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Econ Answers

Delving into the intricate web of international trade and economics, this guide offers readers a comprehensive overview of the forces that shape our globalized world.

From understanding the nuances of imports and exports to grasping the implications of currency fluctuations, this resource demystifies complex concepts, making them accessible to both novices and seasoned economists.

Econ Unit 3: Supply, Demand, and Market Equilibrium

Supply, Demand, and Market Equilibrium

Unit 3 Answers

Products whose demand levels are connected to other products are calledcomplementary goods
An example of a substitute good would be a

sale on skis in the summer.
sale on swimsuits in the winter.
lower-priced gallon of milk.
higher-priced luxury car.
lower-priced gallon of milk
According to the law of demand, as prices decrease, demand

stays the same.
Which best explains how the law of demand affects consumers?

It helps consumers know when prices are going down.
It helps consumers know when prices are going up.
It helps consumers tell producers when prices are too high.
It helps consumers tell producers when to make new goods.
It helps consumers tell producers when prices are too high
The law of demand applies most directly to which group?

Consumers create demand for

goods and services.
sales and low prices.
goods and income.
services and low prices.
goods and services
A factor that most influences changes in consumer demand is

Which best describes a reason that consumer demand can change?

loss of income
loss of supply
distribution problems
market problems
loss of income
The area in which the law of demand best applies is

social policy.
political science.
The graph shows a demand curve.

What does the data shown in this graph represent?
a decrease in demand as prices decrease
an increase in price as demand decreases
a decrease in income as demand increases
an increase in demand as prices decrease
an increase in demand as prices decrease
A factory produces blue and green widgets, both at equal production costs. In one day, the factory can make 20 widgets of either color. The factory has been making 10 blue and 10 green widgets per day because they both sell for $5.00. Recently, the price of blue widgets has increased from $5.00 each to $8.00 each.

How does the law of supply say the factory will respond to the increase in the price of blue widgets?

by increasing the number of green widgets supplied
by not changing the number of blue widgets produced
by increasing the number of blue widgets supplied
by decreasing the number of blue widgets supplied
by increasing the number of blue widgets supplied
Which factors must a producer consider when deciding what good to supply? Check all that apply.

the appeal of the good to family members
the elasticity of a good being supplied
competition within the market
the ability to produce the good efficiently
the ability to produce a good of low quality
the elasticity of a good being supplied
competition within the market
the ability to produce the good efficiently
Scientists have created a new grass seed that stops grass growth at a specific length, eliminating the need to mow the lawn. The price of this seed is high, but many consumers still want to use it. As a result, several different producers supply a large amount of this seed to consumers. In order to attract consumers to their product, some producers lower their prices and supply fewer bags of seeds.

What is the best description of the grass seed that is described in this scenario?
a good with a low price
a good with a high price
a good with an inelastic supply
a good with an elastic supply
a good with an elastic supply
Which best describes what happens to the amount of a good or service that is supplied to consumers?

The amount of a good or service can change.
The amount of a good or service always remains the same.
The amount of a good cannot change.
The amount of a service cannot change.
The amount of a good or service can change.
Which best describes the role the availability of resources plays when a company is considering whether to produce a certain good?

Resources can always be obtained, no matter what the cost.
If a resource is difficult to obtain, production costs will be high.
Resources play no part in a company’s decision to produce a good.
If a resource is easy to obtain, production costs will be high.
If a resource is difficult to obtain, production costs will be high.
When prices for homes rise, why might construction companies decide to build more homes?

to increase employment
to make a profit
to create a need for more resources
to boost name recognition
to make a profit
The amount that a good is sold for is its
The law of supply states that as the price of a good rises, the quantity supplied of that good

remains the same.
All things being equal, when producers sell goods for a lower price, they make

more money.
the same amount of money.
less money.
as much money as the law allows.
less money
The law of supply demonstrates the behaviors of producers when they

change their company’s name.
decide to hire fewer workers.
supply goods to consumers.
launch a new marketing campaign.
supply goods to consumers
Equilibrium is defined when

supply is limited and demand decreases.
supply and demand meet.
demand is higher than supply.
supply is higher than demand.
supply and demand meet
Which explains why the price indicated by p2 on the graph is lower than the equilibrium price?

As prices fall, demand goes up.
As prices fall, demand goes down.
As prices fall, demand stays the same.
As prices fall, demand disappears.
As prices fall, demand goes up
Supply and demand coordinate to determine prices by working
with other factors.
On a graph, a(n) __ shows the demand portion of equilibrium.demand curve
On a graph, an equilibrium point is where

a supply curve and a demand curve meet.
a supply curve is higher than a demand curve.
the supply and demand curves head up.
the supply and demand curves head down.
a supply curve and a demand curve meet.
Which occurs during market equilibrium? Check all that apply.

Supply and demand meet at a specific price.
Supply is slightly greater than demand.
Supply and demand meet at a specific quantity.
Supply and demand meet at a demand point.
Supply and demand meet at a supply point.
Supply and demand meet at a specific price
Supply and demand meet at a specific quantity
Which needs to happen to the price indicated by p2 on the graph in order to achieve equilibrium?

It needs to be increased.
It needs to be decreased.
It needs to reach the price ceiling.
It needs to remain unchanged.
It needs to be decreased
What happens when the quantity of goods is higher than demand?

excess supply
stable prices
exact equilibrium
increased production
excess supply
If supply for a product is high but demand is low, what most likely needs to happen to achieve equilibrium?

The price of the product must go up.
The price of the product must go down.
Supply and demand must be raised.
Supply and demand must be lowered.
The price of the product must go down
What does “P” represent on the graph?

the point where equilibrium is achieved
the price at the equilibrium point
the average price of goods sold
the point where supply and demand drop
the price at the equilibrium point

Understanding Demand

  • Definition of Demand: The desire, ability, and willingness of consumers to buy a product or service at a specific price.
  • Complementary Goods: These are products whose demand is interlinked. For instance, if the price of coffee rises, the demand for coffee stirrers might decrease since they are used together.
  • Substitute Goods: These are products that can be used in place of another. For instance, if the price of butter goes up, people might buy margarine instead. The given example of a gallon of milk can be seen in the context of almond milk vs. dairy milk.
  • Law of Demand: It states that, all other factors being equal, as the price of a product decreases, the quantity demanded increases, and vice versa. This is an inverse relationship between price and demand.
  • Effect of Law of Demand on Consumers: This law helps consumers signal to producers when a product’s price is too high. If something is priced too high, consumers will buy less of it, signaling to producers to lower the price.
  • Application of Law of Demand: While it applies across various sectors, it primarily concerns buyers in the market. When prices are high, buyers might look for alternatives or delay their purchase.
  • Consumer Demand: It’s the total amount of a product or service that consumers are willing and able to purchase at a given price. It’s the driving force of the market.
  • Factors Influencing Consumer Demand: While price is a significant factor, other elements like consumer preferences, income levels, expectations of future prices, and the prices of related goods (complementary and substitute goods) also play a role.
  • Changes in Consumer Demand: Various factors can lead to shifts in demand. For instance, a sudden loss of income due to job loss can decrease the demand for luxury goods. Similarly, a rise in health awareness can increase the demand for organic products.
  • Law of Demand in Economics: This fundamental concept is a cornerstone in microeconomics. It helps in understanding consumer behavior and predicting how changes in prices can affect the overall market demand.

