NAEPHigh School Economics Released Items: Easy-Questions-Keys-Classifications 2006

NAEPHigh SchoolEconomics

2006 Released Items

Easy Difficulty

The released items in this document appeared on the 2006 NAEP Economics Assessment and were categorized as easy in difficulty. There are a total of 15 items.

Contents

Items………………………………………………………………………………………..Pages 2 - 16

Answer Keys……………………………………………………………………………….Pages 17 - 22

Content Area Descriptions………………………………………………………………..Pages 23 - 24

Cognitive Domain Descriptions………………………………………………….……….Page25

1. / If there were a decrease in the worldwide production of oil, which of the following
would most likely occur?
A) / Global consumption of oil would increase.
B) / Economic growth in oil-importing countries would decrease.
C) / International spending on research into alternative energy sources would decrease.
D) / Global exploration for new oil reserves would decrease.
2. / Mary and Leticia are employed at a local company. Leticia has decided to put part
of her pay each week in a retirement savings program. Mary has decided not to
and spends the money instead.
Compare the short-term economic effects of these decisions on Mary and Leticia.
Compare the long-term economic effects of these decisions on Mary and Leticia.
What factors might explain why Mary’s and Leticia’s choices were different?
3. / What is most likely to happen when consumers increase their purchases of goods
and services?
A) / Businesses will increase production, and workers will receive more income.
B) / Businesses will increase production, and workers will receive less income.
C) / Businesses will decrease production, and workers will receive more income.
D) / Businesses will decrease production, and workers will receive less income.
4. / Which of the following best describes why the price of wheat might rise
following a poor wheat harvest?
A) / The demand for wheat has decreased.
B) / The demand for wheat has increased.
C) / The supply of wheat has decreased.
D) / The supply of wheat has increased.
5. / Which of the following is the most likely economic explanation for why a local
restaurant that is busy and has many loyal customers could go out of business?
A) / The restaurant is spending too little on advertising.
B) / The restaurant is paying too little for rent and food.
C) / The restaurant has more customers than it needs.
D) / The restaurant's costs are higher than its revenues.
6. / Auto dealers begin to offer new cars for sale with no down payment required and
an interest rate of 0 percent. Which of the following is most likely to occur?
A) / Sales of new cars will decrease.
B) / More consumers will buy new cars.
C) / More people will use public transportation.
D) / Prices of used cars will increase.
7. / Luisa has decided to give up her full-time job to go back to school. Identify one
potential economic risk and one potential economic benefit that Luisa might
have considered in making her decision.
8. / A profit-maximizing company that manufactures sports clothing wants to spend
$25 million to have a professional athlete appear in commercials for its clothing.
Which of the following is the best economic reason for the company to spend
the money?
A) / The company sells $25 million worth of clothing per year.
B) / The company could cover the cost of the athlete’s contract with profits from
previous years.
C) / The additional revenue generated by the commercials would be greater than
the additional costs of producing the clothing.
D) / The additional revenue generated by the commercials would be greater than
$25 million plus the costs of producing the additional clothing.
9. / Because Country A has no domestic sources of wood, it imports all its wood from
wood-producing countries. If the price of wood in wood-producing countries rises
substantially, which of the following is most likely to occur?
A) / Country A will import more wood to meet rising demand.
B) / Country A will impose a tariff on wood imports.
C) / Housing prices in Country A will increase as wood imports become
more expensive.
D) / Profits in other wood-producing countries will increase because of
increased exports to Country A.
10. / Other than wages, what are two issues commonly addressed by collective
bargaining between labor unions and employers?
A) / Amount of stock to issue and selection of union leaders
B) / Corporate image and company location
C) / Fringe benefits and work rules
D) / Selection of corporate leaders and advertising
11. / Tom has $1,000 that he can either spend now or deposit into a bank account.
The account pays a fixed rate of interest per year and does not allow withdrawal
for two years. List two economic factors that Tom should consider in making
his decision.
1)
2)
12. / Which of the following is true of people with poor credit histories?
A) / They will earn higher rates of interest on savings accounts than people with
good credit histories.
B) / They will earn lower rates of interest on savings accounts than people with
good credit histories.
C) / They will be charged higher rates of interest on loans than people with good
credit histories.
D) / They will be charged lower rates of interest on loans than people with good
credit histories.
13. / Recently, the hourly wage that parents are willing to pay babysitters increased
dramatically. Higher pay will most likely cause which of the following changes in
how babysitters divide their out-of-school time between babysitting and other
activities?
Time Spent
Babysitting / Time Spent
on Other Activities
A) / No change / Decrease
B) / Increase / Decrease
C) / Decrease / No change
D) / Increase / Increase
14. / James borrows $10,000 from the bank. By the time the loan is repaid, James has
paid the bank $10,400. What does the additional $400 represent?
A) / Inflation rate
B) / Purchasing power of money
C) / Interest
D) / Investment
15. / When people’s incomes increase, the demand for roses and the price of roses are
most likely to change in which of the following ways?
Demand for Roses / Price
A) / Decrease / Decrease
B) / Decrease / Increase
C) / Increase / Decrease
D) / Increase / Increase

Question 1

Key
1. / If there were a decrease in the worldwide production of oil, which of the following
would most likely occur?
A) / Global consumption of oil would increase.
/ B) / Economic growth in oil-importing countries would decrease.
C) / International spending on research into alternative energy sources would decrease.
D) / Global exploration for new oil reserves would decrease.

