AnswersEconomicsPublic and Private Solutions

Practice Test Answers

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1
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Which best describes why governments collect taxes?

A
to control the value of currency
B
to keep the government running
C
to fund government programs
D
to ensure surplus funds
2
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The development of many new businesses helps limit

A
unemployment.
B
taxation.
C
risk.
D
revenue.
3

Which best describes a regressive tax?

A
a tax that charges high-income earners a lower percentage than low-income earners
B
a tax that charges earners based on their professions
C
a tax that charges an equal percentage to all
D
a tax that charges low-income earners a lower percentage than high-income earners
4

Which best explains why a sole proprietor would want a partner?

A
to move into a more favorable tax bracket.
B
to make it easier to raise funds for expansion.
C
to reduce the number of responsibilities.
D
to take advantage of little government oversight.
5

Which describes an example of the economic system known as free enterprise?

A
People are free to shop for the best price on products because there is open competition.
B
Government oversight of business gives people freedom to shop for the best deals.
C
Government regulations ensure that everyone has the freedom to shop for the best deals.
D
People are free to shop around for products, but manufacturers dictate what is available.
6

Articles of partnership establish

A
how businesses can raise capital.
B
what business taxes are paid.
C
what is included in a charter.
D
how profits and losses are divided.
7

Weighing advantages and disadvantages can help a student to

A
evaluate a solution.
B
identify a problem.
C
make a decision.
D
gather information.
8

Which group does the Fed serve?

A
government bodies
B
bankers
C
financial institutions
D
consumers
9

Which best describes a difference between the views of Milton Friedman and John Maynard Keynes on the economy?

A
Keynes believed the economy was too complicated to think of aggregates, while Friedman said higher aggregate demand could solve issues.
B
Friedman said that monetary policy should be used to influence aggregate demand, while Keynes believed the best approach was fiscal policy.
C
Keynes believed in little government intervention in the economy, while Friedman said government should play an active role.
D
Friedman said that fiscal policy should be used to influence aggregate demand, while Keynes believed the best approach was monetary policy.
10

Which body manages the Fed?

A
the Federal Reserve Board
B
the Economic Policy Subcommittee
C
the Appropriations Committee
D
the Federal Open Markets Committee
11

Which statement explains a way how the Securities and Exchange Commission upholds fair business practices?

A
The SEC tries to limit risk in the financial system.
B
The SEC generally oversees banking practices.
C
The SEC makes sure that banks follow federal laws.
D
The SEC generally oversees financial advisers.
12

What part does interest play in deficit spending?

A
Citizens must pay interest when their governments borrow money.
B
Governments may charge foreign countries interest when they borrow money.
C
Governments must pay interest on money they borrow when they take on debt.
D
Interest is not a factor when a government’s budget is in deficit.
13

Among the changes that labor reformers wanted after the Industrial Revolution was

A
more jobs for untrained workers.
B
equal pay for owners and workers.
C
jobs for women factory workers.
D
a ban on child factory workers.
14

Expansionary spending takes place when a government makes the decision to

A
put a freeze on the number of its employees.
B
raise taxes to balance its budget.
C
raise spending to stimulate the economy.
D
raise taxes to run a budget surplus.
15

What happens if a country faces a shortage of raw materials?

A
The sellers will halt the production of the product.
B
The sellers will provide high-quality products at the same price.
C
The sellers will hire more labor to compensate for raw materials.
D
The sellers will invest more capital to compensate for raw materials.
16

How does private ownership of factors of production help businesses?

A
It helps businesses to enjoy profits without growing the business.
B
It helps businesses to monopolize the market.
C
It helps businesses to promote unfair business practices.
D
It helps businesses to invest more in growing the business.
17

Successful entrepreneurs contribute to the economy by

A
creating business strategies.
B
expanding markets.
C
becoming wealthy.
D
encouraging free trade.
18

Labor unions were certain to advocate for the best interests of workers because

A
the government shut down factories that did not improve work conditions.
B
the government required all labor unions to promote workplace reform.
C
the labor unions were created by workers and made up of workers.
D
the top factories were run by owners who wanted to retain their workers.
19

Which is the last step in the problem-solving process?

A
gathering information
B
evaluating the solution
C
weighing disadvantages
D
considering options
20

The EPA tries to balance protecting business interests with protecting

A
consumer products.
B
food.
C
air.
D
medical devices.

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