Name: Date:
Graded Assignment
Semester Test Part 2: U.S. and Global Economics
Answer the following 10 questions based on what you have learned this semester. Each question is worth 10 points, for a total of 100 points.
(10 points)
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1. Describe the circular flow model of the free-market system.
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2. How do consumers use cost-benefit analysis? Why do consumers make different decisions using this process?
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3. Name two different market structures. Describe how and why they each have a different competitive situation.
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4. What is the Law of Supply and Demand? Explain how increases and decreases in supply and demand affect prices.
(10 points)
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5. What is the business cycle? What causes changes from one phase of the business cycle to another?
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6. Explain the different investment options someone with a high level of risk aversion might choose. What are the possible investment goals for this person?
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7. What are tariffs? What are some of the harmful effects of tariffs?
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8. Give an example of a public good and describe why it's a public good. Should the government provide this good? Why or why not?
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9. What is globalization? Why does globalization benefit some countries more than others?
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10. There are a number of organizations designed to regulate the global economy and assist individual nations in the global economy. List and describe two such organizations.
1. The circular flow model of the free-market system shows the flow of goods and services between households and businesses. Households provide labor and receive income, which is then used to purchase goods and services from businesses. Businesses use the income to pay for resources and produce goods and services, creating a continuous cycle of production and consumption.
2. Consumers use cost-benefit analysis to weigh the costs and benefits of different choices before making a decision. Consumers may make different decisions using this process because they have different preferences, priorities, and circumstances that influence their choices.
3. Two different market structures are perfect competition and monopoly. In perfect competition, there are many small firms competing with identical products, leading to price competition. In contrast, a monopoly has one firm dominating the market with no close substitutes, allowing the firm to set prices and limit competition.
4. The Law of Supply and Demand states that prices will adjust to bring the quantity supplied and the quantity demanded into balance. Increases in supply or decreases in demand will lower prices, while decreases in supply or increases in demand will raise prices.
5. The business cycle is the fluctuations in economic activity over time, including periods of expansion, peak, contraction, and trough. Changes from one phase to another are caused by various factors like changes in consumer spending, business investment, government policies, and external shocks.
6. Someone with a high level of risk aversion might choose low-risk investment options such as bonds, treasury bills, or certificates of deposit. Possible investment goals for this person could include capital preservation, income generation, or retirement planning.
7. Tariffs are taxes on imported goods, making them more expensive for consumers and protecting domestic industries from foreign competition. Some harmful effects of tariffs include higher prices for consumers, reduced competitiveness for businesses, and potential trade wars with other countries.
8. An example of a public good is national defense, which benefits all citizens and cannot be easily excluded from anyone's consumption. The government should provide this good because individual consumers would not voluntarily pay for the full costs needed to provide national defense.
9. Globalization refers to the increased interconnectedness and interdependency of countries in the world economy. Globalization benefits some countries more than others due to differences in resource endowments, technological capabilities, market access, and government policies.
10. Two organizations designed to regulate the global economy and assist individual nations are the International Monetary Fund (IMF) and the World Trade Organization (WTO). The IMF provides financial assistance and policy advice to member countries facing economic crises, while the WTO sets rules for international trade and resolves disputes between member countries.