Content Area: The International Economy
Cognitive Levels: Applying
Question 2

Scoring Guide
Score & Description
Superior
Response offers an acceptable (A) short-term comparison, (B) long-term comparison, and (C) explanation of why the two women might have made different choices.
Satisfactory
The response has two of the three parts listed above.
Minimal
The response has one of the three parts listed above.
Incorrect
The response makes no relevant comparative statement.

Content Area: The Market Economy
Cognitive Levels: Reasoning
Question 3

Key
3. / What is most likely to happen when consumers increase their purchases of goods
and services?
/ A) / Businesses will increase production, and workers will receive more income.
B) / Businesses will increase production, and workers will receive less income.
C) / Businesses will decrease production, and workers will receive more income.
D) / Businesses will decrease production, and workers will receive less income.

Content Area: The National Economy
Cognitive Levels: Applying
Question 4

Key
4. / Which of the following best describes why the price of wheat might rise
following a poor wheat harvest?
A) / The demand for wheat has decreased.
B) / The demand for wheat has increased.
/ C) / The supply of wheat has decreased.
D) / The supply of wheat has increased.

Content Area: The Market Economy
Cognitive Levels: Applying
Question 5

Key
5. / Which of the following is the most likely economic explanation for why a local
restaurant that is busy and has many loyal customers could go out of business?
A) / The restaurant is spending too little on advertising.
B) / The restaurant is paying too little for rent and food.
C) / The restaurant has more customers than it needs.
/ D) / The restaurant's costs are higher than its revenues.

Content Area: The Market Economy
Cognitive Levels: Applying
Question 6

Key
6. / Auto dealers begin to offer new cars for sale with no down payment required and
an interest rate of 0 percent. Which of the following is most likely to occur?
A) / Sales of new cars will decrease.
/ B) / More consumers will buy new cars.
C) / More people will use public transportation.
D) / Prices of used cars will increase.

Content Area: The Market Economy
Cognitive Levels: Knowing

Question 7

Scoring Guide
Score & Description
Correct
The response gives one potential economic risk and one potential economic benefit.
Partially Correct
The response gives either one potential economic risk OR one potential economic benefit.
Incorrect
The response gives no acceptable economic risk or benefit.

Content Area: The Market Economy
Cognitive Levels: Applying
Question 8

Key
8. / A profit-maximizing company that manufactures sports clothing wants to spend
$25 million to have a professional athlete appear in commercials for its clothing.
Which of the following is the best economic reason for the company to spend
the money?
A) / The company sells $25 million worth of clothing per year.
B) / The company could cover the cost of the athlete’s contract with profits from
previous years.
C) / The additional revenue generated by the commercials would be greater than
the additional costs of producing the clothing.
/ D) / The additional revenue generated by the commercials would be greater than
$25 million plus the costs of producing the additional clothing.

Content Area: The Market Economy
Cognitive Levels: Reasoning
Question 9

Key
9. / Because Country A has no domestic sources of wood, it imports all its wood from
wood-producing countries. If the price of wood in wood-producing countries rises
substantially, which of the following is most likely to occur?
A) / Country A will import more wood to meet rising demand.
B) / Country A will impose a tariff on wood imports.
/ C) / Housing prices in Country A will increase as wood imports become
more expensive.
D) / Profits in other wood-producing countries will increase because of
increased exports to Country A.

Content Area: The International Economy
Cognitive Levels: Reasoning
Question 10

Key
10. / Other than wages, what are two issues commonly addressed by collective
bargaining between labor unions and employers?
A) / Amount of stock to issue and selection of union leaders
B) / Corporate image and company location
/ C) / Fringe benefits and work rules
D) / Selection of corporate leaders and advertising

Content Area: The Market Economy
Cognitive Levels: Knowing
Question 11

Scoring Guide
Score & Description
Correct
The student lists at least two of the factors listed below.
- The inflation rate estimated for the next two years
- The interest rate paid on the savings account
- The uses to which Tom could put the $1,000 if it is not put into savings
- The tax liability associated with earned interest
- Alternative investments, such as stocks and bonds
- Concern about the risks associated with investments
- Need for the money within the two year time horizon
- The compounding of interest
- Opportunity cost
- Need for additions to wealth for retirement or other purposes
- Concern for future expenses
- Consider penalty fee for early withdrawal
Partially Correct
The student lists one factor.
Incorrect
The student does not suggest any factors to be considered in the decision.

Content Area: The Market Economy
Cognitive Levels: Applying

Question 12

Key
12. / Which of the following is true of people with poor credit histories?
A) / They will earn higher rates of interest on savings accounts than people with
good credit histories.
B) / They will earn lower rates of interest on savings accounts than people with
good credit histories.
/ C) / They will be charged higher rates of interest on loans than people with good
credit histories.
D) / They will be charged lower rates of interest on loans than people with good
credit histories.

