Download Free Enterprise Activities

FREE ENTERPRISE
Activities
TO THE TEACHER
Free Enterprise Activities relate important economic concepts taught in the text to the
market economy. Each activity reinforces an aspect of the American free enterprise system.
Many activities challenge students to play the role of an entrepreneur, underscoring the key
part played by those who assume the necessary risks to develop a business. Other activities
help students understand the roles of government, labor, consumers, and the global economy
in American free enterprise.
CREATING A CUSTOMIZED FILE
The individual booklets in the Teacher’s Classroom Resources provide a wide variety of
supplemental materials to help make economics meaningful to students. These resources
appear as individual booklets in a carryall file box.
There are a variety of ways to organize your classroom resources.
Three alternatives are given here:
■ Organize by category (all activities, all tests, etc.)
■ Organize by category and chapter (all Chapter 1 activities, all Chapter 1 tests, etc.)
■ Organize sequentially by lesson (activities, quizzes, and other materials for Chapter 1, Section 1;
Chapter 1, Section 2, etc.)
Regardless of the organization you choose, you may pull out individual activity sheets from
these booklets, or you may photocopy them directly from the booklets and file the photocopies.
You will then be able to keep original booklets intact in a safe place.
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the material contained herein on the condition that such material be reproduced only for classroom use;
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(
ONTENTS
Activity 1
Productive Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Activity 2
Business and Government . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Activity 3
Choosing a Business Organization . . . . . . . . . . . . . . . . . . . . .
3
Activity 4
Analyzing Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Activity 5
Needs, Wants, Marketers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
Activity 6
Market Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Activity 7
Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Activity 8
Selling Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Activity 9
Responsible Consumerism . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
Activity 10
Going Into Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Activity 11
Expressed and Implied Warranties . . . . . . . . . . . . . . . . . . . . . . 11
Activity 12
Speculating in Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Activity 13
Using Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Activity 14
Tax Holiday . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Activity 15
The Federal Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Activity 16
Types, Functions, and Characteristics of Money . . . . . . . . . . . 16
Activity 17
Certificates of Deposit or Mutual Funds? . . . . . . . . . . . . . . . . 17
Activity 18
Economic Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Activity 19
Types of Unemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Activity 20
Decision Making at the Federal Reserve Board . . . . . . . . . . . . 20
Activity 21
Policies for Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Activity 22
Free Trade and Jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Activity 23
China’s Bold Reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Activity 24
Funding Economic Growth in Developing Nations . . . . . . . . . 24
Activity 25
Foreign Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Activity 26
Cybernomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Answer Key
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
iii
Name
Date
Class
1
P
RODUCTIVE RESOURCES
In a market economy, individuals are free to choose the way they will make a living. The following passage shows how one entrepreneur filled a need and made a profit in a market economy.
Levi’s Jeans
In 1850 a 20-year-old immigrant named Levi Strauss sailed for San Francisco. He planned to sell goods to miners
who were digging for gold in California. By the time Strauss arrived in San Francisco, however, he had sold most
of his goods to other travelers headed for the gold fields. All he had left was canvas, which he planned to sell for
making tents.
When Strauss reached the gold fields, he found that the miners needed tough pants. So instead of selling tents,
he hired tailors to make his canvas into trousers. Word spread quickly that Strauss’ pants were durable, and soon the
new pants were in great demand.
Convinced that his product would remain popular, Strauss went into business with his brothers, Jonas and Louis.
They founded Levi Strauss and Company in 1853. The brothers bought a building and converted it into a factory. They
purchased scissors, sewing machines, needles, canvas, thread, and snaps. Finally, they hired workers to cut, sew, and
deliver the jeans to stores. Today Levi Strauss & Co. has production plants around the world and sells more than a
billion dollars in jeans each year.
Directions: Use the information above to complete the following exercises.
1. You have learned about the factors of production, or the resources needed to produce goods and services. List
the major resources that the Strauss brothers needed to make canvas trousers, or jeans.
2. All resources fall under these categories: Land includes natural resources that are used to make a product; labor
is made up of the workers; capital includes tools, buildings, and equipment; entrepreneurship is the ability to
combine the other three resources to make or improve a product or service. Place each resource you listed in
Exercise 1 under the correct heading in the chart.
Copyright © by The McGraw-Hill Companies, Inc.
Land
Labor
Capital
3. Did the Strauss brothers possess entrepreneurship? Explain.
Free Enterprise Activities
1
Name
Date
Class
2
B
USINESS AND GOVERNMENT
You have learned that government plays an important role in regulating business and
industry. However, businesses also influence government. For example, national business
associations often use lobbyists to impress their ideas on our elected representatives. Businesses
also contribute money to the election campaigns of people who agree with their ideas. And
government is usually very sensitive to the needs of business, for if businesses are hurt, their
employees are also hurt.
Directions: Assume that you own a factory that makes children’s clothes for both the United States
market and for export. State whether you would want your elected representative to support the
following proposals, and give your reasons.
1. Stricter pollution controls on electric generating stations
2. Higher standards of quality for clothing
3. A tax on imported clothing that will raise its price by 15 percent
4. Government support for day care for single parents with children
6. Deregulation of the trucking industry designed to increase competition among firms that transport
manufactured goods
7. An increase in the business tax to help reduce the federal budget deficit
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Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
5. An import tax on inexpensive foreign fabrics, raising the price by 20 percent
Name
Date
Class
3
C
HOOSING A BUSINESS ORGANIZATION
The three main types of business organizations are sole proprietorships, partnerships, and
corporations. The type of business that entrepreneurs choose depends on their tolerance for
risk and appetite for rewards.
Directions: Imagine that you have money to invest in a business. Take the following quiz to determine
which kind of business organization best fits you.
First name the product or service you will provide.
1. You prefer to
a) get all the profits but take all the risks.
b) share equally with others in the profits and the losses.
c) get only partial profits but have little risk.
2. You want to make
a) all business decisions quickly.
b) joint decisions with competent people.
c) money, not decisions.
3. You plan to
a) take out a small loan against your own assets.
b) get help to borrow a larger amount.
c) borrow a huge sum of money.
Copyright © by The McGraw-Hill Companies, Inc.
4. You prefer paying
a) personal income taxes on all profits.
b) fewer taxes on less profit.
c) a high tax rate rather than having unlimited liability.
6. You will risk your investment
a) and personal assets on your decisions.
b) and personal assets on a colleague’s
decisions.
c) but not your personal assets.
7. In order to expand your business, you are
willing to
a) buy a computer, but that’s all.
b) agree to a division of duties and profits.
c) file articles of incorporation and sell
stock.
8. After you leave the business, you think it will
a) dissolve.
b) operate under a different name.
c) continue as long as it earns a profit.
5. You would be most satisfied as
a) your own boss.
b) part of a successful team.
c) part owner, but not operator, of a business.
Did you choose:
• answer a most often?
• answer b most often?
• answer c most often?
If so, you would probably prefer
• a sole proprietorship.
• a partnership.
• a corporation or to simply buy stock.
If your answers show no clear preference, list your priorities. For example, is profit or doing the work your way more
important to you? Then decide which kind of business organization serves your priorities best.
Write your decision here.
