Economics Chapter 3 Review

Transcription

1 Name: Class: Date: ID: A Economics Chapter 3 Review Completion Complete each statement. 1. The right of allows people to buy or sell what they choose. 2. A woman has the right of, so she can sign an agreement with her employer to work for one year. 3. People who want to exert influence on policymakers may form an. 4. The government may take private property by, but it must compensate owners. 5. Americans expect their government to set econonomic policy that promotes the. 6. Congress passed that require companies to inform consumers about the products they sell. 7. A bridge is an example of something that is usually provided as a. 8. Public goods are financed by the. 9. The part of the economy that involves transactions between individuals and businesses is the. 10. Someone who does not pay for a good or service but benefits from it anyway is called a. 11. A public good is an example of a. 12. A positive side effect of a public or private good is called a positive. Multiple Choice Identify the choice that best completes the statement or answers the question. Directions: Write the letter of the correct answer. 13. Why has America been referred to as the land of opportunity? a. It provides anyone the possibility of success through hard work. b. It provides jobs for all citizens. c. It provides farmers farmland without levying taxes on the land. d. It provides money for all citizens. 1

2 Name: ID: A 14. What basic principles are fundamental to American free enterprise? a. state-owned property, contracts, voluntary exchange, self-interest b. economic freedom, private property, protection from competition c. open opportunity, private property, contracts, voluntary exchange d. economic freedom, private property, mandatory exchange Main Ideas Directions: Write the letter of the correct answer in the blank provided. 15. In a free enterprise system, what is the most common way that consumers make their desires known to businesses? a. ing or texting the companies b. protesting and boycotting products c. buying or not buying products d. hiring lobbyists to speak for them 16. Which statement best describes the role of government in a free enterprise system? a. It controls all decisions about business activities, including profit levels. b. It forms companies and then allows individual managers to run them. c. It regulates businesses when the public interest is involved. d. It follows a strict policy of laissez-faire. 17. Why is legal equality important to the free enterprise system? a. Ensuring that all businesses have the same legal rights will create competition in the marketplace. b. Making all lawyers obtain the same education will ensure competent legal representation for businesses. c. Protecting legal equality makes sure that all people may decide what legal agreements they want to enter into. d. Guaranteeing all people the same legal rights will maximize human capital on the free market. 18. In what way does the Bill of Rights protect individuals freedom to engage in business activities? a. It recognizes property rights. b. It denies the government the ability to regulate commerce. c. It provides free contracts. d. It provides each industry with a competitive edge. 19. Under a system of voluntary exchange, final decisions are made by a. producers. b. consumers. c. the government. d. free riders. 20. Why has the federal government passed laws requiring businesses to disclose product information to the public? a. to make buyers more knowledgeable and safer b. to make it hard for businesses to make an excess profit c. to make it easier for consumers to own property d. to make it easy for businesses to have good information 2

3 Name: ID: A 21. What is considered a negative effect of government regulations? a. They cut into company profits. b. They stifle competition. c. They cause higher prices for consumers. d. All of the above. Directions: Write the letter of the correct ending in the blank provided. 22. Business cycles occur in free enterprise systems because a. government policy creates cycles. b. the efficiency of workers is not the same from season to season, but fluctuates on a regular basis annually. c. the standard of living is very high. d. economic decisions about factors such as prices, production, and consumption are determined by the market. 23. What is the difference between a business cycle and the day-to-day fluctuations of the stock market? a. Day-to-day fluctuations are more predictable than a business cycle. b. Day-to-day fluctuations have a greater impact on people s finances than a business cycle. c. A business cycle is usually more restricted, whereas day-to-day fluctuations are worldwide. d. A business cycle consists of prolonged fluctuations rather than day-to-day fluctuations. 3

4 Name: ID: A 24. What does this graph show? a. the percentage of jobs lost or gained during that period b. the percent change in cash the federal government has available c. the average percentage of lending rates that most banks offered d. the percent change in total value of American goods and services 25. Based on the graph, which of the following statements best describes the U.S. economy in 2007? a. It experienced slow growth at first, then ended the year with strong, steady growth. b. It experienced strong growth at the beginning of the year, then steady decline. c. It experienced strong growth in the middle of the year. d. It had some slight fluctuations, but was generally strong and growing steadily all year long. 26. You read an article in a news magazine that explains how the economy expanded for several years, and then went into a period of contraction. What is the main subject of this article? a. poverty b. microeconomics c. the business cycle d. voluntary exchange 4