Understanding Supply

  • Law of Supply: This fundamental principle states that, all other factors being constant, as the price of a good or service increases, the quantity supplied for that good or service will also increase, and vice versa. This is a direct relationship between price and supply. For instance, if the price of handmade crafts rises, artisans might be motivated to produce more crafts to capitalize on the higher prices.
  • Factors Influencing Production Decisions: Several factors can influence a producer’s decision to produce a certain quantity of goods. One of the primary factors is the availability of resources. If raw materials are readily available and can be acquired at a reasonable cost, production can increase. Conversely, if there’s a shortage of essential resources or if their prices skyrocket, it might hinder production. Other factors include technological advancements, government policies, and the number of suppliers in the market.
  • Profit Motive: This is the driving force behind many production decisions. When there’s a potential to earn higher profits, producers are more likely to increase their output. For example, if there’s a surge in demand for homes and their prices rise, construction companies might ramp up their operations to build more homes and capitalize on the lucrative market.
  • Price of a Good: This refers to the amount for which a product or service is sold in the market. It’s determined by various factors, including production costs, competition, and consumer demand. The price acts as a signal to both producers and consumers, guiding production and consumption decisions.
  • Behavior of Producers: Producers play a pivotal role in the market, supplying the goods and services that consumers demand. Their behavior is often guided by the law of supply. When prices are high, and there’s a potential for greater profits, producers are likely to supply more. Conversely, if prices drop and the profit margins shrink, they might reduce their output. This behavior ensures that the market remains in equilibrium, balancing the forces of supply and demand.

Market Equilibrium

  • Definition: Market equilibrium is a state in which the quantity of goods or services supplied in the market matches the quantity demanded by consumers. At this point, there’s neither a surplus nor a shortage, and both producers and consumers are satisfied with the prevailing market price.
  • Role of Supply and Demand: Supply and demand are the two primary forces that drive market dynamics. They interact to determine the equilibrium price and quantity. When demand increases, prices tend to rise, prompting producers to supply more. Conversely, when demand decreases, prices tend to fall, leading to a reduction in supply. This continuous interaction ensures that markets adjust and find a balance.
  • Graphical Representation: In a typical supply and demand graph, the vertical axis represents the price, while the horizontal axis represents the quantity. The upward-sloping line is the supply curve, and the downward-sloping line is the demand curve. The point where these two curves intersect is the equilibrium point, indicating the equilibrium price and quantity.
  • Achieving Equilibrium: Markets are dynamic, and various factors can disrupt equilibrium. For instance, if there’s a sudden surge in the production of a good, leading to a higher quantity than what consumers demand, there will be excess supply. This surplus will typically result in a decrease in prices as producers try to clear their inventory. On the other hand, if demand outstrips supply, prices will rise as consumers compete for the limited goods available. Over time, these price adjustments will lead the market back to equilibrium.

Econ Unit 6: Currency, Banking, and Investments

Unit 6 Answers

  1. What is one problem that might commonly occur when one is bartering?
    • Answer: Two people have different ideas about the value of an item.
  2. In the United States, dollar bills, nickels, and dimes are?
    • Answer: Different denominations.
  3. How many types of money are included in the M2 category?
    • Answer: Four.
  4. When might it be important to know a currency’s exchange rate?
    • Answer: When planning expenses for an overseas trip.
  5. What would happen if currency in all countries had fewer denominations?
    • Answer: People could not charge as many different prices for goods.
  6. A currency is a system of money created and used by?
    • Answer: A nation or region of the world.
  7. People might choose to use a debit card rather than cash for purchases because?
    • Answer: They do not want to carry around large amounts of cash.
  8. To barter means to?
    • Answer: Trade.
  9. A currency’s exchange rate is?
    • Answer: Its changing value relative to other currencies.
  10. What kind of money is a gold certificate considered to be?
    • Answer: Representative.
  11. Who mostly directly benefits when banks make a profit?
    • Answer: Shareholders, companies, and the economy.
  12. The Federal Reserve manages the nation’s currency and money supply by?
    • Answer: Setting interest rates and acting as a lender to banks.
  13. Which example describes how a bank injects money into the economy?
    • Answer: A bank approves a mortgage for a customer.
  14. Which best explains why banks consider interest on loans to be important?
    • Answer: Interest helps them cover business costs.
  15. An entrepreneur who needs money to create and distribute a new invention would most likely visit?
    • Answer: An investment banker.
  16. What explains the difference between retail and commercial banking?
    • Answer: Retail banks loan money to small businesses, while commercial banks loan money to large corporations.
  17. A fee banks charge in exchange for borrowing money is called?
    • Answer: Interest.
  18. Which best describes the effects of low and high interest rates on the economy?
    • Answer: Low interest rates encourage consumers to borrow and spend, while high interest rates discourage such behavior.
  19. Which factors can affect a stock’s price?
    • Answers: Market performance, the company’s financial health, and the economy.
  20. Which best describes how an investor makes money off debt?
    • Answer: By being repaid for the principal.
  21. Which best describes what generally occurs in financial markets?
    • Answer: Assets are traded.
  22. How do bonds generate income for investors?
    • Answer: Bonds pay a specified amount at maturity.
  23. Which term refers to the possibility of an investor losing some or all of an investment?
    • Answer: Risk.
  24. Which best describes the role that government and business play in investments?
    • Answer: They both invest money to earn a profit.
  25. Capital appreciation refers to?
    • Answer: The increased value of a stock.
  26. Once stocks are on the market, which best explains how their prices are set?
    • Answer: Prices fluctuate on the basis of demand.
  27. Which best describes what a market index does?
    • Answer: An index measures market performance.
  28. The level of investment in markets often indicates?
    • Answer: The state of the economy.
  29. What advantages does money have over bartered goods?
    • Answers: Money has a set value, and bartered goods do not. Money is more portable than bartered goods. Money allows people to easily store value they earn.
  30. What role does the Federal Reserve play?
    • Answers: Regulate the banking industry, loan money to banks, and transfers any profits to the Treasury.
  31. Which is an example of how a denomination is divisible?
    • Answer: An American dollar is equal to four quarters.
  32. One fact about all currency is that it?
    • Answer: Has a changing value.
  33. Which is the most liquid form of money?
    • Answer: Cash and currency in circulation.
  34. Which best describes the economic impact of defaulting on bank loans?
    • Answer: The economy suffers because banks have less money to loan to others.
  35. Which best describes why investing can be such a challenge?
    • Answer: There are no guaranteed investments.
  36. Which statement best describes the main cause of the 2008 housing market crash in the United States?
    • Answer: Many people could not make home payments during a weak economy.
  37. How do bank loans help the nation’s economy?
    • Answer: They allow businesses to expand and improve.
  38. _______ are debt certificates that are purchased by an investor.
    • Answer: Bonds.