Content Area: The National Economy
Cognitive Levels: Knowing
Question 13

Key
13. / Recently, the hourly wage that parents are willing to pay babysitters increased
dramatically. Higher pay will most likely cause which of the following changes in
how babysitters divide their out-of-school time between babysitting and other
activities?
Time Spent
Babysitting / Time Spent
on Other Activities
A) / No change / Decrease
/ B) / Increase / Decrease
C) / Decrease / No change
D) / Increase / Increase

Content Area: The Market Economy
Cognitive Levels: Applying

Question 14

Key
14. / James borrows $10,000 from the bank. By the time the loan is repaid, James has
paid the bank $10,400. What does the additional $400 represent?
A) / Inflation rate
B) / Purchasing power of money
/ C) / Interest
D) / Investment

Content Area: The National Economy
Cognitive Levels: Knowing
Question 15

Key
15. / When people’s incomes increase, the demand for roses and the price of roses are
most likely to change in which of the following ways?
Demand for Roses / Price
A) / Decrease / Decrease
B) / Decrease / Increase
C) / Increase / Decrease
/ D) / Increase / Increase

Content Area: The Market Economy
Cognitive Levels: Applying

Content Area
The Market Economy
Content area includes
  • the relevance of limited resources,
  • how individuals and institutions make and evaluate decisions,
  • the role of incentives,
  • how buyers and sellers interact to create markets,
  • how markets allocate resources, and
  • the economic role of government in a market economy.
Economically literate grade 12 students are able to identify what tradeoffs they face—what they gain and what they give up when they consider alternatives and make choices. Doing so informs their decisions, helping them choose alternatives that promote their goals as consumers, producers, savers, investors, and citizens. They can identify incentives that affect people's behavior and explain how incentives affect their own behavior. In addition, these students can
  • describe how the interaction of buyers and sellers in markets influences prices and output levels;
  • describe the likely effects of plans for education, training, and career options on future earnings and can identify the risks, returns, and other characteristics of entrepreneurship that bear on its attractiveness as a career; and
  • describe the roles of economic institutions, such as legal systems, private property, labor unions, and corporations.

The National Economy
Content area includes
  • the concepts, terminology, and data used to identify and describe inflation, unemployment, output, and growth;
  • the factors that cause changes in those conditions;
  • the role of money and interest rates in an economy; and
  • the mechanics and the appropriate uses of Federal Reserve monetary policies and federal government fiscal policies.
Economically literate grade 12 students are able to describe how economies use different systems of allocating goods and services and can compare the benefits and the costs of different methods. Students can identify the various economic roles that governments play as providers of goods and services. In addition, economically literate students can
  • explain the role of money in an economy and identify interest rates as the prices of borrowing or lending money;
  • give examples of situations in which they might pay or receive interest and how they would react to changes in interest rates;
  • identify the effects of technological change and investment on gross domestic product;
  • explain the function of taxes and how taxes may redistribute income;
  • interpret media reports about current economic conditions and explain how these conditions can influence decisions made by consumers, producers, and governments;
  • make informed decisions by anticipating the consequences of inflation and unemployment; and
  • explain the macroeconomic policies of the federal government and the Federal Reserve System, under what conditions policy decisions are likely to change, and the effects of those changes on themselves and others.

The International Economy
Content area includes
  • the reasons for individuals and businesses to specialize and trade;
  • the rationale for specialization and trade across international borders; and
  • the comparison of the benefits and costs of that specialization and resulting trade for consumers, producers, and governments.
Economically literate grade 12 students are able to explain how voluntary exchange, whether in a domestic or an international market, is undertaken because both parties in the exchange expect to benefit. Students can explain how they benefit themselves and others by developing special skills and strengths. They are able to negotiate exchanges and identify the gains to themselves and others.
Economically literate students can also
  • compare the benefits and costs of policies that alter trade barriers between nations, such as tariffs and quotas;
  • identify who bears those costs and who receives the benefits;
  • explain why exchange rates change and can predict the effects of those changes on themselves and others; and
  • explain how investment, technological change, education, and incentive structure contribute to differences in economic growth and standards of living among countries.

Cognitive Levels
Knowing
Measures students' abilities to identify and recall information and to recognize economic terms and concepts. Questions in the Knowing category asked students to
  • recognize and recall information and concepts, and
  • interpret data and information to identify events or trends.

Applying
Measures students' abilities to describe or explain the relationship between information (data, summaries, headlines, problems, and scenarios) and economic concepts. Items in the Applying category asked students to
  • restate an economic concept in their own words,
  • interpret data and information to identify events or trends and explain the cause,
  • analyze a given scenario or event that requires only one step in the analysis, and
  • apply or use a concept when the concept is specified.

Reasoning
Measures students' ability to use information and economic concepts accurately to solve problems, evaluate issues, and interpret situations. Items in the Reasoning category asked students to
  • interpret data to identify an event or a trend, explain the cause, and recommend policy;
  • apply or use a concept when the concept is not specified;
  • apply more than one concept when one or more concepts are specified; and
  • perform a multiple-step analysis on a given scenario or event.

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