5 Name: ID: A 27. To protect the economy from the vulnerabilities of the business cycle, policymakers try to achieve three main outcomes: high employment, steady growth, and a. technological advancement. b. stability. c. competition. d. work ethic. 28. The federal government monitors and regulates American banks and other financial institutions a. to improve the standard of living for all. b. to keep control over the economy. c. to shield money from the damaging effects of economic downturns. d. to keep prices stable. 29. Policymakers pursue all of the following goals to stabilize the economy except a. high unemployment. b. stable productivity. c. stable prices. d. steady growth. 30. Improved technology helps create a higher standard of living for future generations by a. preventing drastic shifts in general price levels. b. creating specialized jobs for workers. c. reducing the number of unemployed workers d. providing additional goods and services. 31. Why does the government promote technological processes? a. to make the economy stronger and more efficient b. to reduces the economy s dependence on government c. to slow an economy down for a long period of time d. to increase unemployment by making workers unnecessary 32. Why does the government protect inventors and authors by offering them patents and copyrights? a. to encourage free trade b. to promote innovation c. to regulate the business cycle d. to strengthen American culture 33. Something is generally considered to be a public good if a. the private sector could provide the service more efficiently. b. the benefits of the good are greater for government than for society. c. the total benefits to society are greater than the total financial costs. d. taxpayers demand that the government provide the service. 34. Which of the following is the best example of a public good? a. a highway system b. a shopping mall c. a country club d. a movie theater 5

6 Name: ID: A 35. What is critical in determining whether something is produced as a public good? a. whether the market will provide it b. whether the benefits to society are greater than the total cost c. whether the government needs to use tax money to provide it d. whether the benefits to society are limited to the poor 36. You will still be able to get a public broadcasting channel even though you did not contribute to its fundraising campaign. This is an example of a. an in-kind benefit. b. a market failure. c. a negative externality. d. a free-rider problem. 37. Why do public goods demonstrate the limitations of a free market economy? a. They allow consumers to make all of the economic decisions. b. They allow government to make some economic decisions. c. They allow governments to control most economic decisions. d. They prevent consumers from making economic decisions. 38. Private company Big Road Inc. is put in charge of building and running a state s entire road system. The company charges high fees to use its roads and only maintains them in heavily populated areas. Big Road is an example of a a. positive externality. b. public good. c. market failure. d. negative externality. 39. A market failure occurs when a free market is unable to a. distribute resources efficiently. b. provide open opportunity c. meet government regulations. d. encourage innovation. 40. If a student volunteers at a nursing home after school, which of the following might be a negative externality? a. A student might volunteer to spend more time with the residents. b. A student might learn a new skill. c. A student might be unable to work at her part-time job on that afternoon. d. A student would feel good about herself. 41. A new runway has opened up at the airport, and citizens complain to local officials that the noise of the airplanes is disturbing their neighborhood. The noise is an example of a a. positive externality. b. free-rider problem. c. negative externality. d. market failure. 6

7 Name: ID: A 42. Which of the following actions might a free market government take to encourage the development of new technology? a. invest in more technological training for the public b. prohibit companies from using new technology c. require business leaders to increase their use of technology d. discourage use of technology by taxing new inventions 43. What is the government s role in controlling externalities in the American economy? a. Government tries to encourage positive and limit negative externalities. b. Government tries to limit all externalities to stop market failures. c. Government tries to limit positive and encourage negative externalities. d. Government tries to encourage all externalities to increase competition. 44. Various federal, state, and local government programs help raise people s standard of living because a. people living in areas of poverty cannot afford to pay their taxes. b. people want the government to intervene in the market. c. certain groups of people have fewer opportunities to be productive. d. people expect to maintain a high standard of living. "We can never insure one hundred percent of the population against one hundred percent of the hazards... of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age." President Franklin D. Roosevelt, Which of the following programs was President Roosevelt establishing when he spoke these words? a. Temporary Assistance for Needy Families b. Social Security c. War on Poverty d. The New Deal 46. The most common in-kind benefits are a. coupons, food stamps, subsidized housing, and legal aid. b. food giveaways, food stamps, subsidized housing, and legal aid. c. food giveaways, food stamps, housing reimbursements, and legal aid. d. food giveaways, food stamps, subsidized housing, and tuition reimbursements. 47. Which of the following arguments might someone make in support of in-kind benefits? a. Finding affordable housing can help people search for a job. b. Young people should not have to pay money that goes to retirees. c. Worker s compensation helps people get back to work. d. If people cannot afford a lawyer, they should not commit crimes. 7

