a better judge of resource allocation than businesses or citizens in a market economy.
- In a command economy, the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold are all planned by the government.
- A market economy is one in which resources are primarily owned and controlled by individuals and companies.
- A market economy gives individuals the freedom to decide where to work doing what, how to spend or save money, and whether to consume now or later.
- The range of economic systems in the world today, when represented on a spectrum, has one end anchored by the idea of capitalism, the other with that of socialism.
- An economic system is the set of structures and processes that guides the allocation of resources and shapes the conduct of business activities within a country.
- In a country's balance of payments, the current account and the capital account represent equal values.
- The balance of trade is a record of a country's international transactions that take place among companies, governments, or individuals.
- There is a strong relationship between skewed income distributions and the split between those who live in urban settings versus those who live in rural areas.
- Uneven income distribution is largely a problem confined to poorer nations.
- External debt results when the government spends more than it collects in revenues, whereas internal debt results when a government borrows money from foreign lenders.
- The so-called "misery index" is the sum of a country's inflation and unemployment rates.
- Inflation affects interest rates, exchange rates, the cost of living, general economic confidence, and the stability of the current political system.
- The Human Development Index measures the average achievements in a country on three basic dimensions of human development: mortality, knowledge, and standard of living.
- Economic indicators such as GNI, and its expression in terms of per capita, growth rate, and PPP, are not sufficient to develop a clear picture of the overall quality of life in a country.
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