Unit Nine Reading Questions:

The Government and the Economy

Answer Me!

Name: ______

DUE DATE: ______

Section #1 – Features of the US Economy and Circular Flow

  1. What three groups shares economic decision-making in the United States?
  1. What is capitalism?
  1. Nearly all resources in the United States are ______owned.
  1. What is the difference regarding the consumption of private and public goods/services?

Circular Flow:

  1. The US economy is composed of groups whose economic activities are interdependent, which means…______.
  1. What do individuals do in the economy? (List at least three actions)
  1. What do businesses do in the economy? (List at least two actions)
  1. What does the government do in the economy? (List at least two actions)
  1. What is the difference between a consumer and a producer?

From the image of the balloon at the top of the page for Section 1:

  1. What is an example of a resource that is sold from individuals to businesses?
  1. What is an example of a product that is sold from businesses to individuals?
  1. Where can individuals and businesses save and invest?

Section #2– Business Ownership and Private Financial Institutions

  1. Fill out the chart below with information about business ownership:

Type of Business Ownership / Proprietorship / Partnership
Number of owners
Examples
How long do they exist
How much of the profit can owner(s) keep?
How much of the risk do the owners have to take on?
  1. What is liability?
  1. A corporation is authorized by the law to act as a ______regardless of how many people actually own shares in it.
  1. How do corporations raise large amounts of money?
  1. Can stockholders lose more money than they invested to buy shares? (Can stockholders go into debt from the stocks?)
  1. Out of the three types of businessownership...
  1. Which has the most liability (risk)?
  1. How do you know?
  1. Out of the three types of businessownership...
  1. Which has the least liability (risk)?
  1. How do you know?
  1. Complete the following Scenario: (Note: Not in the Reading)

You and a group of friends decide to open a small tire and alignment car shop. You all split the profits fairly and accordingly but every owner of the shop shares in a portion of the risk if the business falls flat and revenues begin to fail.

  • What kind of business are you apart of? ______
  • How do you know?
  1. Complete the following Scenario: (Note: Not in the Reading)

You decide to buy a local convenience store near your home to make a living. You have no business partners or co-owners. You pay for all of your expenses, keep all of the profits, but you are also responsible for all liability and risk.

  • What kind of business are you apart of?______
  • How do you know?
  1. Complete the following Scenario: (Note: Note in the Reading)

You buy $10,000 in stock for an international Hydrogen Cell Battery Company that provides energy cells for electric vehicles. They have overwhelming profits but occasionally have losses as well. You are a member of many stockholders.

  • What kind of business are you apart of?______
  • How do you know?

Private Financial Institutions

  1. What is a PFI?
  1. List the three types of private financial institutions (PFI).
  1. What do all PFI’s want to do?

Section #3: Providing for Public and Private Goods

  1. Who provides public goods and services?
  1. What are examples of public goods and services?
  1. How does the government pay for these items?
  1. What amendment allows Congress to tax incomes?
  1. The Reading Packet said “Consumption of public goods is subject to the non-exclusion principle.” What do you believe this means?
  1. Why doesn’t the Private Sector provide public goods?
  1. Complete the following chart:

Type of Tax / Characteristics
Income Tax
Sales Tax
Property Tax

Section #4– The United States Government and Money

What is money?

  1. What are the three functions of money?
  2. Function 1: ______
  3. Function 2: ______
  4. Function 3: ______
  1. What were some of the earliest types of money?
  1. Why do you think money has evolved over the course of human history? (Note: This is NOT in the reading)
  1. What are the three types of money used in the United States today?
  2. ______, b. ______, c. ______
  1. If a $100.00 bill only costs a few cents to create, why do we value the $100.00 bill?
  1. If a $100.00 bill only costs a few cents to create, why doesn’t the government just print more and give them to the people so they have more money? (Note: This is NOT in the reading and you might not be able to answer it, wait until the next two lessons and come back to this question)

Reading Section #5: The Federal Reserve System

  1. Complete the chart below:

What is the Fed / Why was the Fed created?
  1. According to the History of the Federal Reserve, the Federal Reserve has three powers as the nation’s central bank. These three powers are:
  2. ______
  3. ______
  4. ______
  1. What are Federal Reserve Notes?
  1. Structure and Organization of the Fed:
  2. When people or businesses need money, who do they borrow from? ______
  3. When banks need money who do they borrow from? ______
  1. Functions of the Fed:
  2. One function of the Fed is overseeing large commercial banks. What is one example of that function?
  1. A second function of the Fed is enforcing consumer borrowing laws. What is one example of that function?
  1. List and explain the three ways the Federal Reserve acts as the government’s bank.
  2. ______
  3. ______
  4. ______
  1. What is monetary policy?
  1. To control the money supply, what are the three tools the Federal Reserve can use?

a. b. c.

  1. Look at the chart of the changes in money supply over time from 1989 until January 2009. If the line is in a positive %, that means the economy is growing. If the line is in a negative %, that means the money supply is going down. Answer the following questions:
  1. What year was the economy growing or increasing the most? ______
  2. What year was the money supply shrinking or decreasing the most? ______
  1. Why can the Fed and monetary policy be more effective than Congress or the President?

Section #6 – Fiscal Policy and Government Interventions

  1. How does cutting taxes help people during times of high employment?
  1. What happens in a recession?
  1. When might the government raise taxes?
  1. What is inflation?
  1. When might the government decrease its spending?
  1. When might the government increase its borrowing?
  1. Why is Fiscal Policy difficult with political leaders?

Section #7 – Consumer Protections

Ensuring Competition in the Market Place

  1. What are monopolies?
  1. What is one example of monopoly that the US government broke up?
  1. The US Government oversees and regulates businesses by:

a. Promoting and regulating ______competition.

b. Protecting ______.

  1. When the US Government is promoting and regulating Marketplace Competition, what three actions can the US government take?

a. ______An example of this is the: ______

b. ______An example of this is the: ______

c. ______An example of this is the: ______

  1. When the US Government is protecting American Citizens, what five actions can the US government take?

a. ______An example of this is the: ______

b. ______An example of this is the: ______

c. ______An example of this is the: ______

d. ______An example of this is the: ______

e. ______An example of this is the: ______