GED Economics Practice Questions, Set 2

1.A household lists what it owns and what it owes: Savings account: $4,500 Car (current value): $9,000 Car loan balance: $6,000 Credit card balance: $1,500 Net worth equals what you own minus what you owe. What is this household’s net worth?

1. A.$21,000
2. B.$6,000
3. C.$7,500
4. D.$13,500

2.Gasoline prices rise sharply and stay high for more than a year. Car dealers report that buyers are shopping for smaller, more fuel-efficient cars. What most likely happens to the demand for large SUVs, which use a lot of gasoline?

1. A.It rises, since buyers want the largest vehicle
2. B.It rises, since SUVs now cost more to buy
3. C.It falls, since SUVs are now costlier to drive
4. D.It stays the same, since gas and cars are unrelated

3.News report: “The Federal Open Market Committee voted 10 to 2 today to hold its target for short-term interest rates steady.” Which statement about this decision is accurate?

1. A.It was a law passed by Congress and signed by the president
2. B.It changes the federal income tax rates for this year
3. C.It was decided by the Treasury in a public vote of citizens
4. D.It was a monetary policy choice made by the Federal Reserve

4.The North American Free Trade Agreement (NAFTA) took effect in 1994 among the United States, Canada, and Mexico. In 2020 it was replaced by a similar deal, the United States-Mexico-Canada Agreement (USMCA). What was the main goal of NAFTA?

1. A.To create one shared currency for the three countries
2. B.To remove most tariffs on trade among the three countries
3. C.To allow free movement of all workers across the borders
4. D.To set up a joint army to defend North America

5.A worker earns $52,000 a year. Her employer matches 50 cents for every dollar she puts in her retirement plan, on contributions up to 6 percent of her salary. She contributes 4 percent of her salary. How much does her employer contribute in a year?

1. A.$1,560
2. B.$1,040
3. C.$2,080
4. D.$3,120

6.Economists say scarcity affects everyone, even very rich people. Which example best supports this claim?

1. A.A billionaire’s wealth can rise when stock prices rise
2. B.A billionaire can buy anything a store has in stock
3. C.A billionaire pays more in taxes than most people
4. D.A billionaire still has only 24 hours in each day

7.A farmer has 100 acres. Each acre can produce either 180 bushels of corn or 50 bushels of soybeans. This year the farmer switches 10 acres from corn to soybeans. What is the opportunity cost of the soybeans grown on those 10 acres?

1. A.1,800 bushels of corn
2. B.500 bushels of soybeans
3. C.2,300 bushels of corn
4. D.1,300 bushels of corn

8.The three companies that sell almost all the cement in a region meet secretly and agree that none of them will charge less than $140 a ton. Before the meeting, prices ranged from $110 to $125 a ton. Which statement best describes their agreement?

1. A.It is illegal price fixing that harms competition
2. B.It is legal because each firm sets its own costs
3. C.It creates perfect competition among the three firms
4. D.It lowers prices by increasing the supply of cement

9.A bank installs self-service machines and online tools that do most of the work tellers once did. Hundreds of tellers lose their jobs. Many apply for new jobs but are not hired, because open positions in the area call for computer coding or nursing skills. Which type of unemployment does this describe?

1. A.Structural unemployment
2. B.Frictional unemployment
3. C.Seasonal unemployment
4. D.Cyclical unemployment

10.A company cuts the price of its home printers from $150 to $79. Ink cartridges that work only in those printers stay at the same price. What will most likely happen to the demand for the ink cartridges?

1. A.It will fall, because the printers now cost less money
2. B.It will fall, because buyers will switch to the printers
3. C.It will rise, because more people will own the printers
4. D.It will stay the same, because ink prices did not change

11.A man takes out a loan to buy a pickup truck. The loan agreement says the lender can take the truck if he stops making payments. What role does the truck play in this loan?

1. A.It is collateral that secures the loan
2. B.It is the lender’s profit on the deal
3. C.It is the interest the borrower owes
4. D.It is the down payment on the loan

12.Federal budget results, in billions of dollars (positive = surplus, negative = deficit): 1997: −22 1998: +69 1999: +126 2000: +236 2001: +128 2002: −158 Which statement is supported by the data?

1. A.The largest deficit shown occurred in 1997
2. B.The budget balance grew larger every year shown
3. C.The government ran surpluses from 1998 through 2001
4. D.The government ran budget deficits from 1998 through 2001

13.A state charges a 6 percent sales tax on most purchases. Two households each spend $20,000 a year on taxable goods. Household A earns $25,000 a year, and Household B earns $100,000. Why do economists call this sales tax regressive?

1. A.The tax rate rises as a household’s income rises
2. B.Household B pays four times as much tax as Household A
3. C.Both pay $1,200, a larger share of A’s income than B’s
4. D.Both pay the same percentage of their total income

14.Commercial banks can borrow money for short periods directly from the Federal Reserve. The interest rate the Fed charges on these loans is called the discount rate. If the Fed lowers the discount rate, what is the most likely result?

1. A.Taxes on bank profits rise to make up for the cut
2. B.Banks must keep all deposits as cash in their vaults
3. C.Savers earn much more interest on their accounts
4. D.Banks borrow more cheaply and can offer cheaper loans

15.A developing country wants to build its own solar panel industry. Its leaders put high tariffs on imported panels for ten years, arguing that new local factories need time to grow before they can compete with established foreign producers. What is this argument for tariffs called?

1. A.The trade surplus argument
2. B.The free trade argument
3. C.The comparative advantage argument
4. D.The infant industry argument

16.After a trade agreement removes tariffs on imported televisions, TV prices in the United States fall by 20 percent. A U.S. television factory that cannot match the lower prices closes and lays off 400 workers. Which statement best describes the effects of the agreement?

1. A.Everyone in the country is better off, and no one loses
2. B.Consumers gain from lower prices, while some workers lose jobs
3. C.The agreement has no effect on prices or on employment
4. D.Consumers pay more, while factory workers gain many new jobs in the industry