2^nd Economics Test

--April 25 (odd classes) and April 26 (even classes)

To prepare for the test:

1. Complete the Study Guide. Use your notes to help you. Ask your teacher BEFORE the day of the test if you have any questions. Turn in this study guide the day of the test.

2. Review the class notes (below), paying special attention to underlined information. Also review the SOLs for this unit (below).

3. Make sure that you know all of the information from the study guide. Suggestion: Ask a parent or friend to quiz you on this information.

Class Notes:

Notes: Taxes

Notes: Investments

Stock Market Notes

Notes: The Federal Reserve System

Notes: Government Economic Policies

Notes: Capitalists

Today’s Global Economy

2^nd Set of Economics SOLs:

Entrepreneur

· A person who takes a risk to produce goods and services in search of profit

· May establish a business according to any of the three types of organizational structures

Economic flow

· Individual and business saving and investment provide financial capital that can be borrowed for business expansion and increased consumption.

· Individuals (households) own the resources used in production, sell the resources, and use the income to purchase products.

· Businesses (producers) buy resources; make products that are sold to individuals, other businesses, and the government; and use the profits to buy more resources.

· Governments use tax revenue from individuals and businesses to provide public goods and services

Characteristics of private financial institutions

· Include banks, savings and loans, credit unions, and securities brokerages

· Receive deposits and make loans

· Encourage saving and investing by paying interest on deposits

Global Economy—Worldwide markets in which the buying and selling of goods and services by all nations takes place

Reasons that states and nations trade

· To obtain goods and services they cannot produce or produce efficiently themselves

· To buy goods and services at a lower cost or a lower opportunity cost

· To sell goods and services to other countries

· To create jobs

Virginia and the United States specialize in the production of certain goods and services which promotes efficiency and growth.

Impact of technological innovations

· Innovations in technology (e.g., the Internet) contribute to the global flow of information, capital, goods, and services.

· The use of such technology also lowers the cost of production.

Ways the government promotes marketplace competition

· Enforcing antitrust legislation to discourage the development of monopolies

· Engaging in global trade

· Supporting business start-ups

Government agencies that regulate business

· FCC (Federal Communications Commission)

· EPA (Environmental Protection Agency)

· FTC (Federal Trade Commission)

These agencies oversee the way individuals and companies do business.

Characteristics of public goods and services

· Include such items as interstate highways, postal service, and national defense

· Provide benefits to many simultaneously

· Would not be available if individuals had to provide them

Ways governments produce public goods and services

· Through tax revenue

· Through borrowed funds

Government tax increases reduce the funds available for private and business spending; tax decreases increase funds for private and business spending.

Increased government borrowing reduces funds available for borrowing by individuals and businesses; decreased government borrowing increases funds available for borrowing by individuals and businesses.

Increased government spending increases demand, which may increase employment and production; decreased spending reduces demand, which may result in a slowing of the economy.

Increased government spending may result in higher taxes; decreased government spending may result in lower taxes.

The 16th Amendment to the Constitution of the United States of America authorizes Congress to tax incomes (personal and business).

The Federal Reserve System (Fed) is the central bank of the United States.

Federal Reserve banks act as a banker’s bank by issuing currency and regulating the amount of money in circulation.

To slow the economy, the Federal Reserve Bank restricts the money supply, causing interest rates to rise; to stimulate the economy the Fed increases the money supply, causing interest rates to decline.

Ways the Federal Reserve Bank slows the economy

· Increases the reserve requirement

· Raises the discount rate

· Sells government securities

Ways the Federal Reserve Bank stimulates the economy

· Lowers the reserve requirement

· Lowers the discount rate

· Purchases government securities

Individuals have the right of private ownership, which is protected by negotiated contracts that are enforceable by law.

Government agencies establish guidelines that protect public health and safety.

Consumers may take legal action against violations of consumer rights.

Career planning starts with self-assessment.

Employers seek employees who demonstrate the attitudes and behaviors of a strong work ethic.

Higher skill(s) and/or education level(s) generally lead to higher incomes.

Supply and demand also influence job income.

Employers seek individuals who have kept pace with technological change/skills.

Technological advancements create new jobs in the workplace.