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Practice Test Answers

20 verified answers
1
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Which best describes a regressive tax?

A
a tax that charges an equal percentage to all
B
a tax that charges earners based on their professions
C
a tax that charges low-income earners a lower percentage than high-income earners
D
a tax that charges high-income earners a lower percentage than low-income earners
2
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Which best describes a difference between the views of Milton Friedman and John Maynard Keynes on the economy?

A
Friedman said that fiscal policy should be used to influence aggregate demand, while Keynes believed the best approach was monetary policy.
B
Keynes believed the economy was too complicated to think of aggregates, while Friedman said higher aggregate demand could solve issues.
C
Friedman said that monetary policy should be used to influence aggregate demand, while Keynes believed the best approach was fiscal policy.
D
Keynes believed in little government intervention in the economy, while Friedman said government should play an active role.
3

An economy that balances government intervention with free enterprise is known as a

A
regulatory agency.
B
monopoly.
C
mixed market.
D
commission.
4

What part does interest play in deficit spending?

A
Interest is not a factor when a government’s budget is in deficit.
B
Governments must pay interest on money they borrow when they take on debt.
C
Governments may charge foreign countries interest when they borrow money.
D
Citizens must pay interest when their governments borrow money.
5

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

A
the labor unions were created by workers and made up of workers.
B
the government required all labor unions to promote workplace reform.
C
the top factories were run by owners who wanted to retain their workers.
D
the government shut down factories that did not improve work conditions.
6

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

A
Government regulations ensure that everyone has the freedom to shop for the best deals.
B
Government oversight of business gives people freedom to shop for the best deals.
C
People are free to shop for the best price on products because there is open competition.
D
People are free to shop around for products, but manufacturers dictate what is available.
7

Expansionary spending takes place when a government makes the decision to

A
raise spending to stimulate the economy.
B
raise taxes to balance its budget.
C
put a freeze on the number of its employees.
D
raise taxes to run a budget surplus.
8

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
9

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

A
jobs for women factory workers.
B
equal pay for owners and workers.
C
a ban on child factory workers.
D
more jobs for untrained workers.
10

When a government decides to limit the number of goods that can be sold to another nation, that government is creating

A
monetary policy.
B
fiscal policy.
C
regulatory policy.
D
trade policy.
11

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

A
to take advantage of little government oversight.
B
to move into a more favorable tax bracket.
C
to reduce the number of responsibilities.
D
to make it easier to raise funds for expansion.
12

Which of these regulations is established at the federal level?

A
the types of goods a market can sell
B
the requirements employees must meet
C
the hours a business can stay open
D
the pay for minimum-wage employees
13

The development of many new businesses helps limit

A
taxation.
B
unemployment.
C
risk.
D
revenue.
14

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 hire more labor to compensate for raw materials.
C
The sellers will provide high-quality products at the same price.
D
The sellers will invest more capital to compensate for raw materials.
15

Articles of partnership establish

A
how businesses can raise capital.
B
what is included in a charter.
C
what business taxes are paid.
D
how profits and losses are divided.
16

Which group does the Fed serve?

A
financial institutions
B
government bodies
C
bankers
D
consumers
17

The government of Country C has passed a law protecting the physical safety of factory workers. This is an example of

A
monetary policy.
B
supply and demand.
C
regulatory policy.
D
fiscal policy.
18

Which best describes why governments collect taxes?

A
to fund government programs
B
to control the value of currency
C
to keep the government running
D
to ensure surplus funds
19

Successful entrepreneurs contribute to the economy by

A
expanding markets.
B
encouraging free trade.
C
becoming wealthy.
D
creating business strategies.
20

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 invest more in growing the business.
C
It helps businesses to monopolize the market.
D
It helps businesses to promote unfair business practices.

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