Free Enterprise Activities
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Name
Date
Class
4
A NALYZING ADVERTISING
Businesses have some responsibility in advertising, packaging, and product guarantees.
However, it is still the consumer who must compare products, read labels, and check out
advertising claims. Read the advertisement below and answer the checklist questions.
First in its class!
YOU HAVE THE WHEELS, NOW GET THE NEW SWISHER AUTOSHINE POLISHER.
Variable speeds, light weight, durable (1-year warranty), battery or A/C operated. The
polisher of choice for the new car owner, the Swisher will bring a new car shine to any
vehicle. See yourself in the shine!
WHY PAY UP TO $50 FOR SECOND BEST? Get the Swisher on sale at your local hardware.
Now only $39.99!
PLUS! A free can of Swisher Gleem with your new polisher.
Directions: Assume you are in the market for this product and complete the following checklist.
1. Does the ad appeal to my emotions, or are there adequate facts? Explain.
Copyright © by The McGraw-Hill Companies, Inc.
2. What are the product’s special features? Do they meet my needs?
3. What does the ad say about the products’ durability? How would I check this?
4. How does the ad’s price compare with similar products? How would I compare prices?
4
Free Enterprise Activities
Name
Date
Class
5
N EEDS, WANTS, MARKETERS
When shopping for food and clothing, customers look for the best quality at the lowest price.
Store owners are trying to make a good profit by selling more articles or getting higher prices
for the articles. Strategies to encourage shoppers to buy more include sales, special promotions, and displays.
Directions: Explain (a.) the effect the store owner hopes the strategy described below will have on the
customers and (b.) the benefit to the store owner if the strategy succeeds.
1. Kramer’s Supermarket sells two brands of English muffins. The name brand, which costs $1.79 for a package, is
displayed in a special rack in the middle of the bread aisle. The store brand, which costs $1.29, is placed on the
far end of the bread shelves.
(a.)
(b.)
2. At the end of summer, Chen’s Clothing Store had this sale: Buy two short-sleeve shirts at full price, and get a
third shirt free.
(a.)
(b.)
3. Sally’s Food Warehouse ran this promotion: With receipts for $100 worth of food bought at the store, you can
get $10 off your next purchase of $10 or more.
(a.)
(b.)
4. The Upper Crust Dress Shop is the only retail outlet for the new fashions by Vivette, a popular French dress
designer. In newspaper and television advertisements, the shop announced that on Saturday afternoon Vivette
would be giving advice in person on what to wear in the coming season.
(a.)
(b.)
5. In Rolf’s Men’s Store, the clothes are displayed as ensembles. Shirts are matched with ties, sport jackets with
Copyright © by The McGraw-Hill Companies, Inc.
sweaters, and suits with overcoats.
(a.)
(b.)
Free Enterprise Activities
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Name
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Class
6
M ARKET CONDITIONS
Four types of market conditions are characterized by different amounts and kinds of
competition. They are perfect or pure competition, monopolistic competition, oligopoly,
and monopoly.
Directions: In the chart below, the characteristics of perfect or pure competition are given. Fill in the
information for the other three types of markets, and then answer the questions that follow.
Market Characteristics
Market
Number
of Firms
Ease of Entry
Product
Difference
Advertising
Influence
Over Price
Perfect or pure
competition
unlimited
easy
none
none
none
Monopolistic
competition
Oligopoly
Monopoly
1. If you owned a business and were concerned only with profits, which market would you like best? Why?
2. If you were starting a business, which market would you like best? Why?
3. As a consumer, which market would you like best? Why?
5. If you owned an advertising agency, which market would you like best? Why?
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Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
4. As a business owner, would you rather have oligopoly or monopolistic competition? Explain your answer.
Name
Date
Class
7
M ARKETING STRATEGY
A company’s plans to sell a new product are called its marketing strategy. Any good strategy
takes into consideration the “four P’s” of marketing: product, price, place, and promotion.
Here are some questions the marketing department might ask in each area.
Product: What services are offered with the product? How will it be packaged?
What product identification should be used?
Price: What price should be charged?
Place: Where should the product be sold?
Promotion: What type of promotion should be used to inform
consumers that this product or service is available?
Directions: Examine the following advertisement. Decide what it tells you about the marketing strategy of
the company. On the lines following the ad, write a summary of the strategy, remembering to include the
four P’s.
NEW!! MASTERY GAMES
Games with two terminals at the
same time! Use the hookup so that
your friends can join in too!
To get all the special features, you
would have to buy more than a
dozen regular programs worth
hundreds of dollars. But for a limited
time, Mastery Games is available for
only $79.95. So hurry to your favorite
computer store and look for the
bright red box. When you get this
disk, you will know that you’ve
reached – MASTERY!
Copyright © by The McGraw-Hill Companies, Inc.
Now get the latest in computer
games for your home computer
library. Mastery Games puts you a
key stroke away from all the games
you could want! This special software
includes video graphics games as well
as mystery and chase games. Just call
up the master menu and tell Mastery
Games which game you want to play.
No waiting! No submenus! Mastery
Games even remembers what level
you reached the last time you played.
Best of all, you can use Mastery
Free Enterprise Activities
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Name
Date
Class
8
S
ELLING ASSETS
You have learned that companies in need of money raise it in several ways. One way is to sell
a part of the company in the form of stocks. The following announcement is an offer to sell
stocks in Hollywood Shoes, Inc.
Directions: Use what you have learned to complete the exercises below.
NEW ISSUE
2000
990,000 Shares
HOLLYWOOD SHOES, INC.
Common Stock
Price $20.25 per Share
Philips, Arnold & Walden, Inc.
Bronson, Weill, Labouisse, March
LaRosa & Co.
Branch, Murphy and Company
B. G. Wykosky & Co.
Chan Investment, Inc.
Fisk Affiliated Securities, Inc.
Shultz & Company, Inc.
Krantz, Lesser & Ross
Jeffrey Adams & Company
Brown & Company, Incorporated
Craig-Stein, Inc.
Jessup & LaRosa Securities Co., Inc.
Rosen, Olmstead, Kennedy & Marcus
Moore & Kim Corporation
Smith, Herman & Co.
Schneider, Hall, Sale & Associates, Inc.
First Oregon Securities, Inc.
R. Myers & Co.
Martin, Viner, Gonzalez & Co., Inc.
1. The other company names on the announcement represent investment firms that are underwriting the stock.
That is, they are distributing new shares to the public. These companies guarantee the sale of the entire 990,000
shares. An underwriter will either buy the whole issue itself and sell it to the individual investors, or the firm will
form an underwriting syndicate with other dealers, and together they will sell the stock. Do you think
underwriting is risky? Explain.
and the stock that will be sold. If you owned Hollywood Shoes, Inc., what would you include about plans for the
company that might encourage investment?
3. What other methods of raising money might the company use?
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Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
2. Interested investors are urged to send for the company’s prospectus, which gives information about the company
Name
Date
Class
9
R
ESPONSIBLE CONSUMERISM
Consumers have a responsibility to take action if they feel their rights are being violated. Part of
this responsibility is figuring out which government agency to contact for information or help.
Directions: In the blank before each situation, write the letter of the agency that could probably help
the most.