Understanding Currency and Bartering

  • Bartering Issues: Bartering is the ancient system of exchanging goods and services without using money. One of the primary issues with bartering is the need for a “double coincidence of wants.” This means both parties involved in the trade must want what the other is offering. Additionally, determining the exact value of goods and services can be challenging, leading to potential disagreements or perceived inequalities in the trade.
  • Types of Money: Money can be categorized based on its physical form and function. Physical forms include coins (like pennies, nickels, dimes) and paper money (like dollar bills). Functionally, money serves as a medium of exchange, a unit of account, a store of value, and a standard of deferred payment.
  • Currency Categories: Money supply can be categorized into different groups based on its liquidity. The M2 category, for instance, includes near-money assets like savings accounts, time deposits, and non-institutional money market funds, in addition to the physical currency and demand deposits.
  • Exchange Rates: An exchange rate represents the value of one currency in terms of another. It’s crucial for international trade and finance. For travelers or businesses planning overseas expenses, understanding the current exchange rate can help in budgeting and determining the cost of transactions in a foreign currency.
  • Denominations: Denominations refer to the different values of money. For example, in the U.S., we have pennies, nickels, dimes, quarters, and various dollar bill denominations. If all countries had fewer denominations, it might simplify transactions but could also limit the flexibility in pricing and making change.
  • Definition of Currency: Currency is a system of money that is recognized and used as a medium of exchange within a particular nation or region. It facilitates trade by providing a standardized measure of value, eliminating the need for bartering. Different countries have their own currencies, like the U.S. Dollar, the Euro, or the Japanese Yen.

Banking and Financial Institutions

  • Debit Cards vs. Cash: While cash has been the traditional method of payment for centuries, the rise of electronic banking has made debit cards increasingly popular. Debit cards offer convenience as they eliminate the need to carry large amounts of cash. They also provide safety benefits; if lost or stolen, they can be easily blocked, unlike cash which, once lost, cannot be recovered.
  • Bartering: An ancient system of trade where goods and services are exchanged directly without the use of money. While not prevalent in modern economies, bartering still exists in certain communities and specific sectors.
  • Exchange Rate of Currency: This rate determines how much one currency is worth in terms of another. It’s influenced by various factors including economic indicators, interest rates, and geopolitical events.
  • Types of Money: Money can be categorized based on its nature. For instance, a gold certificate, which represents a claim to a certain amount of gold, is considered representative money. It derives its value from the commodity it represents.
  • Bank Profits: Banks earn profits from the difference between the interest they pay on deposits and the interest they charge on loans. These profits are essential as they benefit shareholders, allow the bank to invest in new services, and contribute to the overall health of the economy.
  • Federal Reserve’s Role: As the central bank of the U.S., the Federal Reserve (often referred to as the Fed) plays a pivotal role in the country’s monetary policy. It manages the money supply, sets interest rates, and provides financial services to other banks and government agencies.
  • Bank’s Role in Economy: Banks play a multifaceted role in the economy. By approving loans and mortgages, they inject money into the economy, facilitating business expansion and home ownership.
  • Interest on Loans: Interest is the cost of borrowing money. Banks charge interest on loans to cover their operational costs, pay interest to depositors, and earn a profit.
  • Types of Banking: Retail banking caters to individual customers, offering services like savings accounts, personal loans, and mortgages. Commercial banking, on the other hand, focuses on serving businesses, providing them with services like business loans, treasury and cash management.
  • Earning from Investments: Investors can earn money in various ways. They might receive interest from bonds, dividends from shares, or benefit from capital appreciation when they sell an asset at a higher price than they bought it.

Investments and Financial Markets

  • Stock Prices: The price of a company’s stock is influenced by various factors including the company’s financial performance, overall market trends, and broader economic indicators. External events, such as geopolitical tensions, can also impact stock prices.
  • Investment Risks: Every investment carries a certain level of risk. While some investments might offer higher potential returns, they may also come with a higher risk of loss. It’s essential for investors to understand and be comfortable with the level of risk they’re taking.
  • Market Index: An index, like the S&P 500 or the Dow Jones Industrial Average, tracks the performance of a specific group of stocks, providing a snapshot of the market’s overall health.
  • Investment Indicators: High levels of investment can indicate a robust economy, while low levels might suggest economic stagnation or recession.
  • Advantages of Money over Bartering: Money provides a standardized measure of value, making trade more efficient. It’s also portable, divisible, and serves as a store of value.
  • Federal Reserve’s Functions: The Federal Reserve, or the Fed, oversees and regulates banks, ensures financial stability, sets monetary policy, and transfers its profits to the U.S. Treasury.
  • Denomination Divisibility: Money can be broken down into smaller units. For instance, one dollar can be divided into 100 cents or four quarters.
  • Currency Characteristics: The value of a currency can fluctuate based on economic conditions, interest rates, and other factors.
  • Liquidity of Money: Liquidity refers to how quickly an asset can be converted into cash. Physical cash is the most liquid asset, followed by assets like stocks and bonds.
  • Economic Impact of Loan Defaults: When borrowers default on their loans, banks might face financial strain, leading to reduced lending activity and potential economic slowdown.
  • Investment Challenges: Investing always comes with challenges, including market volatility, interest rate changes, and geopolitical events.
  • 2008 Housing Market Crash: A culmination of risky lending practices and financial instruments led to a massive housing market crash in 2008. Many homeowners found themselves unable to make mortgage payments, leading to widespread foreclosures.
  • Economic Role of Bank Loans: Loans provided by banks enable businesses to expand, innovate, and hire, driving economic growth.
  • Debt Certificates: Bonds represent a debt obligation. When investors purchase bonds, they’re essentially lending money to the issuer (like a government or corporation) in exchange for periodic interest payments and the return of the bond’s face value at maturity.

Econ Unit 7 – Macroeconomic Indicators

In the vast realm of economics, macroeconomic indicators stand as powerful tools, shedding light on the overall health and trajectory of a nation’s economy. These indicators, often released by government agencies and independent organizations, provide key insights into various aspects of economic performance, from production output to employment levels, inflation rates, and beyond.

Understanding these indicators is crucial for policymakers, investors, businesses, and even everyday citizens. They not only reflect the current state of an economy but also hint at potential future trends. For instance, a rising Gross Domestic Product (GDP) suggests economic growth and prosperity, while increasing unemployment rates might signal economic downturns.

Unit 7 Answers

Which statements describe a free enterprise system? Check all that apply.

