Name: _____________________
Date: _____________________
Period: _____________________
Economics Practice Worksheet
Directions: Working with one (1) other partner, answer each question in this packet.
Use the front page's list of definitions of economic terms to help you understand what
each question is asking you.
Consumer: Someone who buys things in an economy.
Tax: A charge the government levies on people and businesses in order to pay for
government services.
Goods & Services: Manufactured products and services that can be bought and sold in
an economy by consumers. A car and a haircut are both examples of goods and services.
Loan: Banks can offer individuals a loan, which is a sum of money that has to be payed
back at a later day. Loans typically come with an interest rate.
Interest Rate: The interest rate is a set percentage % on a loan that adds that adds an
additional amount of money to the loan that needs to be paid back. For example, a loan
of $100 with an interest rate of 5% means that the person receiving that loan will have to
pay back $100 + $5 ($105) when the loan comes due.
Command Economy: This is an economy where the government decides what will be
produced and traded. Businesses are controlled by the government.
Market Economy: This is an economy where individuals and private businesses decide
what will be produced and bought/sold. Businesses are privately-owned by individuals.
Mixed Economy: This is an economy that combines elements of the Command and
Market Economy systems. Businesses may be owned by private individuals and the
government.
Traditional Economy: This is an economy based on “cultural mores” or tradition.
Imports: All goods brought into a country, bought from another country.
Exports: All goods sent out of a country, sold to another country.
Federal Reserve: A private bank that is in charge of printing United States currency
(dollars).
Capitalism
 Market Economy
 Encourages production through
competition between private businesses
 Typically found in Democracies
Communism
 Command Economy
 Encourages production through
government ownership of businesses
 Communist states are typically
dictatorships.
1)In a certain country, decisions regarding production and consumption of goods are based upon
customs, beliefs, rituals, and habits. Over time, the economic system changes to one in which
production decisions are based on competition and consumer choice.
How has the economic system of this country changed?
A. from a mixed economy to a command economy
B. from a command economy to a mixed economy
C. from a traditional economy to a market economy
D. from a market economy to a traditional economy
2)What would be the expected effect on consumer spending and on the unemployment rate if the
United States government were to increase personal income tax rates?
Write your answer in the Answer Document. (2 points)
3)In a certain country, all decisions concerning the production of goods and services are made by the
government. However, following a political revolution, a new economic system is set up in which some
decisions regarding production of goods and services are made by the government and others are made
by individuals and private companies.
How has the economy of this country changed?
A. from a mixed economy to a market economy
B. from a command economy to a mixed economy
C. from a market economy to a traditional economy
D. from a traditional economy to a command economy
4)What was a key reason for the creation of the Federal Reserve System?
A. to encourage exports
B. to increase tax revenues
C. to reduce budget deficits
D. to promote economic stability
5)The United States fulfilled one of its imperialist ambitions in the early 20th century by acquiring land
to build the Panama Canal. State two reasons (political and/or economic) why U. S. imperialists wanted
to build the canal.
Write your answer in the Answer Document. (2 points)
6)U.S. government enforcement of environmental regulations helps reduce health problems related to
environmental pollution.
How does this help promote economic growth and stability?
A. It decreases the size of the available workforce.
B. It creates new productive resources.
C. It reduces the cost of raw materials for manufacturers.
D. It lowers health care costs for individuals and businesses.
7)One way the Federal Reserve System seeks to influence the U.S. economy is by raising or lowering
the rate of interest (discount rate) that member banks must pay to borrow money from the Federal
Reserve.
• Considering that the inflation rate rose significantly from 1976 to 1980, identify the change
(increase or decrease) the Federal Reserve System could have made in the discount rate to
reverse that trend.
• Describe the expected impact this change in the discount rate would have had on:
� consumer spending
� business spending
• Explain why this change in the discount rate would produce the desired effects on spending.
Write your answer in the Answer Document. (4 points)
8)In determining what to produce, how do market economies typically respond to high consumer
for a product?
A. The government regulates the price of the product.
B. Private companies increase production of the product.
C. The government sets production quotas until the demand is met.
D. Private companies and the government work together to reduce demand.
9)In a command economy, the question of what goods to produce is primarily determined by;
A. cultural traditions.
B. decisions by individuals.
C. government plans.
D. corporate policies.
demand
10)Economic systems answer the question of how goods and services are produced. What is one way a
country could change from a command economy to a market economy?
A. if the government takes control of family-owned farms
B. if privately owned banks become subject to stricter regulation
C. if agricultural and factory workers are required to join labor unions
D. if industries that had been owned by the government become privately owned
11)How did the U.S. government’s role in the economy change as a result of the Great Depression?
A. The federal government had a diminished role in regulating economic activity.
B. The federal government maintained the role it had in economic matters before the Great
Depression.
C. The federal government expanded its role in regulating economic activity and
promoting economic growth.
D. The federal government transferred its role in economic affairs over to the state governments
12)In order to stimulate the economy, the United States government lowers personal income tax rates.
Why would this action be expected to promote economic growth?
A. Businesses would be required to hire more employees.
B. Manufacturers would have to pay more for raw materials.
C. The government would be less likely to engage in deficit spending.
D. Consumers would have more money available to spend on goods and services.
13)Ecuador has an ideal climate for growing bananas, whereas the United States would have a difficult
time growing them. In order to help U.S. consumers of bananas, the United States would likely:
A. increase the cost of U.S. Goods traded with Ecuador.
B. eliminate the tariff on bananas imported from Ecuador.
C. put an excise tax on bananas grown in the United States.
D. discourage world competition for the U.S. banana market
14)Economies must address how to produce goods and services. In the economy of a certain country,
some factories are owned by individuals and private companies, and other factories are owned and
controlled by the government.
What type of economy does this country have?
A. mixed
B. market
C. traditional
D. command
15)If the U.S. government wanted to encourage businesses to hire more employees, would the
government raise taxes or lower taxes on businesses? Explain your answer. Write your answer in the
Answer Document. (2 points)