1. While shopping for a certain make and model of car, Ben realizes that the seat belts on all the cars he
test drives are difficult to buckle.
2. Irma is planning to buy a home and wants consumer information on everything from mortgage loans to
home appliances.
3. Kim wants to know if the government allows cosmetic companies to use live animals to test its products
for cancer-causing ingredients.
4. Pedro wants to support a proposed law that will make product labels more informative.
5. Seta is looking for an educational program that will teach employees in her construction company about
the safe use of power tools.
6. When Terrence’s grandmother makes dozens of purchases after learning that she is a “million dollar
winner,” he wants something done about misleading mailings.
7. Jamal suspects that computer dealers in his area conspire to keep the cost of printers artificially high and
wants to report this instance of price fixing to the government.
8. Kayla, the manager of a supermarket meat department, notices that the steaks her wholesaler sells to
some clients do not carry a label showing they are government inspected.
Consumer Information Center Program
Federal Trade Commission
Consumer Product Safety Commission
Postal Service
e.
f.
g.
h.
Department of Agriculture
Office of Consumer Affairs
National Highway Traffic Safety Administration
Food and Drug Administration
Copyright © by The McGraw-Hill Companies, Inc.
a.
b.
c.
d.
Free Enterprise Activities
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Name
Date
Class
10
G
OING INTO DEBT
One of the most important questions to ask when borrowing money is “Can I afford the payments?”
Directions: With this in mind, read the following case study. Then complete the exercises.
Grace has the chance to work as a window dresser at an out-of-town department store for $300 a week, but she
needs a car to get to the new job. Grace lives at home and her only fixed expense is $350 per month in rent to her
parents. She has just enough savings to pay her tuition at night school for the next two years and, therefore, does not
want to use the money as a down payment on a car. The dealer has offered her the purchase options below.
• pay $16,000 with no interest over 18 months in monthly payments of (1)
or
• get a rebate of $1,000 and pay off the balance at 9% interest in monthly payments for 1 to 5 years.
1. Use the amortization table to find the total cost of the car when paying it off in the given number of years.
Monthly
payment
at 9%
Total cost
of car
1 year
2 years
3 years
4 years
5 years
$1,311.78
$685.28
$477.00
$373.28
$311.38
(a) ___________
(b) ___________
(c) ___________
(d) ___________
(e) ___________
2. Which option is best for Grace? Explain your choice.
Copyright © by The McGraw-Hill Companies, Inc.
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Free Enterprise Activities
Name
Date
Class
11
E
XPRESSED AND IMPLIED WARRANTIES
An expressed warranty is a seller’s guarantee at the time of purchase that a product will work
as promised. In the past, if a product had no expressed warranty, a buyer had no claim under
the law if a product worked poorly or failed to work. Over time lawmakers developed implied
warranties to protect buyers’ rights. These laws guarantee the buyer’s claim on the seller if
the product does not work because of manufacturing defects. In most states, the buyer must
examine the product for defects and notify the seller of any. Then the buyer may demand a
deduction from the purchase price, reject the goods and demand a total refund, or demand
a new product in place of the old. However, the buyer has no rights if he or she knew of the
defect when buying the product or, in some states, failed to demand satisfaction within a
limited time after buying the product.
Directions: Read the following warranty. Then in the blank for each exercise, write E if the situation is
covered by an expressed warranty, I if covered by an implied warranty, or N if not covered at all.
One-Year Warranty
Mad Mixer, Inc., warrants to the purchaser that the Mad Blender Jr. (except for glass parts) is free from
manufacturers’ defects in material and workmanship for a period of one year from the date of original purchase
when used according to the manufacturer’s instructions. This warranty does not include damage caused by accident
or misuse. Any implied warranty is limited to the one year stipulated in this expressed warranty.
1. Bob got a discount on his Mad Blender Jr. because the “on” switch was cracked. However, he soon
discovered that he could not operate the blender with a broken switch.
2. Beth did not use the Mad Blender Jr. she received at her wedding shower until she tried to make dessert
for her second anniversary party. The blender would not blend. But Beth wasn’t worried because her
state had no time limitations on implied warranties.
3. As soon as Carl returned from the store, he tried to assemble his Mad Blender Jr. and dropped it. The
glass container remained intact but the plastic casing around the motor cracked.
4. Right after Jalal bought a Mad Blender Jr., he realized the cap did not fit the glass container.
Copyright © by The McGraw-Hill Companies, Inc.
5. The bottom of the glass container on Perry’s new Mad Blender Jr. had rough threads and did not seal
tightly when screwed into the base. As a result, the blender leaked.
Free Enterprise Activities
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12
S
PECULATING IN STOCKS
One way people make money on a stock is by selling it for more than they paid. Some people
buy stock just to speculate–they hope that the price will increase so they can sell it at a profit.
The following table shows the most active stocks in the New York Stock Exchange during one
day of trading. This means that stockholders bought and sold more shares of these stocks than
of any others.
1
2
3
Company
Volume1
Close2
Change3
CBS
12,766,000
50 11/16
1 3/4
CocaCl
10,465,800
54 5/8
2 3/4
Hilton s
9,625,000
11 3/16
5/8
AmOnline s
9,597,000
93 5/16
3 1/2
Lucent s
8,606,000
67 1/4
1 1/4
NewellRub
8,120,500
31 15/16
15/16
AT&T s
8,086,300
47 5/17
13/16
IBM s
7,552,000
132
3 9/64
PhiMor
7,471,100
37 1/4
2
Compaq
7,306,400
22 15/16
5/16
Trading volume in numbers of shares
Closing price for the day
Change in price from the previous day’s close
Directions: Use the information above to complete the exercises.
1. Which company names in the table do you recognize? Name at least one service or product for which each company you recognize is known.
3. Based on the table, which stock had the greatest percent change in value? Is it the same as the stock with the
greatest dollar change in value?
4. If you were a speculator that could have invested $1,000 at the beginning of the day, which stock would have
given you the greatest gains? Explain your choice.
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Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
2. Which company’s stock is second-highest in price? Did it cost more or less at the beginning of the day’s trading?
Name
Date
Class
13
U
SING ARBITRATION
Collective bargaining between management and unions is a process of compromise. However,
sometimes management and workers are still far apart when a strike deadline is approaching.
If that happens, both parties may agree to submit their cases to an impartial arbitrator. The
arbitrator considers the merits of each side’s arguments as well as the settlements made by
other companies in the industry. The arbitrator then dictates an agreement that both sides
must accept.
In a dispute between Big Board, Inc., the state’s largest producer of finished lumber, and its 200 workers
represented by Local 14, the arbitrator received the following information:
The average industry wage is $11.00 per hour, but Big Board now pays
$12.00, although employees have not had a raise in two years. Other companies (and Big Board) have a 40-hour workweek, and most of them (but
not Big Board) pay double time for work on the weekends. Big Board has
only one 15-minute break but longer lunchtimes than its competitors. Most
of the industry provides 7 to 8 paid holidays, complete health insurance,
no dental insurance, and a $100 uniform allowance. In general the industry
is increasingly profitable. However, Big Board has been losing some of its
customers to younger competitors.