Citizens can own property.
The government employs all workers.
Supply and demand drives production.
Consumers and producers make their own decisions.
Citizens can accumulate wealth.
The government sets prices and wages.
Citizens can own property.
Supply and demand drives production.
Consumers and producers make their own decisions.
Citizens can accumulate wealth.
Rules ensuring that businesses offer safe products to consumers are part of a nation’s
trade policy.
monetary policy.
regulatory policy.
fiscal policy.
regulatory policy.
Read the scenario.
The citizens of Country D have noticed that the average prices of most goods within their nation have begun to rise. At the same time, employers are not raising wages at the same rate. The combination of these challenges has resulted in a decrease in overall demand, causing a decline in GDP.
Based on the scenario, who is most affected by the situation taking place within Country D?
the government of Country D
the workers of Country D
the businesses of Country D
the government, workers, and businesses of Country D
the government, workers, and businesses of Country D
In a free enterprise system, governments address public problems through policy to ensure that
citizens’ needs are met and protected.
economic operations of businesses are controlled.
workers earn more than workers in other countries.
the nation’s level of productivity remains steady.
citizens’ needs are met and protected.
What are economic challenges that governments must face? Check all that apply.
threats of war
low production
low voter turnout
low production
Public policy can be best defined as
a course of action the government takes in response to an issue or problem.
a decision made by all registered voters to change a government program.
the annual review of a government’s plans to spend taxpayers’ money.
a forum where citizens can debate the merits of a government proposal.
a course of action the government takes in response to an issue or problem.
Which of these policies would a government take when it comes to employment?
paying employees whether they work or not
seeing that at least half the workforce has a job
ensuring that as many workers are employed as possible
making sure that only skilled workers get jobs
ensuring that as many workers are employed as possible
When an economy suffers from low production, a country cannot
worry about unemployment.
change the tax rate.
provide adequate funding for public safety.
enjoy a steady rate of economic growth.
enjoy a steady rate of economic growth.
Which of the following statements most accurately describes the federal government and its employees?
Millions of Americans work for the federal government.
The federal government is not allowed to hire employees.
The majority of Americans are employed by the federal government.
The number of federal employees is too small to affect government spending.
Millions of Americans work for the federal government.
The diagram shows an aspect of fiscal policy.
What aspect of fiscal policy does this diagram show?
the way in which a government creates a budget
a budget that is severely unbalanced
government spending to strengthen the economy
ways in which governments spend money
government spending to strengthen the economy
What does deficit spending require a government to do?
lay off workers
cut taxes
take on debt
hire more workers
take on debt
This diagram shows a government’s approach to taxing and spending.
Which of the following would be a good title for this diagram?
Government Spending
The National Economy
The Federal Debt
Fiscal Policy
Fiscal Policy
When a government creates a budget, it is seeking a way to
spend as much revenue as possible.
cut spending to a bare minimum.
return as much money to taxpayers as possible.
allocate money to programs and projects.
allocate money to programs and projects.
What is the main goal in creating the federal budget?
managing businesses and increasing spending on all programs
deciding how to manage the government’s tax revenue and expenditures
finding a way to allow the economy to run on its own
finding a way to slow down rapid economic growth
deciding how to manage the government’s tax revenue and expenditures
How is an excise tax different from a sales tax?
An excise tax is not deductible.
An excise tax applies to specific products.
An excise tax applies only to imported goods.
An excise tax is an indirect tax
An excise tax applies to specific products.
Governments collect taxes to ensure that
there is sufficient money to meet the needs of all citizens.
citizens contribute to meeting society’s needs.
politicians get paid in a timely manner.
money is never borrowed by the government.
citizens contribute to meeting society’s needs.
A sales tax is a type of
progressive tax.
indirect tax.
proportional tax.
direct tax.
indirect tax.
Which of these best describes income tax?
regressive tax
progressive tax
direct tax
proportional tax
direct tax
If expansionary taxation policies encourage growth, are they always appropriate to implement?
No, government services could be reduced and cause serious problems for individuals and businesses.
Yes, the private sector can easily and affordably replace all services and facilities cut by the government.
No, the government is capable of providing many but not all services individuals and businesses need.
Yes, the government will still ensure that individuals and businesses continue to receive all necessary services
No, government services could be reduced and cause serious problems for individuals and businesses.
Under an expansionary taxation policy, the government tries to stimulate economic growth by
increasing taxes.
reducing taxes.
increasing spending.
reducing spending.
reducing taxes.
Under a contractionary taxation policy, the government tries to improve its finances by
increasing taxes.
reducing taxes.
increasing spending.
reducing spending.
increasing taxes.
Which are examples of programs or projects most likely funded by taxes paid by citizens of the United States? Check all that apply.
constructing a highway
collecting garbage
developing a vacation resort
building of private homes
maintaining state parks
constructing a highway
collecting garbage
maintaining state parks
A(n) __ policy is employed when the government chooses to run a larger deficitexpansionary
How are progressive taxes and regressive taxes similar?
Both charge high-income individuals more.
Both are considered flat taxes.
Both are determined based on income.
Both are types of indirect taxes.
Both are determined based on income.
Which statement best describes how the Fed responds to recessions?
It sells more securities.
It charges banks more interest.
It increases reserve requirements.
It increases the money supply.
It increases the money supply.
Which best describes a central bank’s primary role?
controlling inflation
adjusting interest rates
printing money
creating monetary policy
creating monetary policy
When inflation is _ , the Fed aims to slow the economy.high
When the Fed adjusts its interest rate, it directly influences consumer
What is a potential negative effect of an expansionary policy?
decreased borrowing
increased interest rates
increased inflation
decreased available credit
increased inflation
Which statement best describes how the Fed’s use of open market operations affects banks?
It affects banks’ interest rates
It affects banks’ liquidity.
It affects banks’ lending practices.
It affects banks’ stability.
It affects banks’ liquidity.
__ monetary policy involves decreasing the money supply.contractionary
Why does the Fed pay interest to banks?
It is interest on money held in reserve.
It is interest on credit available to the Fed.
It is interest on loans taken by the Fed.
It is interest on government investments.
It is interest on money held in reserve.
If the domino effect occurs as a result of changes in the money supply, what will most likely happen as an immediate result of banks having more money to lend?
Borrowing will increase.
Interest rates will decrease.
Investing will increase.
Inflation will decrease.
Interest rates will decrease.
Which of these is a banking activity of the Fed?
printing money
regulating securities markets
storing money for banks
funding government programs
storing money for banks
Spending that can change from year to year is known as _ spending.discretionary
Fiscal policies establish a government’s plans for taxation and _spending
The government of Country C has passed a law protecting the physical safety of factory workers. This is an example of
monetary policy.
supply and demand.
fiscal policy.
regulatory policy.
regulatory policy.
Which best describes why governments collect taxes?
to control the value of currency
to keep the government running
to ensure surplus funds
to fund government programs
to fund government programs
Which body manages the Fed?
the Appropriations Committee
the Federal Reserve Board
the Federal Open Markets Committee
the Economic Policy Subcommittee
the Federal Reserve Board
US federal income tax is progressive by law, but which best explains why is it sometimes regressive in practice?
High-income earners can fight in court for the right to a reduced rate.
High-income earners reduce their tax rates through numerous deductions.
High-income earners use tax laws to their advantage to reduce their tax rates.
High-income earners always place their assets overseas to lower their tax rates.
High-income earners use tax laws to their advantage to reduce their tax rates.
Which best describes a regressive tax?
a tax that charges low-income earners a lower percentage than high-income earners
a tax that charges an equal percentage to all
a tax that charges earners based on their professions
a tax that charges high-income earners a lower percentage than low-income earners
a tax that charges high-income earners a lower percentage than low-income earners
In which of the following ways do governments spend money to meet public needs? Check all that apply.
by protecting the public
by arming the public
by providing health care
by supporting education
by building roads and bridges
by protecting the public
by providing health care
by supporting education
by building roads and bridges
Which group does the Fed serve?
financial institutions
government bodies
financial institutions
Which of these are goals of an expansionary policy? Check all that apply.
increased available credit
decreased available credit
increased money supply
increased inflation
increased interest rates
decreased interest rates
increased available credit
increased money supply
decreased interest rates
On which of these are individuals required to pay income taxes in the United States? Check all that apply.
store purchases
investment earnings
investment earnings
What part does interest play in deficit spending?
Governments must pay interest on money they borrow when they take on debt.
Citizens must pay interest when their governments borrow money.
Governments may charge foreign countries interest when they borrow money.
Interest is not a factor when a government’s budget is in deficit.
Governments must pay interest on money they borrow when they take on debt.
What happens when a bank is required to hold more money in reserve?
It has less money for loans.
It has less money for operations.
It has less money for interest payments.
It has less money for withdrawals.
It has less money for loans.
Expansionary spending takes place when a government makes the decision to
put a freeze on the number of its employees.
raise taxes to balance its budget.
raise taxes to run a budget surplus.
raise spending to stimulate the economy
raise spending to stimulate the economy

Gross Domestic Product (GDP)

GDP, or Gross Domestic Product, is one of the most widely used indicators of a country’s economic performance. It represents the total dollar value of all goods and services produced over a specific time period within a nation’s borders.

