Unit 8: Economics and Government Policy

What is the primary focus of fiscal policy?

• Controlling inflation

• Managing government spending and taxation

• Regulating interest rates

• Balancing trade deficits

Which economic system is characterized by private ownership and free markets?

• Communism

• Socialism

• Capitalism

• Command economy

Define opportunity cost in the context of economic decision-making.

• The total cost of all resources used

• The benefit of the next best alternative foregone

• The monetary cost of a decision

• The time taken to make a decision

How does a mixed economy differ from a command economy?

• A mixed economy has no government intervention

• A command economy allows for private enterprise

• A mixed economy combines private and public sector roles

• A command economy is based on free market principles

Explain how inflation affects purchasing power.

• Increases the value of money

• Decreases the value of money

• Has no effect on the value of money

• Stabilizes the value of money

Analyze the opportunity costs and benefits of a government decision to increase taxes on luxury goods.

• Opportunity cost: Reduced government revenue; Benefit: Increased luxury consumption

• Opportunity cost: Decreased luxury consumption; Benefit: Increased government revenue

• Opportunity cost: Increased luxury consumption; Benefit: Decreased government revenue

• Opportunity cost: Increased government revenue; Benefit: Decreased luxury consumption

Which of the following best describes a free market?

• Government controls all economic activities

• Prices are determined by supply and demand

• All businesses are owned by the state

• Trade is restricted by tariffs and quotas

Evaluate the effects of a recession on employment and production.

• Employment increases, production decreases

• Employment decreases, production increases

• Both employment and production decrease

• Both employment and production increase

What is the primary goal of monetary policy?

• To regulate government spending

• To control the money supply and interest rates

• To set tax rates

• To manage international trade

How does a command economy allocate resources?

• Through market forces

• Based on consumer preferences

• By government planning and directives

• Through private enterprise decisions