Directions: Assume that you are the arbitrator in this dispute. Which demands and offers below seem
reasonable? Which seem unreasonable? Complete the chart with a compromise agreement.
Union Demands
Management Offers
Wages
10% raise or $13.20 per hour
3% raise or $12.36 per hour
Hours
36-hour week
40-hour week
Double time after 36 hours
Time and a half after 40 hours;
double time on weekends
15 minutes,
morning and afternoon
15 minutes
in the afternoon
10
8
Health Insurance
All paid by company
First $250 paid by employee
Dental Insurance
All paid by company
First $500 paid by employee
$200
$50
Overtime
Copyright © by The McGraw-Hill Companies, Inc.
Breaks
Paid Holidays
Uniform Allowance
Free Enterprise Activities
Agreement
13
Name
Date
Class
14
T
AX HOLIDAY
Juanita’s School Purchases
Hooded sweater
$ 40.00
Jeans
45.00
Skirt
35.00
Raincoat
115.00
Digital watch
39.00
Slip-on loafers
36.00
Prescription glasses
58.00
Long-sleeved shirt
25.00
Running shoes
Perfume
Leather jacket
Book bag
138.00
15.00
159.00
40.00
Printer paper
5.00
Juice boxes
4.50
Calculator
10.00
Ballpoint pens
Almost all states levy sales taxes. Some states try to
make sales taxes easier to pay by not taxing food
because poorer people spend a higher proportion
of their income on this need than do more affluent
people. Suppose, in an effort to make sales taxes
fairer, that one state’s governor declared a “tax
holiday” on its 8.5% sales tax just before school
opened. Any article of clothing that could be worn
to school with a price of less than $100 would be
tax-free for three days.
Directions: Calculate the amount of tax that would be saved on
Juanita’s purchases, shown in the chart, during this tax holiday. Then
complete the exercises.
1. a. How much would the total tax have been on these purchases
before the tax holiday?
b. How much is the total tax during the tax holiday?
c. How much did the buyer save in sales tax?
2. Why do you think items priced $100 or more were ineligible for the
tax break?
1.80
Subtotal
3. How do you think people with limited incomes might have benefited
Tax
Total
from a tax break on more expensive items? Explain.
choice.
5. Suppose that critics claimed that the tax holiday did little to help poor people and was merely a gimmick to
enhance the image of the governor. Would you agree? Why or why not?
14
Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
4. Choose a taxed item that you think should have been included in the back-to-school tax holiday. Explain your
Name
Date
Class
15
T
HE FEDERAL BUDGET
In 1992 deficits in the federal budget peaked at $290 billion. At that time, no one thought the
budget could be balanced by the year 2000. Unexpectedly, however, the deficit fell to $23 billion in 1997. In 1998 the federal government issued its first balanced budget since 1960. By
1999 government officials were arguing about how to spend the government’s surplus money.
How would you make federal budget decisions?
Directions: Complete the exercises below to show how you would make budget decisions.
1. Suppose Congress gave the Office of Management and Budget the authority to spend the government’s surplus
in the following five main budget areas.
Defense
MX missiles
Spacebased
weapons
New submarines
New attack
planes
Foreign military
aid
Social
Security
Retirement
benefits
Cost of living
increases
Medicare
payments
Other social
welfare
programs
Medicaid
Subsidized
housing
Unemployment
insurance
Food stamps
Veterans’ benefits
Other domestic
programs
The national
debt
Education
Energy
Price supports for
farmers
Public transportation
Public works
Health research
Principal
Copyright © by The McGraw-Hill Companies, Inc.
If you were a member of a committee deciding where the surplus money would go, which areas would you
target and why?
2. Three members of Congress describe their districts in this way:
Representative A: In my district, almost half the workers are employed by companies that depend on defense
contracts to survive.
Representative B: My district has many old factories, one city that is trying to renew itself, high unemployment, and pollution problems.
Representative C: Many voters in my district are either farmers or retired people.
Which programs would Representative A probably want to expand?
Representative B?
Representative C?
Free Enterprise Activities
15
Name
Date
Class
16
T
YPES, FUNCTIONS, AND CHARACTERISTICS
OF MONEY
Directions: Complete each sentence with vocabulary words relating to money, its types, functions, and
characteristics. Then complete the crossword puzzle. For example, the word in blank 8A should be written
in as the word at 8 Across.
2
1
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
16
Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
• (8A) makes it possible for businesses and customers to obtain the goods and services they want and need.
• For two parties to (5A) goods and services, they must have a double (7D) of (9A), which tends to limit this
type of activity.
• In the United States, the dollar is (2A); that is, it must be accepted as repayment for all debts.
• The three functions of money are (6D), (8A), and (14A).
• Type of money in use in the United States today is (10D) money. The other two types of money are (4D) and
(11A).
• To make the dollar (15A), the smaller unit of (12A) is used.
• Because money is (16A), it can be kept for a long time. Because it is (6A) it will continue to buy about the
same amount of goods and services.
• Money retains its value because it is (1D).
• The size of money is compact so that it is (17A).
• The (13D) is the unit of money (3A) all across the United States.
Name
Date
Class
17
C
ERTIFICATES OF DEPOSIT OR MUTUAL FUNDS?
Banks offer certificates of deposit (CDs) to their customers as a way of earning greater interest
on their investments than in regular savings accounts, but with the same security of being federally insured. This means that when you invest in a 1-year CD the bank promises to return to
you your full principal plus the interest you have earned.
The stock market is another way to invest your savings. The easiest way to invest in stocks is by
joining a mutual fund, where professional stock analysts pick the stocks that will be shared by
their investors. Earnings in stocks (and good mutual funds), over a long period of time, have
historically been better than bank accounts, but they are riskier. That means that on any one
day, an investment may have a greater yield than a similar investment in stocks, but on most
days, the stock investment will provide the greater yield.
Directions: Compute the value of each account in the tables below. Then answer the questions. To find
the value of an account this year, take the value from last year and multiply by this year’s interest rate.
This is the interest for the year. Then add this onto last year’s account value. Round your answers to the
nearest dollar.
1. Find the value of a $1,000 investment in two 5-year CDs. For example, to find the account value in 1990, find
$1,000 × 0.075 + $1,000.
Year
Rate
Acc’t
value
1989
1990
7.5%
1991
7.5%
1992
7.5%
1993
7.5%
1994
7.5%
1995
5%
1996
5%
1997
5%
1998
5%
1999
5%
1997
29%
1998
14%
1999
39%
$1,000
2. Find the value of a $1,000 investment in a typical stock mutual fund for 10 years.
Copyright © by The McGraw-Hill Companies, Inc.
Year
Rate
Acc’t
value
1989
1990
9%
1991
–2%
1992
3%
1993
16%
1994
18%
1995
20%
1996
19%
$1,000
3. In which years was the money invested in a CD worth more?
4. In which years was the money invested in a mutual fund worth more?
5. If you want to use your savings in 2 years to buy a car, why would a CD be a better place for you to put your
savings?
6. If you want to save your money for the next 40 years until you retire, why would the stock market be a better
place to put your savings?
