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Descriptive Statements:
- Apply basic economic terms and concepts, such as scarcity, the laws of supply and demand, opportunity cost, economic incentives, inflation, and recession.
- Compare fundamental features of traditional, market, command, and mixed economic systems.
- Demonstrate knowledge of the factors of production (i.e., land, labor, capital, and entrepreneurship) and how they are combined to produce goods and services.
- Analyze the organization and operation of market economies, including the roles of entrepreneurs, competition, prices, and the laws of supply and demand.
- Demonstrate knowledge of basic forms of business organization and of factors affecting business operations and decisions.
- Apply basic principles of consumer economics to accessing information, evaluating advertising claims and marketing promotions, making purchases, and utilizing consumer protection laws.
- Demonstrate knowledge of basic principles of personal finance, budgeting, credit, and savings and investment.
Sample Item:
A young woman is trying to decide whether she should return to college full time and
complete her bachelor's degree or accept an entry-level management position at a local
company. Which of the following economic concepts applies most directly to the decision
this person is trying to make?
- opportunity cost
- scarcity
- economic incentives
- productivity
Correct Response and Explanation (Show Correct ResponseHide Correct Response)
A. This question requires the examinee to recognize basic economic
concepts. Opportunity cost refers to the value lost by making one use of resources
rather than another, and involves the trade-offs required when choosing between two
desirable but mutually exclusive options. In this case, the opportunity costs that
the young woman has to consider are the cost of completing her education instead of
taking a job, and the cost of taking a job instead of completing her education.
Descriptive Statements:
- Demonstrate knowledge of the major components of the U.S. economic system, including banks, financial markets, labor unions, corporations, and consumers.
- Analyze the causes and effects of unemployment, inflation and deflation, and factors influencing the business cycle.
- Demonstrate knowledge of how fiscal policy influences economic activity.
- Recognize the functions of monetary policy and the role of the Federal Reserve System in regulating the nation's money supply and moderating inflation and recession.
- Analyze how government regulation influences financial and business operations, protects workers, and affects consumers.
- Analyze the reaction of the federal government to economic crises in U.S. history.
- Demonstrate knowledge of basic principles of international economics and of factors influencing the operation of the international economic system.
Sample Item:
Which of the following best describes an important role of the Federal Reserve in the U.S.
economy?
- ensuring the safety of checking and savings accounts in the U.S. banks
- regulating the operation of U.S. security and commodity exchanges
- managing the nation's money supply
- maintaining consumer demand
Correct Response and Explanation (Show Correct ResponseHide Correct Response)
C. This question requires the examinee to analyze factors influencing
monetary policy, including the structure and functions of the Federal Reserve System.
An important role of the Federal Reserve is to manage the nation's money supply through
its regulation of the reserve requirements of banks, the purchase and sale of government
securities, and alterations in the discount rate that it charges banks for loans.
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