8 Name: ID: A 48. Each payday, some of your pay is withheld as payroll deductions for Social Security. What happens to the money that is withheld? a. It is redistributed as cash transfers to workers who are injured on the job. b. It is put into an account under your name to earn interest until you retire. c. It is used to provide medical benefits to Americans over 65. d. It is redistributed as cash transfers to retired and disabled people. 49. Jeff and Margaret qualify for Section 8 housing, a subsidized housing program administered by the federal government. What kind of benefit are they receiving? a. cash transfer b. in-kind benefit c. Social Security benefit d. faith-based initiative 50. Health insurance for the elderly, the poor, and the disabled is provided by a. Medicare and Medicaid. b. the unemployment insurance program. c. Worker s Compensation. d. TANF. 51. Education programs make the economy more productive by a. adding to human capital and labor productivity. b. providing more jobs to educators. c. reducing payments to unemployed people. d. reducing injuries on the job. 52. What type of federal program aims to encourage private efforts to fill needs not filled by the government, since the government cannot insure one hundred percent of the population? a. Medicaid and Medicare b. cash transfers c. in-kind benefits d. federal grants Matching a. macroeconomics e. technology b. microeconomics f. obsolescence c. business cycle g. referendum d. gross domestic product (GDP) h. patent 53. a period of macroeconomic expansion followed by a period of contraction 54. the study of economic behavior of small units, such as individuals, families, and businesses 55. the study of the behavior and decision making of entire economies 56. the total value of all final goods and services produced in a particular economy in a year 57. the process used to produce a good or service 8

9 Name: ID: A 58. the process by which older products and processes become out of date a. standard of living e. in-kind benefits b. redistribution f. grant c. poverty threshold g. unemployment insurance d. cash transfers h. welfare 59. an income level below that which is needed to support a household 60. direct payments of money to eligible poor people 61. level of economic well-being 62. government aid to the poor 63. goods and services provided for free or at greatly reduced prices 64. a financial award given by government to a private individual or group to carry out a specific task Short Answer: You MUST answer TWO QUESTIONS for FIVE POINTS EACH. Additional correct answers earn one point of extra credit. Critical Thinking and Writing Directions: Use complete sentences to answer the questions below. 65. What are five basic principles of the U.S. free enterprise system? 66. How do consumers influence the U.S. economy? 67. How does the U.S. government try to encourage innovation in the marketplace? 9

10 Name: ID: A 68. How does the American work ethic affect the U.S. economy? 69. Explain how and why the U.S. welfare system changed in

11 ID: A Economics Chapter 3 Review Answer Section COMPLETION 1. ANS: voluntary exchange PTS: 2 DIF: L3 REF: A.51 OBJ: Describe the role of the consumer in the American economy. NAT: 4.1 TOP: Free Enterprise Voluntary Exchange 2. ANS: free contract PTS: 2 DIF: L3 REF: A.51 OBJ: Describe the role of the consumer in the American economy. NAT: 4.1 TOP: Free Enterprise Free Contract 3. ANS: interest group PTS: 2 DIF: L3 REF: A.52 OBJ: Describe the role of the consumer in the American economy. NAT: 4.1 TOP: Free Enterprise Interest Group 4. ANS: eminent domain PTS: 2 DIF: L3 REF: A.52 OBJ: Identify the constitutional protections that underlie free enterprise. STA: B.1 B.2 TOP: Free Enterprise Eminent Domain 5. ANS: public interest PTS: 2 DIF: L3 REF: A.53 OBJ: Explain why the government may intervene in the marketplace. NAT: STA: F.1 TOP: Free Enterprise Public Interest 6. ANS: public disclosure laws PTS: 2 DIF: L3 REF: A.54 OBJ: Explain why the government may intervene in the marketplace. NAT: STA: F.1 TOP: Free Enterprise Public Disclosure 7. ANS: public good PTS: 2 DIF: L3 REF: A.62 OBJ: Identify examples of public goods. 8. ANS: public sector PTS: 2 DIF: L3 REF: A.63 OBJ: Identify examples of public goods. TOP: Free Enterprise Public Goods TOP: Free Enterprise Public Sector 1