Free Enterprise Activities
17
Name
Date
Class
18
E
CONOMIC INDICATORS
Economic indicators help businesses and government determine which way the economy is
headed. They also allow businesses to plan their future needs and actions with some degree of
accuracy. There are three types of indicators:
Leading indicators are those whose movement predicts the movement of the economy as a whole.
Coincident indicators are those that move at about the same time as the rest of the economy.
Lagging indicators are those that signal the strength of an upward or downward swing in the economy
after the movement has begun.
Directions: In the following chart, check whether each headline is good news or bad news for the
economy. Then tell the type of indicator that is referred to by the headline.
Headline
Good News
Bad News
Type of Indicator
1. Housing Starts Lowest in Months
2. Fed Lowers Discount Rate:
Interest Rates Tumble
3. Retail Sales Up 3% Over Last Month
4. Business Debt Down From Last Year
5. Unemployed Have Average Two-Month
Wait Before Finding New Job:
Down From Four-Month Wait Last Year
6. Producer Price Index Rises 0.5%
7. Business Buying More Electronic
Office Equipment, Hiring More Clerical Staff
8. Industry Jobs Go Unfilled as Area
Unemployment Rate Sinks to 5%
9. Consumer Debt Higher Than at
Any Time in History
Copyright © by The McGraw-Hill Companies, Inc.
10. Telephone Company Reports 30-Day
Backlog in Installing Business Systems
18
Free Enterprise Activities
Name
Date
Class
19
T
YPES OF UNEMPLOYMENT
The four types of unemployment are: cyclical unemployment, which is associated with ups
and downs of the business cycle; structural unemployment, which is caused by changes in the
economy such as new technology; seasonal unemployment, which is related to weather patterns; and frictional unemployment, which is temporary unemployment between jobs. Can
you identify these patterns when they occur?
Directions: For each scenario below, write C if the unemployment is cyclical, ST if it is structural, SE if it is
seasonal, and F if it is frictional. Underline the key words that support your conclusion.
1. Fifteen hundred workers in Georgia lost their jobs because textile companies have moved their factory
operations outside the country.
2. People in a resort area that is busy in the summer and winter try to make enough money during these
times of the year to tide them over during the fall and spring.
3. Lumber companies laid off hundreds of workers after reducing their projected output due to a
slow-down in housing starts.
4. Hundreds of Mexican immigrants moved to California in the last year, but many remain unemployed
because their English is not yet adequate for most jobs.
5. A Broadway musical show had its final run, leaving all the actors unemployed.
6. Hundreds of Texans lost jobs when a jeans manufacturer closed its border town factories and moved its
operations to Mexico.
7. Many travel agents have left the field because their former customers now go to the Internet for the
lowest fares.
8. National unemployment rose to 6% as the economy slumped for the third straight month.
9. Workers at many nuclear power plants lost their jobs when power companies decided not to replace
aging plants.
10. A typewriter company let go all its workers and shut down after one hundred years in business
Copyright © by The McGraw-Hill Companies, Inc.
because computers made its product obsolete.
Free Enterprise Activities
19
Name
Date
Class
20
D ECISION MAKING AT THE FEDERAL RESERVE
BOARD
The Federal Reserve Board uses three major tools to control the nation’s money supply and to
keep the economy running smoothly: reserve requirements, discount rate, and open market
operations.
Directions: Predict which tool the board would use in each situation below and explain how the board
would use it.
1. The Federal Reserve Board wants to decrease the money supply by limiting the amount of money that banks
have to loan.
2. The Federal Reserve Board wants to increase the money supply by encouraging banks to borrow money from district Federal Reserve Banks.
3. The Federal Reserve Board wants to decrease the money supply by having banks raise their prime rate to discourage borrowers.
4. The Federal Reserve Board wants to increase the money supply by adding “new” money.
money.
6. The Federal Reserve Board wants to “tighten“ the money supply by removing money from circulation.
20
Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
5. The Federal Reserve Board wants to “loosen up” the money supply by encouraging banks to lend more of their
Name
Date
Class
21
P
OLICIES FOR GROWTH
Economic growth means the expansion of the economy to produce more goods, jobs, and
wealth. In a recent year the Federal Reserve Board cut interest rates by 0.75% each month for
three months. Meanwhile, the following signs of growth occurred in the U.S. economy.
Directions: For each headline below, explain how the reduction in interest rates probably encouraged each
instance of growth.
1. Retail Sales Up 6.3% Over Last Year and Still Rising!
2. Housing Construction Rising at a Rate of 9% a Year
3. Wages and Salaries Increase More Than 4% This Year
4. Unemployment Rate Reaches a 28-Year Low of 4.3%
Copyright © by The McGraw-Hill Companies, Inc.
5. Gross Domestic Product Up Almost 4% From Last Year
6. High Tax Revenues From Rapidly Growing Economy Produces a National Budget Surplus
7. Choose two of the above signs of growth that you think have a cause-and-effect relationship and explain that
relationship.
Free Enterprise Activities
21
Name
Date
Class
22
F
REE TRADE AND JOBS
When the North American Free Trade Agreement (NAFTA) was signed in 1993, the federal
government established the Trade Adjustment Assistance (TAA) Program. Its purpose is to
retrain people who lose their jobs as a result of NAFTA. The program also provides a tool for
tracking the number of American jobs eliminated because of the agreement. The following
table is based on TAA data from January 1994 to January 1999.
TAA Applicants by Region
West
Alaska
Arizona
South
North Central
Northeast
780
Alabama
6,528
Illinois
5,145
Connecticut
1,131
1,960
Arkansas
8,156
Indiana
9,752
Massachusetts
2,635
Iowa
Maine
1,433
California
15,017
Florida
4,653
Colorado
2,426
Georgia
12,874
Idaho
3,001
Kentucky
Montana
788
Nevada
New Mexico
454
Kansas
1,359
New Hampshire
2,855
Michigan
7,293
New Jersey
Louisiana
4,495
Minnesota
2,102
New York
16,634
257
Maryland
390
Missouri
5,408
Pennsylvania
18,163
669
Mississippi
1,100
N. Dakota
300
Oregon
4,788
N. Carolina
24,530
Nebraska
263
Utah
1,043
Oklahoma
330
Washington
8,330
S. Carolina
5,458
S. Dakota
566
682
Tennessee
12,699
Wisconsin
7,724
Texas
21,294
Wyoming
TOTALS
39,741
Virginia
5,561
W. Virginia
1,343
Ohio
112,266
Vermont
224
7,261
399
6,184
46,550
47,880
Directions: Use the table to complete the following exercises.
2. How many jobless people nationwide applied to TAA for help?
3. Seventy percent of the jobs lost were high-paying manufacturing jobs. The displaced workers probably will have
to find work in what the U.S. Department of Labor predicts are the fastest growing jobs: cashiers, waitpersons,
janitors, and retail clerks. How might this affect the lives of workers and their families?
4. For a while the U.S. Department of Commerce documented NAFTA job creation (1,500 documented), but the
numbers were so low that the department discontinued its surveys. How would you grade NAFTA, based on its
ratio of jobs created to workers displaced? Explain.
22
Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
1. Which region of the country suffered the most job losses due to NAFTA?
Name
Date
Class
23
C
HINA’S BOLD REFORMS
You have studied the main characteristics of a socialist economy. Many of these were formerly
characteristics of the economy of the People’s Republic of China. However, as the passage
below indicates, China has been incorporating capitalist elements into its economy.