  • Nominal GDP: This measures a country’s gross domestic product using current prices, without adjusting for inflation or deflation. It provides a straightforward view of an economy’s size in terms of actual current dollar values.
  • Real GDP: Unlike nominal GDP, real GDP accounts for changes in price or inflation. It provides a more accurate representation of an economy’s size and how it’s growing over time. By adjusting for inflation, it allows for a more apples-to-apples comparison of economic growth from one year to the next.

Methods of Calculating GDP

There are three primary methods used to calculate GDP:

  1. Production (or Output) Method: This calculates GDP as the total value of goods and services produced in the country, minus the value of goods and services used up in production.
  2. Income Method: Here, GDP is computed as the total income earned by residents of a country, including wages, profits, rents, and taxes, minus subsidies.
  3. Expenditure Method: This is the most widely used method. It calculates GDP as the total expenditure made within the economy, broken down as:
    • Consumption
    • Investment
    • Government Spending
    • Net Exports (Exports minus Imports)


Unemployment refers to the situation where individuals who are capable of working and are actively seeking employment cannot find a job. There are various types of unemployment, each with its own causes and implications:

  1. Frictional Unemployment: This type of unemployment occurs when individuals are temporarily out of work while transitioning from one job to another or entering the workforce for the first time. It’s a natural form of unemployment that results from the time it takes for job seekers to find a match for their skills and preferences.
  2. Structural Unemployment: This arises due to technological changes or shifts in the economy that render certain skills obsolete. For instance, the decline of a particular industry in a region can lead to structural unemployment for workers specialized in that industry.
  3. Cyclical Unemployment: Directly related to the economic cycles, cyclical unemployment occurs during recessions. When there’s a downturn in the economy, demand for goods and services drops, leading businesses to cut back on production and lay off workers.
  4. Seasonal Unemployment: As the name suggests, this type of unemployment is tied to certain times of the year when demand for specific labor is low. For example, agricultural workers might face unemployment during off-harvest seasons, or ski instructors might be unemployed during the summer.

Effects of Prolonged Unemployment

Extended periods of unemployment can have severe consequences, both for individuals and the economy:

  • Economic Strain: Prolonged unemployment can lead to a decrease in consumer spending, which can further slow down the economy.
  • Loss of Skills: Over time, unemployed individuals might lose their skills, making it even harder for them to find a job in the future.
  • Mental Health Issues: Chronic unemployment can lead to stress, depression, and other mental health problems.
  • Increased Government Expenditure: Governments might have to spend more on unemployment benefits and other social welfare programs.
  • Decrease in Potential Output: With a significant portion of the workforce unemployed, the economy operates below its potential, leading to a loss in potential GDP.

Econ Unit 8 – Monetary Policy

Monetary policy refers to the actions undertaken by a nation’s central bank to control and influence the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity. It plays a pivotal role in stabilizing the national economy.

Central banks, like the Federal Reserve in the United States, the European Central Bank in the Eurozone, and the Bank of England in the UK, use monetary policy as a tool to either stimulate the economy or cool it down, depending on the economic context.

Unit 8 Answers

  1. A purpose of government regulation in a mixed-market economy is to protect:
    • Answer: property rights.
  2. The Food and Drug Administration sets standards for:
    • Answer: product labeling.
  3. Which are results of regulation in a mixed-market economy? Check all that apply.
    • Answers:
      • compliance with laws
      • control of externalities
  4. A regulatory agency that protects workers is:
    • Answer: OSHA.
  5. Which explains why government regulation is necessary in a mixed-market economy?
    • Answer: Government regulation protects constitutional rights, safety, and fairness.
  6. Which are duties of OSHA? Check all that apply.
    • Answers:
      • investigating worker complaints
      • inspecting businesses
  7. Regulatory agencies such as the OCC and the FDIC add _________ to the banking system.
    • Answer: safety
  8. Which is a function of regulatory agencies?
    • Answer: encouraging business compliance
  9. The most efficient way to ensure that producers are responsible for products is through:
    • Answer: labeling.
  10. Which regulatory agencies provide general oversight for the banking industry?
    • Answer: the Fed and the FDIC
  11. Milton Friedman led a new economic school of thought called:
    • Answer: monetarism.
  12. Milton Friedman argued that consumers are more likely to alter their behavior based on:
    • Answer: long-term changes in the economy.
  13. Classical economics played an important role in helping the United States establish:
    • Answer: free enterprise
  14. Friedrich Hayek believed that:
    • Answer: the economy is too complicated to apply aggregates.
  15. Monetarism plays a role in economic growth by:
    • Answer: influencing the supply of money.
  16. Why did Friedrich Hayek call expansionary spending dangerous?
    • Answer: He felt it could lead to inflation and poor decisions by consumers.
  17. Expansionary monetary policy is used when a government:
    • Answer: increases its money supply to boost the economy.
  18. According to Milton Friedman, __________ policy is the best way to influence the economy’s aggregate demand.
    • Answer: monetary
  19. Which best describes the idea behind the “invisible hand”?
    • Answer: Producers and consumers work together, which guides the economy.
  20. Both newspaper journalists and postal workers have been negatively affected by:
    • Answer: the popularity of electronic communication and the Internet.
  21. In the 1870s, __________ began to investigate factory conditions.
    • Answer: Massachusetts
  22. What event had an enormous effect on US workplace safety?
    • Answer: a deadly factory fire
  23. What was the status of US workplace safety laws in 1900?
    • Answer: Most states had passed some safety laws, but enforcement varied.
  24. In the year 2013, which of these fields has the largest percentage of workers?
    • Answer: education and health care
  25. What is the definition of collective bargaining?
    • Answer: labor union and employer negotiations about wages and other issues
  26. What is one benefit for US workers who have a college degree rather than a high school diploma?
    • Answer: Those with a college degree earn nearly twice as much as those without college
  27. The job outlook for physical therapists:
    • Answer: will improve over time.
  28. If union contracts raise wages above competitive levels, what might be one negative outcome?
    • Answer: Companies will move overseas to escape unions and hire cheaper labor.
  29. Which statements correctly describe the FAFSA? Check all that apply.
    • Answers:
      • It requires students to provide their financial information.
      • It gives students access to money from the government.
      • It helps determine whether a student needs financial aid.
  30. Which statement best explains a grant?
    • Answer: A grant is federal money awarded to a student.
  31. Which interest could best help someone become an athletic trainer?
    • Answer: understanding sports injuries
  32. Which statement best defines tuition?
    • Answer: Tuition is the price of attending classes at a school.
  33. How is a student loan different from a scholarship?
    • Answer: A student loan must be paid back, but a scholarship is not paid back.
  34. Student-specific scholarships are awarded to students who:
    • Answer: are members of a certain group.
  35. At an educational institution, the cost of room and board includes:
    • Answer: housing and meals.
  36. Besides the cost of an education, what additional expenses must students pay? Check all that apply.
    • Answers:
      • housing
      • meals
      • supplies
      • textbooks
  37. Which describes the process of how a business incorporates?
    • Answer: The business must gain government permission and issue a stock sale, followed by a shareholder vote.
  38. Which are examples of sole proprietorships? Check all that apply.
    • Answers:
      • independent workers
      • tax preparers
      • freelance writers
  39. How do corporations raise money and resources to expand?
    • Answer: They agree to sell stocks
  40. What happens to earnings in a cooperative?
    • Answer: They are shared with member-owners.
  41. A disadvantage of corporations is that shareholders have to pay _________ on profits:
    • Answer: taxes
  42. The primary responsibility of shareholders is to:
    • Answer: run the business by electing a board of directors, who then hire the company’s leaders.
  43. Which document determines the number of shares a company can sell?
    • Answer: a corporate charter
  44. Entrepreneurs who want to open a franchise:
    • Answer: buy the rights from the parent company and invest in a location approved by the parent company.
  45. A disadvantage of forming a partnership is that owners:
    • Answer: are fully responsible for their partners’ losses
  46. Which best describes the difference between sole proprietorships and partnerships?
    • Answer: Sole proprietors keep all profits and have unlimited liability, while partners split profits and share liabilities.
  47. What is a main reason why entrepreneurs experience daily stress?
    • Answer: They have considerable responsibility.
  48. According to the article by Brooks, successful entrepreneurs are most interested in:
    • Answer: personal fulfillment.
  49. What led to Henry Ford’s success as an entrepreneur?
    • Answer: His innovative production methods.
  50. According to Brooks’ article, what was the main effect of entrepreneurship in China?
    • Answer: Poverty noticeably declined.
  51. What is one purpose of writing a business plan before entering the market?
    • Answer: to differentiate the new company from the competition
  52. An entrepreneur must accept being accountable for the failure of the company because the entrepreneur is:
    • Answer: responsible for organizing the business.
  53. Because many successful business owners fail on their first attempts, the reader should assume that:
    • Answer: they learned from their mistakes.
  54. What must an entrepreneur assume when starting a business?
    • Answer: clever market strategies may still fail to sell a product
  55. How are Bill Gates and Henry Ford similar? Check all that apply.
    • Answers:
      • They both became wealthy and successful.
      • They both helped better the lifestyles of others.
      • They both developed products that filled a human need or needs.
  56. Which statement explains a way how the Securities and Exchange Commission upholds fair business practices?
    • Answer: The SEC generally oversees financial advisers.
  57. Labor unions were certain to advocate for the best interests of workers because:
    • Answer: the labor unions were created by workers and made up of workers.
  58. Which federal regulatory agency would most likely bring a civil suit against a business that broke securities laws?
    • Answer: the SEC
  59. A business owner would most likely create a cooperative instead of buying a franchise because:
    • Answer: cooperatives allow all owners to share profits, while franchises are required to share profits with a parent company.
  60. The development of many new businesses helps limit:
    • Answer: unemployment.
  61. Which best describes a difference between the views of Milton Friedman and John Maynard Keynes on the economy?
    • Answer: Friedman said that monetary policy should be used to influence aggregate demand, while Keynes believed the best approach was fiscal policy.
  62. What circumstances during the early days of industrialization led to a need for reform? Check all that apply.
    • Answers:
      • Factory equipment was dangerous to operate.
      • There was little government regulation of workplaces.
      • A typical work shift might be twelve to sixteen hours long.
  63. Articles of partnership establish:
    • Answer: how profits and losses are divided.
  64. To reduce pollution, the _________ legislates and enforces regulations that protect the air, water, and land.
    • Answer: Environmental Protection Agency
  65. Many classical economists such as Adam Smith believed that the government should:
    • Answer: intervene little in the economy.
  66. Successful entrepreneurs contribute to the economy by:
    • Answer: expanding markets.

