Download ECONOMICS Review sheet

American Government
HSA Review: Economics
Name: _____________________________
Directions: Use the slide show review to answer the following questions.
1. What are the four types of economic systems?
A. production, market, command, free
B. market, traditional, mixed, command
C. command, labor, capital traditional
D. free, command, communist, mixed
2. Which of the following MOST resembles a traditional economic system?
A. Susan became a nurse because her mother and grandmother were nurses. Although she
could have chosen any profession, she wanted to follow in their footsteps. One day, she
plans on returning to medical school and becoming a surgeon.
B. Arthur is a talented man. He is intelligent enough to do almost anything, but the
government has assigned him to work in an automobile factory. He hates his job but has
no choice since the government makes all economic decisions and stresses the important
of everyone working for the food of the country.
C. Nathan is an excellent cobbler. Because his family has practiced this profession for
generations, it is all he ever hoped or was expected to be. The shop he works out of is on
land owned by a wealthy landlord and, although he takes great pride in his work, Nathan
will likely never advance beyond where he currently is in life.
D. Paula has pulled her up by the bootstraps. Although she was born poor, she worked
hard in school and earned a scholarship. She graduated with honors and now works for a
large corporation. Taking advantage of the opportunities afforded her, she was able to
buy her parents a new house and send her baby brother to college as well.
3. Not having enough money to finance all the social programs a government wants to
reflects which of the following problems?
A. scarcity of money
B. scarcity of social programs
C. lack of opportunity
D. inadequate opportunity costs
4. Additional government regulations restricting the amount of gases a factory may omit
into the atmosphere are MOST likely to have which of the following effects?
A. increased damage to the environment
B. less efficient productivity
C. prevent future scarcity
D. eliminate opportunity costs
5. The way the government conducts spending and taxation is called what?
A. monetary policy
B. economic policy
C. free enterprise policy
D. fiscal policy
6. The way the government chooses to control the money supply is called what?
A. monetary policy
B. open market operation
C. reserve requirement and discount rate
D. fiscal policy
7. Economic system based on equity and in which the government decides what gets
made and sets price is called what?
A. market system
B. traditional economy
C. political economy
D. command economy
8. A small country in the Western Hemisphere is ruled by a communist government. The
government, therefore, practices strict control over the economy. However, in reality, the
government does allow some capitalism to exist because it finds that it helps bring much
needed money in the country. This nation’s economic system can most accurately be
labeled as which of the following?
A. command economy
B. capitalistic economy
C. mixed economy
D. market economy
9. The ups and downs that the nation’s economy goes through is officially referred to as
what?
A. a roller coaster
B. expansion
C. the business cycle
D. market economy
10. GDP, CPI, unemployment rate and the national debt are all what?
A. signs that the economy is peaking
B. signs that the economy is in contraction
C. economic indicators used to determine the state direction of the economy
D. the results of economic expansion
11. The new president proposes an economic plan to Congress. In it, he calls for lower
taxes and recommends several programs that he would like the government to spend
money on. The president’s proposal reflects what?
A. his monetary policy
B. his fiscal policy
C. his desire to reduce inflation
D. his ability to control the Federal Reserve
12. The Federal Reserve comes to the conclusion that more money must be pumped into
the economy in an effort to stimulate economic growth. Which of the following actions
could the “Fed” take that would result in increasing the money supply?
A. raise the discount rate
B. raise the reserve requirement
C. sell securities (bonds)
D. buy securities (bonds)
13. Congress is about to pass a bill that will increase federal spending on social programs.
The funds that they will allocate could have been spent on health care of job training. In
the end, both houses decided to split the money 50/50, spending half on government
funded healthcare programs and half grants designed to train US workers for the
changing job market. Which of the following is not an opportunity cost of Congress’
decision?
A. the additional job training that could have occurred with more funding
B. the additional healthcare benefits that could have been provided with more funding
C. the benefits that could have been gained by funding other social programs
D. the monetary policy Congress could have established is it had more money to spend
Short Answer
1. Inflation is a rise in prices and tends to increase as more money is pumped into the
economy. If inflation started to rise too high, what actions might the government take in
terms of fiscal policy? What actions might it take in terms of monetary policy?
2. What are some reasons why command economics have traditionally been less effective
than market economics?
3. Draw and label the business cycle. Explain what is happening to the economy at each
point.
4. If the country increases spending by building new bridges and rebuilding roads, what
will this do to the economy? Why?
5. If the Federal Reserve increases the interest rate which means banks will loan less
money to the people, what will this do to inflation?