Directions: Read the passage below and answer the questions that follow.
China, which now has the fastest growing economy in Asia, adopted many principles of a market economy in the
1990s. Two decades ago, the government told high school graduates whether they would be working or going on to
higher education. Today graduates have more choices about where they will work and what careers they can pursue.
The government also allows individuals to start their own businesses and to adopt capitalist techniques. Unlike
state-run cooperatives that guaranteed workers lifelong employment, independent firms hire and fire workers. As a
result, 20 to 30 million workers have lost their jobs or had their hours and pay cut. Others enjoy a newfound prosperity; they have larger incomes and more buying power.
Recently the Chinese premier announced measures to cut back on government involvement in business. One
measure is the elimination or merger of several ministries, including those that control oil, coal, chemicals, and
machine building. The government is also paring 4 million jobs from the government bureaucracy and following a
three-year plan to privatize or eliminate the large, noncompetitive state-run businesses.
However, the government has not relinquished all economic control. State-run and some semiprivate businesses
must meet government production quotas. Also, central party members use economic reforms to strengthen the oneparty system rather than to encourage political changes.
1. How have China’s reforms made its economy different from a pure socialist economy?
2. What elements of a command economy are still present in China?
Copyright © by The McGraw-Hill Companies, Inc.
3. What have been the advantages and disadvantages of economic reforms for the Chinese?
Free Enterprise Activities
23
Name
Date
Class
24
F
UNDING ECONOMIC GROWTH
IN DEVELOPING NATIONS
Developing nations may seek investments from foreign companies to finance new enterprises,
such as steel mills and mines, to build railroads and highways, and to modernize agriculture.
Developing nations may also seek foreign aid from other governments. Such aid may take the
following forms:
Economic assistance: loans and grants that add to a nation’s capital resources
Humanitarian aid: food, clothing, medical supplies
Technical assistance: services of engineers, technicians, teachers, health care professionals,
and others to teach skills in developing nations
Military assistance: economic and technical assistance given to a nation’s armed forces
Directions: Use the information above to complete the following exercises.
1. What is the difference between foreign investment and foreign aid?
2. How might each kind of foreign aid encourage investment in a developing country?
3. Study the following chart. Identify two statistics for each country that indicate that country’s greatest needs.
Then identify the type of aid that would help the most and explain why.
Statistic
Burkina Faso
China
Nigeria
99
109
45
71
Population per physician
9,846
27,158
628
4,496
Per capita GDP (dollars)
1,000
740
2,800
1,380
Adult literacy rate
53%
19%
82%
57%
Percent of labor force in agriculture
57%
80%
54%
54%
Infant mortality (deaths per 1,000 births)
Sources: The World Almanac and Book of Facts, 1999
a. Haiti:
b. Burkina Faso:
c. China:
d. Nigeria:
24
Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
Haiti
Name
Date
Class
25
F
OREIGN INVESTMENT
Directions: Use the following table and the information below to deduce how and why
changes in the economic and political policies of the countries or regions listed have affected
U.S. investments. Then complete the exercises by describing each statement’s relationship to the chart.
U.S. Direct Foreign Investment
U.S. Direct Foreign
Investment* 1990
U.S. Direct Foreign
Investment* 1998
Brazil
14,918
37,802
Canada
67,033
103,198
China
0
6,348
Eastern Europe
0
8,143
Egypt
1,465
1,955
Hong Kong
6,187
20,802
Indonesia
3,226
1,480
Mexico
9,398
25,877
956
2,363
68,224
178,648
Country
South Africa
United Kingdom
*in millions of dollars
1. Between 1989 and 1991, Poland, the Czech Republic, Romania, and other Eastern European countries held free
elections and ousted their Communist leaders.
Copyright © by The McGraw-Hill Companies, Inc.
2. In 1993 the United States, Canada, and Mexico signed the North American Free Trade Agreement.
3. In 1993 the Chinese began converting state-owned enterprises into joint-stock companies.
4. During the 1990s the continuing harassment and abuse of the East Timorese people in Indonesia destabilized
the political situation and led to the granting of independence to East Timor.
5. In the late 1990s, Brazil’s government, which had long controlled the nation’s media and utilities, began selling
its holdings in the telecommunications and electrical power industries.
Free Enterprise Activities
25
Name
Date
Class
26
C
YBERNOMICS
Computer sabotage means breaking into computer systems to steal information or to vandalize a network. Sabotage is the computer crime that grabs the headlines. But pirating
software—copying and selling works protected by copyright—is more widespread and costs
software companies billions of dollars in lost sales. A recent study showed that 28% of all software sold in North America is pirated, 68% in Latin America, 80% in Eastern Europe, 43%
in Western Europe, and 74% in the Middle East.
Directions: Use the data above to complete the pictograph below. ( 5%; less than 5%)
Then supply a title for the graph.
Title:
North
America
Western
Europe
Latin
America
Middle
East
Eastern
Europe
Below are suggestions to end software pirating. For each suggestion, check yes if you think it would be
effective or no if you think it would not be. Explain your choice.
Yes No
1. A United States law outlawing attempts to bypass electronic anti-copying protection
2. A United States law making Internet service providers liable if their users infringe copyrights
3. International treaties forbidding the pirating of software with copyrights
26
Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
ANSWER KEY
Activity 1: Productive Resources
1. The major resources that the Strauss brothers
needed were workers, canvas, scissors, sewing
machines, needles, thread, snaps, and a factory.
2.
Land
Labor
Capital
property for factory
workers to cut
canvas
workers to sew
needles, thread
workers to deliver
sewing machines
snaps
building for factory
3. Yes, because they successfully combined land, labor,
and capital to make their product and to build and
expand their company.
Activity 2: Business and Government
Students’ opinions on these issues will vary, but here are
some reasons for and against each proposal.
1. Not support: Students may say that less pollution
will help the quality of life, but it will also increase
the cost of electricity and thus the cost of doing
business.
2. Not support: Higher quality increases the cost of the
clothing but makes for a better product and more
satisfied customers.
3. Support: With the import tax, competition from
abroad will be easier to combat. However, foreign
countries may retaliate with import taxes of their
own.
4. Support: Government support for day care would
free more parents to work, increase the labor pool,
and keep wages from increasing rapidly.
Copyright © by The McGraw-Hill Companies, Inc.
5. Not support: The import tax will raise the price of
the raw material needed to make clothes, which
will cut into profits. However, the tax may help the
United States fabric producers to compete against
foreign companies, providing more jobs (and more
money) for Americans, who also buy the clothing.
6. Support: Competition among the truckers will tend
to lower transportation costs, which means higher
profits. However, increased competition also will
mean greater risks on the road from truckers who
have to drive faster with heavier loads in order to
make money.
7. Not support: Increased taxes will reduce profits,
although decreasing the federal budget deficit will
help the economy overall.
Free Enterprise Activities
Activity 3: Choosing a Business
Organization
Answers to the questions will vary. Check that
students choose the type of business organization indicated by their answers.
Activity 4: Analyzing Advertising
1. Although there are a few facts, the ad appeals
primarily to my emotions.