Role of Monetary Policy in the Economy

  1. Controlling Inflation: By adjusting the interest rates and influencing the money supply, central banks can control inflation to ensure that it remains within a target range. High inflation can erode purchasing power, while deflation can lead to decreased consumer spending.
  2. Economic Growth: Monetary policy can influence economic growth by making borrowing cheaper or more expensive. Lower interest rates can stimulate borrowing and investment, leading to economic expansion, while higher rates can have the opposite effect.
  3. Exchange Rate Stability: By influencing interest rates, monetary policy can also affect the exchange rate of a country’s currency. A higher interest rate might attract foreign capital and cause the currency to appreciate, while a lower rate might lead to depreciation.
  4. Employment: By stimulating economic activity through monetary policy, central banks can indirectly influence employment levels. An expanding economy often leads to higher employment, while a contracting economy can lead to job losses.
  5. Financial Market Stability: Especially in times of economic crises, the central bank can act as a lender of last resort, ensuring liquidity and stability in the financial markets.

Econ Unit 9 – International Trade

International trade, the exchange of goods and services across international borders, has been a cornerstone of human civilization for centuries. As economies have evolved, so too has the complexity and importance of international trade.

Today, in an era of globalization, international trade plays a pivotal role in shaping the economic, political, and social landscapes of nations worldwide.

Unit 9 Answers

  1. In regard to trade, the United States
    • Answer: imports and exports goods and services.
  2. What role does competition play in international trade?
    • Answer: It drives down prices for consumers.
  3. The Middle East is best associated with which internationally traded product?
    • Answer: oil.
  4. A country that can produce a good more efficiently than another country has with the same number of resources has the
    • Answer: an absolute advantage.
  5. A company in Maine sends lobsters to France. What is this an example of?
    • Answer: exporting.
  6. Which is an example of a country that is overly dependent on another country for critical goods and services?
    • Answer: a country that imports all its oil.
  7. Which is the best example of a country that is dependent on other countries?
    • Answer: a country that has little fertile soil.
  8. Which statement best describes how globalization is affecting the world?
    • Answer: The world is becoming more globalized and connected.
  9. How does international trade best benefit specialization?
    • Answer: A country can make and sell goods affordably and buy goods it cannot make.
  10. Why does the US import oil?
    • Answer: because it does not produce enough oil.
  11. Which of these statements most accurately describes currencies in North America?
    • Answer: Each country in North America uses its own currency.
  12. Which statements accurately describe a country’s currency?
    • Answers:
      • The currency is easily divisible.
      • The currency has a value that can change.
      • The currency has denominations.
  13. A currency shared by several countries in Europe is the
    • Answer: euro.
  14. There would be no separation between one country’s economy and another’s if the entire world
    • Answer: shared the same currency.
  15. Which best explains why a US corporation would open a factory in China?
    • Answer: to take advantage of lower labor costs.
  16. Technologies that allow for instant worldwide communication include
    • Answer: mobile phones and Internet access.
  17. Global trade provides consumers with
    • Answer: more options and lower prices.
  18. Airplanes have changed the way the world does business by
    • Answer: making long trips in faster time.
  19. Which technologies have made global communication instant and more effective?
    • Answers:
      • cell phones
      • wireless devices
      • smart phones
  20. One way to measure economic growth is by using GDP, which stands for
    • Answer: Gross Domestic Product.
  21. Recent improvements in _________ have increased the pace of globalization
    • Answer: technology.
  22. How has globalization made countries more interdependent?
    • Answers:
      • Countries rely on each other for vital resources.
      • Countries rely on each other for chances to import.
      • Countries rely on each other for chances to export.
  23. If the value of the US dollar declines in relation to other currencies, goods imported into the United States will
    • Answer: become more expensive.
  24. Which of these statements most accurately describes the use of currencies in different parts of the world?
    • Answer: Different countries use different currencies.
  25. Why might a country choose to devalue its currency?
    • Answer: to encourage exports.
  26. Which process helps countries import things they cannot make while allowing them to specialize in exports?
    • Answer: international trade.
  27. Which form of transportation has led to more efficient business in a global market?
    • Answer: cargo ships.
  28. Globalization is the process of
    • Answer: connecting the world over time.
  29. A reason that countries trade with each other is
    • Answer: to get products they cannot produce.
  30. A factory owner might decide to manufacture shirts in Pakistan instead of the United States because
    • Answer: it is less expensive to make shirts there.
  31. Which best explains how globalization offers an advantage to businesses?
    • Answer: Businesses can take advantage of new forms of technology to make products cheaply.
  32. An exchange rate table makes it easy to compare the
    • Answer: the value of the currencies for two or more countries.
  33. Which describes the difference between a trade surplus and a trade deficit?
    • Answer: A trade surplus is when a country exports more than it imports, while a trade deficit happens when imports exceed exports.