12 ID: A 9. ANS: private sector PTS: 2 DIF: L3 REF: A.63 OBJ: Evaluate how the government allocates some resources by managing externalities. STA: F.1 F.2 TOP: Free Enterprise Private Sector 10. ANS: free rider PTS: 2 DIF: L3 REF: A.64 OBJ: Evaluate how the government allocates some resources by managing externalities. STA: F.1 F.2 TOP: Free Enterprise Free Rider 11. ANS: market failure PTS: 2 DIF: L3 REF: A.65 OBJ: Analyze market failures. TOP: Free Enterprise Market Failure 12. ANS: externality PTS: 2 DIF: L3 REF: A.66 OBJ: Evaluate how the government allocates some resources by managing externalities. STA: F.1 F.2 TOP: Free Enterprise Externalities MULTIPLE CHOICE 13. ANS: A The American tradition of free enterprise allows people to try out their business ideas. PTS: 3 DIF: L3 REF: A.49 OBJ: Define the basic principles of the U.S. free enterprise system. NAT: STA: B.2 TOP: Free Enterprise Opportunity 14. ANS: C The fundamental priciples of the American free enterprise system are the open opportunity, private property rights, voluntary exchange, the profit motive, legal equality, the right of free contract, and competition. PTS: 3 DIF: L3 REF: A.51 OBJ: Define the basic principles of the U.S. free enterprise system. NAT: STA: B.2 TOP: Free Enterprise Principles 15. ANS: C Almost everyone in the free enterprise system is a consumer. Every time consumers choose to buy or not buy products, they send signals to businesses that will adjust their production levels in order to maximize profits. PTS: 3 DIF: L3 REF: A.51 OBJ: Describe the role of the consumer in the American economy. NAT: 4.1 TOP: Free Enterprise Consumers 2

13 ID: A 16. ANS: C The Free Enterprise system is based on the belief that desire for profits will motivate individual choices that help the economy overall. The system works best with little interference from government; however, the government may intervene in the public interest. PTS: 3 DIF: L3 REF: A.51 OBJ: Define the basic principles of the U.S. free enterprise system. NAT: STA: B.2 TOP: Free Enterprise Free Enterprise 17. ANS: D By making sure everyone has the same legal rights, governments allow everyone to participate fully in the free enterprise system. Otherwise, the economy would lose the productivity potential of the group whose rights are limited. PTS: 3 DIF: L3 REF: A.51 OBJ: Identify the constitutional protections that underlie free enterprise. STA: B.1 B.2 TOP: Free Enterprise Legal Equality 18. ANS: A The Fifth Amendment protects private property rights. PTS: 3 DIF: L3 REF: A.52 OBJ: Identify the constitutional protections that underlie free enterprise. STA: B.1 B.2 TOP: Free Enterprise Bill of Rights 19. ANS: B Consumers make decisions in the system of voluntary exchange. PTS: 3 DIF: L3 REF: A.52 OBJ: Describe the role of the consumer in the American economy. NAT: 4.1 TOP: Free Enterprise Voluntary Exchange 20. ANS: A Public disclosure laws are designed to make sure that businesses reveal enough information about their products to enable consumers to make better choices. PTS: 3 DIF: L3 REF: A.54 OBJ: Explain why the government may intervene in the marketplace. NAT: STA: F.1 TOP: Free Enterprise Public Disclosure Laws 21. ANS: D Government regulations can increase costs, stifle competition, and lead to higher prices. PTS: 3 DIF: L3 REF: A.55 OBJ: Identify the constitutional protections that underlie free enterprise. STA: B.1 B.2 TOP: Free Enterprise Government Regulation 22. ANS: D In a free enterprise system, economic decisions are determined by the market. PTS: 3 DIF: L3 REF: A.57 OBJ: Explain why the government tracks and seeks to influence business cycles. NAT: 16.5 STA: F.1 TOP: Free Enterprise Business Cycle 3