2. Students’ needs will vary but answers should
include: The product is “lighter” weight, has
variable speeds, and operates with battery or
a/c electricity.
3. The ad says it has greater durability, but does not
give specifics. I could compare warranties of this
and other products.
4. The ad implies that other brands cost about $10
more. I could check out competitors’ prices.
Activity 5: Needs, Wants, Marketers
1. a. By prominently displaying the more expensive
product, Kramer’s hopes that customers will buy it
on impulse.
b. The store will benefit from a higher profit.
2. a. Chen’s is offering three shirts for the price of
two in order to get rid of inventory before cold
weather sets in.
b. The store will benefit by getting rid of goods it
would not be able to sell later.
3. a. Sally’s Warehouse is encouraging customers to
keep buying until they qualify for the discount.
b. The store will benefit from repeat business and
may also acquire new customers who want the
discount.
4. a. The Upper Crust is using the attraction of meeting the famous designer to draw customers into
the store.
b. Once inside, customers may see things they like
and buy them.
5. a. Rolf’s is trying to get its cutomers to see the
clothing not as separate items but as part of an
ensemble.
b. If a customer likes a particular grouping, he will
be more likely to buy it.
27
ANSWER KEY
Activity 6: Market Conditions
Information that will complete the chart:
Monopolistic Competition: many; fairly easy; great
deal; great deal; some
Oligopoly: few; difficult; identical or slight difference; much; some
Monopoly: one; very difficult; none; little or none;
total
1. The best market would be monopoly, since the
business would be the only one in the market and
could charge whatever price it wanted.
2. The best market would be monopolistic competition
because the barriers to entry are not great, there
are many products to specialize in, and there is
some control of price. Students should see that perfect competition is easiest to get into but does not
have the potential of monopolistic competition.
3. The best market for price would be the perfect
competition, so the prices would be kept low. The
best market for variety would be monopolistic competition, in which each company would try to
differentiate its product from those of other
companies.
4. Answers will vary, depending on whether students
like the freer atmosphere of monopolistic competition or the stability of oligopoly.
5. The best market would be monopolistic competition, in which there is the most advertising.
Activity 7: Marketing Strategy
28
1. Answers will vary. A possible answer is that the
company will be introducing new styles and opening new stores.
2. Students will probably answer yes because if companies do not sell all the stock, they will take a loss.
3. trade credit, unsecured loans, secured loans,
intermediate-term loans, and bonds
Activity 9: Responsible Consumerism
1. g
2. a
3. h
4. f
5. c
6. d
7. b
8. e
Activity 10: Going Into Debt
1. $888.89
a. $15,741.36
b. 16,446.72
c. 17,172.00
d. 17,917.44
e. 18,682.80
2. Students may answer two or three years, depending
on how much they think Grace will need to pay for
gas, insurance, car maintenance, and discretionary
purposes. The car would cost less after the rebate
monthly payments at 9% interest for 1 year, but
Grace could not afford the monthly payment.
Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
The product, Mastery Games, is a new computer software program that runs many computer games. The
strategy is to point out the program’s ease of use,
range of games, and special features (including a
hook-up with other terminals so that more than one
person can play simultaneously). The strategy also
includes comparing the relatively expensive price of
the new program with the even greater amount of
money the consumer would have to spend on individual disks for all of the games included in Mastery
Games. The marketing department has also decided
to sell the program through computer stores and to
use bright red packaging with the name Mastery.
Activity 8: Selling Assets
ANSWER KEY
Activity 11: Expressed and Implied
Warranties
Activity 14: Tax Holiday
Answers for chart: Subtotal: $766.3; Tax: 49.75;
Total: 816.05
1. N
2. I
1. a. 65.14 b. 49.75 c. $15.39
3. N
2. Answers will vary. Sample response: The state
probably assumed that people on limited incomes
would not be paying high prices for single items
but would stretch their money by buying many
lower-priced items.
4. E
5. I
Activity 12: Speculating in Stocks
3. Answers will vary. Sample response: Yes, people
1. Answers will vary. Sample response: CBS, television
broadcasting; CocaCl, soft drinks; Hilton s, hotels;
AmOnline s, access to the Internet; AT&T, telecommunication technology; IBM s, computers; PhilMor,
cigarettes; Compaq, computers
2. At 93 5/16, America Online has the second-highest
closing price, but it cost more at the beginning of
the day.
3. PhiMor decreased by 5.7% during the day, a
greater percent change than any of the other
companies; no, IBM’s increase is a greater amount
dollar-wise.
4. CBS, because you could have bought 20 shares of
stock and sold it for a profit of $35 at the end of
the day. This is more profit than either of the other
two stocks would have been.
5. Answers will vary. Possible answers: the pride of
ownership in a company, the opportunity to support
a product or company of which you approve, or the
power as a stockholder to influence the policies of a
company.
Copyright © by The McGraw-Hill Companies, Inc.
Activity 13: Using Arbitration
Students’ answers will vary. However, they should represent a compromise between the industry averages
and the union demands. A possible agreement looks
like this:
Wages
Hours
Overtime
Breaks
Paid Holidays
Union Demands
Management Offers
Agreement
10% raise or $13.20 / hour
3% raise or $12.36 / hour
5% raise or $12.60/hour
36-hour week
40-hour week
40-hour week
Double time after 36 hours
Time and a half after 40 hours;
double time on weekends
Time and a half after 40 hours;
double time on weekends
15 minutes,
morning and afternoon
15 minutes
in the afternoon
15 minutes
in the afternoon
10
8
8
Health Insurance
All paid by company
First $250 paid by employee
All paid by company
Dental Insurance
All paid by company
First $500 paid by employee
First $500 paid by employee
$200
$50
$100
Uniform Allowance
Free Enterprise Activities
with limited incomes should get a tax break on
expensive items. Sometimes the expensive item is a
better value because it lasts longer than a lessexpensive alternative.
4. Answers will vary. A possible choice are the prescription glasses because they are a necessity,
especially at work and school.
5. Answers will vary. Sample response: No, because,
although the governor’s image might well have
been enhanced, the tax holiday saved people some
money, which serves their needs.
Activity 15: The Federal Budget
1. Answers will vary. Sample response: increased
Medicare payments because the population is aging
and medical costs are rising and increased spending
on education because the country’s future success
depends on well-educated citizens.
2. Answers should be similar to the following:
To keep the support of voters in their districts,
Representative A probably would want to expand
defense programs; Representative B would want to
increase spending on social welfare programs, public transportation facilities, public works, and health
research; and Representative C would probably
want to increase spending on Social Security programs and price supports for farmers.