Benefits and Importance of International Trade

  1. Economic Growth: International trade allows countries to expand their markets, leading to increased economic growth. By accessing new consumers and markets, businesses can increase their sales and profits.
  2. Efficiency and Specialization: Countries can specialize in the production of goods and services in which they have a comparative advantage. This leads to more efficient production globally and allows countries to benefit from specialized expertise.
  3. Access to Resources: Not all countries have the same natural resources. International trade ensures that goods and raw materials can flow to where they’re needed most, benefiting both exporters and importers.
  4. Price Stabilization: The global marketplace can help stabilize prices by balancing supply and demand on a larger scale. This can lead to more consistent and predictable pricing for consumers and businesses.
  5. Innovation and Technology Transfer: Exposure to global markets and competition can drive innovation. Additionally, international trade can facilitate the transfer of technology and knowledge between countries.
  6. Cultural Exchange: Beyond just goods and services, international trade also allows for the exchange of culture, ideas, and values, fostering understanding and cooperation among nations.
  7. Job Creation: Trade can lead to increased employment opportunities as businesses expand and tap into new markets.

However, while international trade offers numerous benefits, it also presents challenges. Issues such as trade imbalances, protectionism, and the potential for job losses in certain sectors must be managed carefully to ensure that the benefits of trade are broadly shared.

In the context of the global economy, international trade is not just a matter of economic policy but is intrinsically linked to broader issues of geopolitics, environmental sustainability, and social justice. As we delve deeper into this unit, we will explore the intricate dynamics of international trade and its profound impact on the world we live in.

Benefits of Trade

Trade, the exchange of goods and services between individuals or entities, has been a fundamental aspect of human societies for millennia. As economies have grown and become more interconnected, the benefits of trade have become even more pronounced. Here, we delve into some of the primary advantages of trade, particularly in the context of international exchanges.

1. Comparative vs. Absolute Advantage

  • Absolute Advantage: This refers to a country’s inherent ability to produce a good or service more efficiently than another country, using the same amount of resources. For instance, if Country A can produce 10 units of a product in an hour while Country B can only produce 5 units in the same time, Country A has an absolute advantage.
  • Comparative Advantage: This concept goes a step further. It suggests that countries should produce and export goods in which they have a relative efficiency advantage, even if they don’t have an absolute advantage in producing that good. The idea is that by specializing in goods where they have a comparative advantage, countries can trade and both end up better off than if they tried to produce everything themselves.

2. Specialization and Efficiency

  • Specialization: By focusing on the production of specific goods or services, countries can become more skilled and efficient in those areas. This is akin to the idea of practicing a particular skill to become better at it. For instance, if a country specializes in producing wine because of its favorable climate and soil conditions, it can potentially produce higher quality wine at a lower cost than a country without those natural advantages.
  • Efficiency: Specialization leads to efficiency in production. When countries produce goods they are specialized in, they can achieve economies of scale, leading to lower average costs of production. This means they can produce more goods at a lower cost, leading to more significant profits and benefits for their economy.

3. Access to a Broader Range of Goods and Services

Trade allows countries to access goods and services that they might not be able to produce domestically. This means consumers have a wider variety of choices available to them, often at more competitive prices.

4. Economic Growth

Trade can stimulate economic growth by providing markets for excess production, facilitating the inflow of capital, and promoting technological and skills transfer.

5. Price Stability

International trade can help stabilize prices by balancing supply and demand on a global scale. If there’s a surplus of a product in one country, it can be exported to another where there’s a demand, helping to stabilize prices in both countries.

6. Fostering Innovation

Exposure to international markets and competition can drive businesses to innovate, leading to the development of new products, services, and technologies.

Econ Unit 10 – Developing Economies

In the vast tapestry of the global economy, developing economies play a crucial and dynamic role. Often referred to as “emerging markets” or “low and middle-income countries,” these economies are characterized by their rapid industrialization and a higher-than-average growth rate.

While they might not have the economic prowess of developed nations, their significance in the global landscape cannot be understated.

Unit 10 Answers

What is the purpose of quotas?
to ban all imports from a country
to restrict the availability of a good from a certain country
to limit how much of a good can be imported
to keep prices on domestic goods low
to limit how much of a good can be imported
Which best describes how standards help domestic producers?
Standards require goods to meet basic requirements.
Standards provide financial support for producers.
Standards restrict the import of cheap goods.
Standards offer incentives to ensure high quality.
Standards require goods to meet basic requirements.
Which type of trade barrier is explicitly used for political purposes?
Customs duty on cars produced overseas is a type of
positive incentive and subsidy.
negative incentive and subsidy.
positive incentive and tariff.
negative incentive and tariff.
negative incentive and tariff.
How are subsidies similar to tariffs?
Both are types of taxes.
Both aim to lower the price of domestic goods.
Both try to raise the price of imported goods.
Both aim to disadvantage imports.
Both aim to disadvantage imports.
Which group directly benefits from subsidies?
Tariffs and subsidies are both types of
import restrictions.
economic penalties.
What is the government’s aim in setting quotas?
to create more competition in the market
to increase sales of domestic goods
to keep tariffs high
to limit export of domestic goods
to increase sales of domestic goods
What term describes a ban or restriction on trade with another country?embargo
On which country has the United States imposed an embargo since 1960?
North Korea
Trade agreements are helpful because they allow countries to
trade for necessary goods.
increase trade tax revenue.
influence foreign trade.
help create new trade barriers
trade for necessary goods.
The Free Trade Agreement Tariff Tool allows US businesses to
request that tariffs be limited.
access tariff rates when planning to export.
know which countries are entering trade associations.
access new trade agreements as they are developed.
access tariff rates when planning to export.
Which best describes ASEAN?
an international organization promoting free trade
a regional organization promoting growth in Southeast Asia
an international organization trying to establish a common currency
a regional organization establishing free trade between Canada and Mexico
a regional organization promoting growth in Southeast Asia
Trade agreements can cause jobs to go to countries that provide those jobs
International trade organizations promote free trade by encouraging countries to
maintain tariffs.
establish trade quotas.
remedy trade surpluses.
develop products.
remedy trade surpluses.
Countries establish internal economic zones in order to
limit foreign investment.
make solving disputes easier.
have fewer economic restrictions.
create manageable amounts of imports.
have fewer economic restrictions.
Which group primarily helps settle trade disputes?
European Union
World Trade Organization
Association of Southeast Asian Nations
North American Free Trade Agreements
World Trade Organization
Which group works to help members establish internal political stability?
European Union
World Trade Organization
Association of Southeast Asian Nations
North American Free Trade Agreements
Association of Southeast Asian Nations
What is one stated purpose of the World Trade Organization?
to create a common currency
to encourage the expansion of exports
to monitor trade policies of many countries
to establish direct trade agreements between countries
to monitor trade policies of many countries
How do trade agreements of international organizations affect trade?
by encouraging the development of trade policies
by eliminating tariffs and taxes on imports and exports
by encouraging countries to balance imports and exports
by helping smaller countries compete in the world market
by encouraging countries to balance imports and exports
Why are environmental problems common in developing countries?