14 ID: A 23. ANS: D Unlike the day-to-day ups and downs of the stock market, business cycles are major fluctuations that can last months or even years. PTS: 3 DIF: L3 REF: A.57 OBJ: Explain why the government tracks and seeks to influence business cycles. NAT: 16.5 STA: F.1 TOP: Free Enterprise Business Cycles 24. ANS: D GDP stands for gross domestic product, the total value of all final goods and services produced in a country. The U.S. government tracks this information to follow the business cycle. PTS: 5 DIF: L4 REF: A.57 OBJ: Explain why the government tracks and seeks to influence business cycles. NAT: 16.5 STA: F.1 TOP: Free Enterprise Gross Domestic Product 25. ANS: C Economists consider GDP a major indicator of economic strength. The graph shows only slight GDP growth in the first quarter of 2007, followed by two quarters of strong growth, and then a decline in the last quarter. PTS: 5 DIF: L4 REF: A.57 OBJ: Explain why the government tracks and seeks to influence business cycles. NAT: 16.5 STA: F.1 TOP: Free Enterprise Gross Domestic Product 26. ANS: C The business cycle is the pattern of a period of expansion, or growth, followed by a period of contractions, or decline. PTS: 3 DIF: L3 REF: A.57 OBJ: Explain why the government tracks and seeks to influence business cycles. NAT: 16.5 STA: F.1 TOP: Free Enterprise Business Cycles 27. ANS: B Unstable prices and financial institutions can damage consumer confidence and slow economic growth. PTS: 3 DIF: L3 REF: A.57 OBJ: Describe how the government promotes economic strength. STA: F.1 TOP: Free Enterprise Business Cycles 28. ANS: C The government regulates banks to promote stability by protecting money from fraud and shielding it from the effects of economic downturns. PTS: 3 DIF: L3 REF: A.58 OBJ: Describe how the government promotes economic strength. STA: F.1 TOP: Free Enterprise Government Regulation 29. ANS: A Policymakers do not consider high unemployment to be a goal. PTS: 3 DIF: L3 REF: A.58 OBJ: Describe how the government promotes economic strength. STA: F.1 TOP: Free Enterprise Government 4

15 ID: A 30. ANS: D Improved technology has led to higher productivity and GDP. PTS: 3 DIF: L3 REF: A.59 OBJ: Analyze the factors that increase productivity. TOP: Free Enterprise Technology 31. ANS: A The government promotes technology to increase productivity, efficiency, and competitive advantage for American companies. PTS: 3 DIF: L3 REF: A.59 OBJ: Analyze the factors that increase productivity. TOP: Free Enterprise Technology 32. ANS: B Patents and copyrights are an incentive to innovation because they protect people s right to profit from their creativity in the free market. PTS: 3 DIF: L3 REF: A.61 OBJ: Describe how the government promotes economic strength. STA: F.1 TOP: Free Enterprise Productivity 33. ANS: C Governments provide public goods to help society as a whole. These public goods often reflect non-monetary benefits, such as the value of protecting nature through national parks. PTS: 3 DIF: L3 REF: A.62 OBJ: Identify examples of public goods. TOP: Free Enterprise Public Goods 34. ANS: A The government manages the highway system as a public good because it would be too inefficient and impractical for private companies to manage them. PTS: 3 DIF: L3 REF: A.62 OBJ: Identify examples of public goods. TOP: Free Enterprise Public Goods 35. ANS: B Governments act in the public interest when the benefits outweigh the cost. PTS: 3 DIF: L3 REF: A.63 OBJ: Identify examples of public goods. TOP: Free Enterprise Public Goods 36. ANS: D The free-rider problem is a phenomenon associated with public goods such as public broadcasting. Free riders contribute nothing to the cost of the service, but use it anyway. PTS: 3 DIF: L3 REF: A.64 OBJ: Identify examples of public goods. TOP: Free Enterprise Free-Rider Problem 37. ANS: B The government, not the free market, decides what should be provided as a public good. PTS: 3 DIF: L3 REF: A.65 OBJ: Identify examples of public goods. TOP: Free Enterprise Market Failures 5

