1. OGT – Chapter 8 Economics Benchmarks A&B

2. 1. All of us have unlimited wants but unfortunately we also have limited resources. In economics the problem of trying to meet our wants because of our limited resources is called scarcity.

3. 2. Because all societies have scarce resources they experience scarcity. As a society then there are 3 basic questions that must be answered. 1. What should be produced? 2. How should it be produced? 3. Who should get what is produced?

4. 3. The method a society uses to answer the basic questions above is known as its Economic System. The four main types of economic systems are: The Traditional Economy which relies on customs and traditions which have been passed down from generation to generation. The Command Economy where the government or ruler decides how the questions will be answered. The Market Economy where individuals enjoy the freedom of making their own decisions and there is very little government interference. The Mixed Economy where a combination of all of the above types are used.

5. 4. Fill out the following chart comparing the different types of Economic Systems.

6. 5. Over the years the role of the U.S. Government in economic policy has changed. For many years we had a laissez-faire policy which meant that the government was not very involved in the economy. During the Progressive Era toward the end of the Industrial Revolution the government tried to ensure fair competition and public safety. During the Depression the government became much more active eventually passing the Full Employment Act in 1946. Today our government attempts to: Promote maximum employment and production and limit inflation.

7. 6. Briefly describe the following Instruments of Government Economic Policy: The power to provide Public Goods – Goods and services provided by the government to the economy directly like military defense. Redistribution of Income – Graduated Income tax where the wealthy pay a higher rate of taxes and the money is then distributed to those less fortunate. The power to regulate Economic Activities – Policies like the Sherman Anti-Trust Act which attempt to make sure things are fair and safe for everyone. Fiscal Policy – How the government influences the economy by its spending, taxing and borrowing.

8. 6. Briefly describe the following Instruments of Government Economic Policy: (Cont.) Monetary Policy – The government’s ability, using the Federal Reserve System, to control the total money supply in our economy. Trade Policy – The government’s ability to regulate American trade using a variety of techniques like tariffs, quotas, blockades and embargos.

9. 7. Fill out the following chart which explains a government’s fiscal policy for each situation.

10. 8. Fill out the following chart which explains a government’s monetary policy using the Federal Reserve System for each situation.

11. 9. Our government regulates trade several different ways including tariffs which are special taxes on imported goods, quotas which are restrictions on the number of goods a foreign country can import into the U.S. and a blockade or embargo which is a complete prohibition of trade with another country. (ex. Cuba). The biggest debate on trade centers on Protectionism vs. Free Trade; the former believes we need to protect American jobs by using the above methods making it tougher for foreign companies to compete while the latter believes that we should get rid of all restrictions which would encourage countries to specialize.