| A | B |
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| In the circular flow model of economic activity, who sells products in the product market? | businesses |
| In the circular flow model of economic activity, who sells the factors of production? | individuals/households |
| What is the primary goal of individuals and businesses in a free-market economy? | profit |
| According to the law of demand, what will consumers do when price falls? | buy more |
| According to the law of supply, what will producers do when price rises? | increase production |
| What is the economic effect of price controls? | shortages |
| What will happen to price if there is a shortage of a product? | it will rise |
| What will happen to price if there is a surplus of a product? | it will fall |
| Which economic principle states that consumers will buy more of a good at a lower price than at a higher price? | law of demand |
| Which economic principle states that producers will increase their output of a good or service when the price is higher? | law of supply |
| In a free market economy, who makes the decisions on the most basic economic questions? | individuals and businesses |
| How does government promote individual initiative in the free enterprise system? | copyrights, patents, protecting private property |
| What does an individual receive in exchange when they offer to sell their labor to a business? | wages or salary |
| What is the price called at which quantity supplied is equal to the quantity demanded? | market price or equilibrium price |
| What will happen to the market price of a good if personal income of consumers rises? | it will rise |
| What will happen to the market price of a good if a complementary good rises in price? | it will fall |
| What will happen to the price of a good if a substitue for it becomes cheaper? | it will fall |
| What term is used to describe the income that people have left over after they have paid for basic necessities? | disposable income |
| What term is used to describe the lowest wage that employers are legally allowed to pay an employee? | minimum wage |
| What term is defined as "a general increase in price levels"? | inflation |
| What type of market only has one supplier of a product? | monopoly |
| What type of market is characterized by only a few suppliers who sell a nearly identical product? | oligopoly |
| What type of market has many different suppliers who produce a similar product? | competitive market |
| What is it called when two firms combine their business operations to form one company? | merger |
| What type of business has the disadvantage of having unlimited legal liability? | sole proprietorships and partnerships |
| What type of business is owned by its shareholders? | corporation |
| What is it called when a person makes a profit by selling shares of stock at a higher price than they paid for them? | capital gain |
| What is it called when a corporation pays out a percentage of its profit to its shareholders? | dividend |
| What type of organization helps workers to acquire higher wages, benefits, and better working conditions? | labor unions |
| What process do labor unions use to negotiate with the owners/management of a business? | collective bargaining |
| What is it called when labor union members refuse to work until its demands are met by the business management? | strike |
| What is it called when the business management refuses to let labor union members go to work until they accept they contract that they are offering? | lock-out |
| Which act established a program to benefit workers if they are injured and unable to work? | Social Security |
| Which legislation officially recognized the right of labor unions to organize and use collective bargaining? | National Labor Relations Act |
| Which act limits labor unions by allowing states to pass "right to work" laws? | Taft-Hartley Act |
| What rights do workers have under the Fair Labor Standards Act? | minimum wage and 40-hour work week |
| Which type of financial institution is most important in the American economy? | commercial banks |
| How do banks make a profit? | charging interest to borrowers |
| What do individuals buy to protect their property and assets from accidents and liability? | insurance |
| What are laws that prohibit companies from restricting competition called? | Anti-trust laws |
| Where do banks acquire the money that they use to make loans? | deposits |
| Which government agency insures individuals' bank deposits | Federal Deposit Insurance Corporation (FDIC) |
| What forms of money are considered to be "legal tender"? | currency (notes and coins) |
| What is an item of value called that is pledged in order to secure a loan? | collateral |
| What figure is used to inform a borrower of the total annual percentage cost of a loan or other form of credit? | annual percentage rate (APR) |
| What form of money can be used to purchase something now and pay for it later on a monthly basis? | credit |
| What type of financial institution exists to provide services only to depositors who are members? | credit union |
| What is the disadvantage of using credit? | increased debt |