16 ID: A 38. ANS: C Big Road is an example of a market failure because the criteria for a properly functioning market do not exist. PTS: 3 DIF: L3 REF: A.65 OBJ: Analyze market failures. TOP: Free Enterprise Market Failures 39. ANS: A The market has failed to distribute resources efficiently because producers cannot provide the good or service at a price consumers can afford. PTS: 5 DIF: L4 REF: A.65 OBJ: Analyze market failures. TOP: Free Enterprise Market Failure 40. ANS: C A negative externality is an unintended negative consequence. PTS: 3 DIF: L3 REF: A.66 OBJ: Evaluate how the government allocates some resources by managing externalities. STA: F.1 F.2 TOP: Free Enterprise Negative Externalities 41. ANS: C Negative externalities are unintentional costs that arise in the course of producing goods and services. The airport is providing a needed service, but is unintentionally disrupting the neighborhood. PTS: 3 DIF: L3 REF: A.66 OBJ: Evaluate how the government allocates some resources by managing externalities. STA: F.1 F.2 TOP: Free Enterprise Externalities 42. ANS: A If technology improves productivity, then it would be encouraged by a government through a service it already provides, such as education. PTS: 3 DIF: L3 REF: A.66 OBJ: Evaluate how the government allocates some resources by managing externalities. STA: F.1 F.2 TOP: Free Enterprise Technology 43. ANS: A Government tries to encourage positive and limit negative externalities using economic policy. PTS: 3 DIF: L3 REF: A.67 OBJ: Evaluate how the government allocates some resources by managing externalities. STA: F.1 F.2 TOP: Free Enterprise Externalities 44. ANS: C As a society, we recognize a responsibility to the disadvantaged. PTS: 3 DIF: L3 REF: A.69 NAT: 16.7 STA: F.1 TOP: Free Enterprise Antipoverty Programs 6

17 ID: A 45. ANS: B In 1935, Roosevelt was signing the Social Security Act into law. PTS: 5 DIF: L3 REF: A.69 NAT: 16.7 STA: F.1 TOP: Free Enterprise Redistribution Programs 46. ANS: B In-kind benefits do not include coupons, housing reimbursements, or tuition reimbursements. PTS: 3 DIF: L3 REF: A.70 NAT: 16.7 STA: F.1 TOP: Free Enterprise Antipoverty Programs 47. ANS: A In-kind benefits include allowing people to rent houses for a lower rent than the market might demand. A supporter of these would argue that having housing can enable people to begin to earn enough money to live without help from the government. PTS: 5 DIF: L4 REF: A.70 OBJ: Explain the U.S. political debate on ways to fight poverty. TOP: Free Enterprise In-Kind Benefits 48. ANS: D Social Security was created during the Great Depression as a cash transfer program to collect money from current workers and redistribute it to people who are no longer in the workforce. PTS: 3 DIF: L3 REF: A.70 NAT: 16.7 STA: F.1 TOP: Free Enterprise Social Security 49. ANS: B Subsidized housing is an in-kind benefit because the government is making a good available at a reduced price by paying part of the rental costs. PTS: 5 DIF: L4 REF: A.70 NAT: 16.7 STA: F.1 TOP: Free Enterprise In-Kind Benefits 50. ANS: A Medicare and Medicaid provide health insurance for the elderly, the poor, and the disabled under the Social Security program. PTS: 3 DIF: L3 REF: A.71 NAT: 16.7 STA: F.1 TOP: Free Enterprise Medicare and Medicaid 51. ANS: A Education adds to human capital and increases the productivity of labor. PTS: 3 DIF: L3 REF: A.71 NAT: 16.7 STA: F.1 TOP: Free Enterprise Education Programs 7