The citizens of developing countries have not been educated about the dangers of pollution and the need to protect resources.
People in developing countries travel long distances by car to get to work and school, leading to air pollution and habitat destruction.
Rapid growth of new industries and technology has led to an enormous increase in environmental woes in developing countries.
Developing countries often specialize in manufacturing and providing raw materials, which can seriously harm the environment.
Developing countries often specialize in manufacturing and providing raw materials, which can seriously harm the environment.
One social issue often facing developing countries is
democratic rule is easily obtainable.
reluctance to accept change.
a shortage of natural resources.
very high population growth.
very high population growth.
Which statement accurately describes a developing country?
The country’s population has a high growth rate.
The country has a high standard of living.
The country’s population has a high life expectancy.
The country has a high GDP per capita.
The country’s population has a high growth rate.
What does the International Monetary Fund (IMF) seek to accomplish for developing countries?
The IMF establishes industries and technologies in developing countries.
The IMF helps a developing country’s citizens establish bank accounts.
The IMF gives college aid to qualified individuals in developing countries.
The IMF provides economic advice and loans to developing countries.
The IMF provides economic advice and loans to developing countries.
The Czech Republic’s decision in 2003 to join the European Union indicated that the Czech Republic
was now equal in wealth to all other European nations.
would give all economic control to the European Union.
was willing to forge economic ties with other nations.
would eventually achieve a mixed-market economy
was willing to forge economic ties with other nations.
In a transitioning economy, what is a downside of rapid economic growth?
Rapid economic growth can be difficult to regulate.
Rapid economic growth benefits only the wealthy.
Rapid economic growth usually leads to a crash.
Rapid economic growth may stifle cultural growth.
Rapid economic growth can be difficult to regulate.
How might foreign investment be problematic for a transitioning economy?
Foreign investment can temporarily slow economic growth.
It may be difficult to adjust to another nation’s influence.
A foreign government may seize control of the country.
The transitioning economy must adopt a foreign currency.
It may be difficult to adjust to another nation’s influence.
“GDP per capita” means that the GDP is calculated per
What steps must countries take to transition to a mixed-market economy? Check all that apply.
They must establish state-owned businesses.
They must decrease private ownership.
They must establish a fair labor market.
They must discourage foreign investment.
They must open up trade to other countries.
They must establish a fair labor market.
They must open up trade to other countries
A country with a _ economy generally has a high standard of livingdeveloped
Which best describes the effect negative incentives have on a certain course of action?
They make the action impossible.
They make the action less profitable.
They make the action difficult.
They make the action less likely.
They make the action less profitable.
Why does an increase in literacy rates often accompany an increase in per capita income?
People who have higher-paying jobs often have the time available to develop literacy skills.
Developing countries have higher-than-average literacy rates, which typically leads to higher income.
People who can read and who receive an education are eligible for higher-paying jobs.
Developed countries often attempt to raise low literacy rates to improve income.
People who can read and who receive an education are eligible for higher-paying jobs.
Why do developing countries usually have less variety in their economic activities?
Limited access to education means that people are not trained to work in industry or technology.
Focusing on one or two economic activities leads to more rapid economic development.
Developing countries are usually small and have limited populations and resources.
People prefer the lifestyle that accompanies traditional activities such as farming.
Limited access to education means that people are not trained to work in industry or technology.
What type of economic growth do most developed economies experience?
rapid growth
unpredictable growth
moderate growth
slow growth
slow growth
In developed economies, less-educated workers
have more jobs to choose from.
are often more highly skilled than other workers.
may be outsourced to other nations.
can have difficulty finding work.
can have difficulty finding work.
What should be included in an outline for an informative essay? Check all that apply.
a thesis statement
a final opinion
several subtopics
parenthetical citations
secondary sources
a thesis statement
several subtopics
The _ is designed to help increase US productivity, GDP, and employmentNational Export Initiative
A tariff is a type of
How did NAFTA affect the economies of participating countries?
by creating unrestricted trade benefits
by raising employment rates and standards of living
by creating a balance of exports and imports
by increasing the overall volume of production
by increasing the overall volume of production
An economic incentive is best described as something that
benefits producers or consumers when taking action.
pushes producers or consumers to act on the government’s behalf.
motivates producers or consumers to take action.
forces producers or consumers to act in a certain way
motivates producers or consumers to take action.
What are standards designed to do? Check all that apply.
protect consumers
support domestic industries
limit imports
ensure safety
offer domestic industries an advantage
protect consumers
limit imports
ensure safety
Which statement explains the main reason to create an outline for an informative essay?
An outline can help a writer find evidence for a claim.
An outline can help a writer avoid the need to make revisions.
An outline can help a writer arrange the references to be cited.
An outline can help a writer select an approach to a topic.
An outline can help a writer select an approach to a topic.
What should be included in an informative essay? Check all that apply.
properly cited sources
emotional language
parenthetical citations
smooth transitions
supporting details
properly cited sources
parenthetical citations
smooth transitions
supporting details
When revising an informative essay, it is most important to make sure the language is _ for the audienceappropriate
What is the purpose of the US International Trade Association?
to help countries establish free trade
to help businesses create viable exports
to limit levels of investment in trade opportunities
to limit trade opportunities for competing companies
to help businesses create viable exports

Developing economies are not just about lower GDPs or burgeoning industries; they represent hope, potential, and a future of possibilities. As we navigate through this unit, we’ll uncover the unique challenges they face, the resilience they exhibit, and the immense potential they hold for reshaping the global economic narrative.

From understanding the foundational elements that define these economies to exploring strategies for sustainable growth, this unit offers a comprehensive insight into the world of developing economies.


  1. Mankiw, N. G. (2014). Principles of Macroeconomics. Cengage Learning.
  2. Krugman, P., & Wells, R. (2018). Macroeconomics. Worth Publishers.
  3. Samuelson, P. A., & Nordhaus, W. D. (2010). Economics. Tata McGraw-Hill Education.

Additional Sources

Gross Domestic Product (GDP)

  • World Bank. (2020). World Development Indicators: GDP. Link
  • Bureau of Economic Analysis (BEA). (2021). GDP and the National Income and Product Account (NIPA) Handbook. Link


  • International Labour Organization (ILO). (2020). Unemployment statistics. Link
  • U.S. Bureau of Labor Statistics. (2021). How the Government Measures Unemployment. Link


  • U.S. Bureau of Labor Statistics. (2021). Consumer Price Index. Link
  • International Monetary Fund (IMF). (2020). World Economic Outlook: Inflation. Link

Monetary Policy

  • Federal Reserve. (2021). Monetary Policy. Link
  • European Central Bank. (2021). Introduction to Monetary Policy. Link

International Trade

  • World Trade Organization (WTO). (2021). International Trade Statistics. Link
  • United Nations Conference on Trade and Development (UNCTAD). (2020). Review of Maritime Transport. Link

Developing Economies

  • World Bank. (2021). World Development Report: Data for Development. Link
  • United Nations Development Programme (UNDP). (2020). Human Development Report. Link

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