29
ANSWER KEY
Activity 16: Types of Money
1
3
a
2
s
c
c
e
p
t
e
d
b
a
r
m
e
t
e
6
r
d
i
u
m
f
y
d
t
e
s
t
n
u
i
r
c
i
f
a
v
t
a
o
b
f
l
d
e
f
a
b
e
x
l
e
i
n
v
c
h
a
n
g
9
m m
a
a
l
u
e
o
d
i
t
w
a
n
t
y
12
c
e
13
d
c
r
7
e
c
o
l
l
u
l
e
a
r
u
n
t
i
r
i
n
s
c
e
i
t
d
t
e
a
n
n
g
d
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v
i
s
i
r
t
a
b
l
e
t
15
c
c
b
l
e
v
17
p
o
3. good news; coincident indicator
o
e
n
1. bad news; leading indicator
2. good news; unclassified indicator
r
p
o
o
n
4
e
11
10
e
16
l
r
n
u
a
t
o
14
g
k
c
8
e
i
a
5
l
Activity 18: Economic Indicators
Activity 17: Certificates of Deposit or
Mutual Funds?
1. 1990=$1,075
1991=$1,155.63
1992=$1,242.30
1993=$1,335.47
1994=$1,435.63
1995=$1,543.30
1996=$1,659.05
1997=$1,783.48
1998=$1,917.24
1999=$2,061.03
4. good news; lagging indicator
5. good news; leading indicator
6. bad news; unclassified indicator
7. good news; leading indicator
8. good news; leading indicator
9. bad news; lagging indicator
10. good news; leading indicator
Activity 19: Types of Unemployment
Some answers may vary. Have students give their reasoning for answers that differ from the following:
1. ST; companies have moved their factory operations
outside the country
2. SE; busy in the summer and winter; tide them over
during the fall and spring
3. C; reducing their projected output
4. F; many remain unemployed because their English is
not yet adequate for most jobs
2. 1990=$1,090
5. F; Broadway show had its final run
6. ST; closed its border town factories and moved its
operations to Mexico
7. ST; customers now go to the Internet for the lowest
fares
8. C; the economy slumped for the third straight
month
9. ST; when power companies decided not to replace
3. 1991, 1992, and 1993
aging plants
10. ST; because computers had made its product
4. 1990, 1994-1999
obsolete
5. CDs are a safer place to invest money, especially for
short-term investments.
6. Over the long term, the stock market generally pays a
higher return.
30
Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
1991=$1,068.20
1992=$1,100.25
1993=$1,276.29
1994=$1,506.02
1995=$1,807.22
1996=$2,150.59
1997=$2,774.26
1998=$3,162.66
1999=$4,396.10
ANSWER KEY
Activity 20: Decision Making at the
Federal Reserve Board
1. The board would increase the reserve requirement
to limit the amount of money that banks have to
loan.
2. The board would lower the discount rate to encourage banks to borrow money from district Federal
Reserve banks.
3. The board would increase the discount rate so that
the banks would have to raise the prime rate for
loans to their customers.
4. The board would use the open market operation of
buying securities such as Treasury Bills to add
“new” money to the economy.
5. The board would lower the reserve requirement to
encourage banks to loan more of their money.
6. The board would use the open market operation of
selling securities such as Treasury Bills to remove
money from circulation.
Activity 21: Policies for Growth
Answers will vary but should be similar to the following
responses:
1. Lower interest rates encouraged consumers to buy
more on credit.
2. Lower interest rates made building materials cheaper for builders, and lower mortgage rates increased
consumer demand for housing.
3. Lower interest rates increased company’s profits and
ability to raise wages.
Copyright © by The McGraw-Hill Companies, Inc.
4. The lower interest rates that increased demand for
products also increased the demand for workers to
make the products. Thus, more jobs were created
and fewer people were left jobless.
Free Enterprise Activities
5. Lower interest rates increased employment and consumer spending, which increased the demand for
and production of products, or Gross Domestic
Product.
6. Because lower interest rates encouraged the
increase in employment and production, the tax
base was widened and produced increased revenues
to cover government expenses.
7. Many answers are possible. Sample response:
increased employment fueled consumer demand for
products
Activity 22: Free Trade and Jobs
1. the South
2. 246,437
3. Answers will vary. A possible answer is that workers
will probably earn less at low-paying service jobs
than they did in manufacturing so their standard of
living will be lower.
4. Answers will vary. A possible answer is that NAFTA
should get “a failing grade” because the agreement
eliminated more American jobs than it created and
lowered the standard of living for thousands of
workers and their families.
Activity 23: China’s Bold Reforms
1. Unlike in pure socialist economies, China allows private ownership and decision making in many
businesses.
2. Unlike in many market economies, the political environment is undemocratic and the government is still
setting quotas for some businesses.
3. The advantages are more choices and, for some,
increased incomes and buying power. The disadvantages for millions of other Chinese are
unemployment or underemployment.
31
ANSWER KEY
Activity 24: Funding Economic Growth in
Developing Nations
Answers may vary. Sample answers are given.
Activity 25: Foreign Investment
Answers will vary. Sample responses are given.
1. United States investors saw opportunities in emerging market systems in Eastern Europe.
1. Foreign investment comes from companies and foreign aid comes from governments or organizations
such as the United Nations.
2. Economic assistance might give the country start-up
money for businesses in which foreigners might
invest. Humanitarian aid would contribute to a
better workforce for businesses in which foreign
companies might invest. Technical assistance would
give people in developing nations the know-how to
begin businesses for investment. Military assistance
might create stability so that foreign investors
would feel safe investing there.
2. NAFTA made U.S. investment in Mexico and in
Canada more attactive.
3. The Chinese decision to privatize its state-owned
businesses created opportunities for U.S. investors.
4. Four years after South Africa ended legalized
racism, Americans were investing more than twice
the money they invested in South Africa in 1990.
5. Once the government showed its willingness to
loosen its control over businesses, U.S. investors felt
confident enough to put 250% of their 1990
investment in Brazil.
3. a. Haiti: Infant mortality and the number of medical doctors; technical assistance to train doctors
and humanitarian assistance in the form of medical
supplies
b. Burkina Faso: Per capita GDP and adult literacy;
technical assistance to train doctors and teachers
and humanitarian assistance in the form of basic
food and clothing needs
c. China: Infant mortality and adult literacy rates;
technical assistance to train health care professionals
and educators
Activity 26: Cybernomics
Titles may vary. Check for accuracy.
Software Sales of Pirated Software as a Percent of Total Sales
North
America
Western
Europe
Latin
America
North America
====== [half disk]
Western Europe
======== [half disk]
Latin America
============== [half disk]
Middle
East
Middle East =============== [half disk]
Eastern
Europe
Eastern Europe
==================
d. Nigeria: Infant mortality and the number of
medical doctors; technical assistance to train
doctors and humanitarian assistance in the form
of medical supplies
Answers for exercises 1–3 will vary. The following are
possible responses.
1. No; because the government would have no way to
enforce what people do in their own homes without violating basic rights to privacy.
2. No; because most of the pirating is not affected by
3. Yes; if countries could regulate copyright infringement without violating citizens’ rights.
32
Free Enterprise Activities
Copyright © by The McGraw-Hill Companies, Inc.
U.S. laws.
Copyright © by The McGraw-Hill Companies, Inc.
Teacher Notes
Free Enterprise Activities
33
Teacher Notes
Copyright © by The McGraw-Hill Companies, Inc.
Free Enterprise Activities
34
Copyright © by The McGraw-Hill Companies, Inc.
Teacher Notes
Free Enterprise Activities
35
Teacher Notes
Copyright © by The McGraw-Hill Companies, Inc.
Free Enterprise Activities
36