Government and the Market Assessment

What is a market economy?

• An economy fully controlled by the government

• An economy based on barter and trade

• An economy where supply and demand determine prices and production

• An economy that only includes agriculture

Who are considered consumers in a market economy?

• People who regulate trade

• People who create goods

• People who purchase and use goods and services

• People who manage factories

What do producers do in the economy?

• Make laws

• Buy goods and services

• Create goods or offer services

• Set interest rates

What does the term "profit" mean?

• The total cost of production

• The financial gain from selling goods or services

• The amount of money paid in taxes

• The cost of labor

Why is competition important in a market economy?

• It prevents consumers from spending

• It reduces the quality of goods

• It leads to lower prices and better quality

• It allows one business to control the market

What is opportunity cost?

• The money you save

• The total price of all alternatives

• The value of the next best alternative when a choice is made

• The interest paid on loans

What is the federal budget?

• A. A list of all government employees

• B. A plan outlining expected government income and spending

• C. The value of all government properties

• D. The interest paid on loans

What is mandatory spending?

• Money spent on education

• Spending decided yearly by Congress

• Expenditures required by law

• Optional purchases made by the military

Which of the following is an example of discretionary spending?

• Social Security

• Medicare

• Defense and education funding

• Unemployment insurance

What is a budget deficit?

• When the government earns more than it spends

• When income and expenses are equal

• When the government spends more than it earns

• When only state governments borrow money