Economics Review Game Unit 3

Why are U.S. dollars considered money?

• They are printed on paper or minted as coins.

• They are backed by government-owned gold or silver held in vaults.

• Their value rises and falls with the economy.

• By law, they must be accepted as a means of payment.

Answer explanation

By law, U.S. dollars must be accepted as a means of payment, which is why they are considered money.

Arjun is learning about economics and asks why gold and silver historically became regarded as money. Which of these best explains that?

• They were rare and did not decay.

• They could be shaped into jewelry.

• They were easy to store in bank vaults.

• They came from mines owned by rulers.

Answer explanation

Gold and silver historically became regarded as money because they were rare and did not decay, making them valuable and reliable forms of currency.

The main function of a bank is to bring together

• risk and reward.

• cash and currency.

• savers and borrowers.

• officers and customers.

Answer explanation

The main function of a bank is to bring together savers and borrowers, allowing savers to earn interest on their savings while providing funds for borrowers to use.

Michael is studying economics and wants to know: Who are the primary customers of the Federal Reserve?

• businesses

• governments

• individuals

• private banks

Answer explanation

The primary customers of the Federal Reserve are private banks, as they interact directly with the Federal Reserve for various financial services and transactions.

Imagine Sophia decides to increase her personal savings rather than spending her monthly bonus. How does this action help the economy grow?

• It results in Sophia spending less.

• It motivates Sophia's family to make a budget.

• It provides funds for business investment.

• It causes manufacturers to lower their prices.

Answer explanation

Increasing personal savings provides funds for business investment, which in turn helps the economy grow by stimulating economic activities and creating job opportunities.

Grace is studying banking regulations and wants to know which institution determines what fraction of deposits a bank must set aside to be available for customer withdrawals. Who should she ask?

• Federal Reserve System

• New York Stock Exchange

• Securities and Exchange Commission

• Federal Deposit Insurance Corporation

Answer explanation

Grace should ask the Federal Reserve System as they determine what fraction of deposits a bank must set aside for customer withdrawals.

Which form of business organization is most common?

• partnership

• corporation

• business franchise

• sole proprietorship

Answer explanation

The most common form of business organization is a corporation.

Avery and Rohan are considering transforming their individual businesses into a partnership. One advantage of forming a partnership over maintaining their sole proprietorships is that a partnership:

• faces less regulation

• avoids double taxation

• can get credit more easily

• has easier decision making

Answer explanation

One advantage of forming a partnership is that it can get credit more easily compared to maintaining sole proprietorships.

Grace is considering joining a local cooperative. What is the main goal of this cooperative?

• to earn its members a profit on investment

• to offer its members low-cost goods or services

• to expand by receiving royalties from its members

• to provide guaranteed employment for its members

Answer explanation

The main goal of the cooperative is to offer its members low-cost goods or services, not to earn a profit, receive royalties, or provide guaranteed employment.

Liam and David are considering turning their partnership business into a corporation. Which of these is a disadvantage of this change?

• loss of control

• continuity issues

• expanded liability

• less management skill

Answer explanation

Choosing to turn their partnership business into a corporation may lead to a loss of control, as decision-making power may become more distributed among shareholders.