18 ID: A 52. ANS: D Federal grants encourage private efforts to help the needy by giving public money to private groups. PTS: 5 DIF: L4 REF: A.72 OBJ: Describe how the government encourages private efforts to help the needy. STA: F.1 TOP: Free Enterprise Grants MATCHING 53. ANS: C PTS: 2 DIF: L3 REF: A.56 OBJ: Explain why the government tracks and seeks to influence business cycles. NAT: 16.5 STA: F.1 TOP: Free Enterprise Business Cycle 54. ANS: B PTS: 2 DIF: L3 REF: A.56 OBJ: Explain why the government tracks and seeks to influence business cycles. NAT: 16.5 STA: F.1 TOP: Free Enterprise Microeconomics 55. ANS: A PTS: 2 DIF: L3 REF: A.56 OBJ: Explain why the government tracks and seeks to influence business cycles. NAT: 16.5 STA: F.1 TOP: Free Enterprise Macroeconomics 56. ANS: D PTS: 2 DIF: L3 REF: A.57 OBJ: Explain why the government tracks and seeks to influence business cycles. NAT: 16.5 STA: F.1 TOP: Free Enterprise Gross Domestic Product 57. ANS: E PTS: 2 DIF: L3 REF: A.59 OBJ: Analyze the factors that increase productivity. TOP: Free Enterprise Technology 58. ANS: F PTS: 2 DIF: L3 REF: A.59 OBJ: Analyze the factors that increase productivity. TOP: Free Enterprise Technology 59. ANS: C PTS: 2 DIF: L3 REF: A.68 NAT: 16.7 STA: F.1 TOP: Free Enterprise Poverty Threshold 60. ANS: D PTS: 2 DIF: L3 REF: A.69 NAT: 16.7 STA: F.1 TOP: Free Enterprise Antipoverty Programs 61. ANS: A PTS: 2 DIF: L3 REF: A.69 NAT: 16.7 STA: F.1 TOP: Free Enterprise Standard of Living 62. ANS: H PTS: 2 DIF: L3 REF: A.69 NAT: 16.7 STA: F.1 TOP: Free Enterprise Welfare 63. ANS: E PTS: 2 DIF: L3 REF: A.70 NAT: 16.7 STA: F.1 TOP: Free Enterprise Antipoverty Programs 64. ANS: F PTS: 2 DIF: L3 REF: A.72 OBJ: Describe how the government encourages private efforts to help the needy. STA: F.1 TOP: Free Enterprise Government Grants 8

19 ID: A SHORT ANSWER 65. ANS: The most basic principles include profit motive, open opportunity, legal equality, private property, competition, and voluntary exchange. PTS: 5 DIF: L3 REF: A.51 OBJ: Define the basic principles of the U.S. free enterprise system. NAT: STA: B.2 TOP: Free Enterprise Free Market 66. ANS: The most basic principle of our free enterprise system is that consumers have the freedom to make their own economic choices. When they make such choices, they send signals to producers that tell them what products to make and in what quantities. PTS: 5 DIF: L3 REF: A.51 OBJ: Describe the role of the consumer in the American economy. NAT: 4.1 TOP: Free Enterprise Consumers 67. ANS: It funds research and development at universities, produces its own research, and issues patents and copyrights to encourage new inventions and ideas. PTS: 5 DIF: L3 REF: A.59 OBJ: Describe how the government promotes economic strength. STA: F.1 TOP: Free Enterprise Productivity 68. ANS: The American work ethic leads producers to increase their productivity and to produce quality products. The work ethic has been a key ingredient in the country s economic success. PTS: 5 DIF: L3 REF: A.61 OBJ: Analyze the factors that increase productivity. TOP: Free Enterprise Work Ethic 69. ANS: Possible response: Supporters of welfare believe it is needed to help the poor, but critics argue that people become too dependent on it and that welfare discourages productivity. In 1996, Congress reformed welfare to limit how long people could receive payments and to allow states greater control over antipoverty programs. PTS: 7 DIF: L4 REF: A.69 OBJ: Explain the U.S. political debate on ways to fight poverty. TOP: Free Enterprise Welfare 9