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Descriptive Statements:
- Demonstrate knowledge of basic economic concepts (e.g., scarcity, opportunity cost, productive resources, economic incentives, competition, specialization, marginal utility, elasticity, economies of scale, the law of diminishing returns).
- Demonstrate knowledge of the characteristics of different economic systems (e.g., traditional, market, command, mixed) and the different ways that these systems allocate limited resources.
- Apply knowledge of the interaction of supply and demand in determining market prices, quantities of outputs produced, and the quantities of productive resources used and of the ways that those adjustments send signals and provide incentives to consumers and producers to change their decisions.
- Demonstrate knowledge of the effects of competition among sellers and competition among buyers in a market system.
- Demonstrate knowledge of the economic indicators (e.g., productivity, gross domestic product, inflation rate, unemployment rate) gathered by the government to assess a nation's overall level of economic well-being.
- Examine the federal government's use of fiscal policy, regulatory actions, and the intended and unintended effects of these policies on economic activity.
- Examine the Federal Reserve System's use of monetary policy tools to regulate the nation's money supply and moderate the effects of expansion and contraction in the economy.
- Apply knowledge of the principles of absolute advantage and comparative advantage as explanations of the benefits of international trade.
- Analyze the effects of protectionist tariffs, quotas, subsidies, trade agreements, embargoes, and membership in multinational economic organizations on international trade.
- Analyze ways in which international trade affects regions' and nations' production, consumption, and interdependence and the ways in which the global economy creates advantages and disadvantages for different segments of the world's population.
Sample Item:
Inflationary economic conditions sometimes lead governments to impose price controls, as occurred in the United States in 1971 19 71 . Which of the following observed consequences of price controls is most likely to be unintended by the officials who impose such controls?
- a similar slowdown in the rate of increase of wages and salaries
- shortages of some of the products subject to price controls
- the simultaneous implementation of expansionary monetary policy
- a decrease in the number of strikes by labor unions
Correct Response and Explanation (Show Correct ResponseHide Correct Response)
B. Price control policies involve setting a legal ceiling on the prices of categories of goods and services, or setting limits on the allowable rate of increase in prices. In imposing a price below what would be the equilibrium price in a market, the ceiling results in a quantity demanded being higher than the quantity supplied, which manifests as an unintended shortage.
Descriptive Statements:
- Apply knowledge of financial decision-making strategies and other elements of financial responsibility and the factors that affect people's earning potential as employees and as entrepreneurs.
- Demonstrate knowledge of the development of a personal budget or spending-and-savings plan and the application of budgeting principles to purchasing decisions, including decisions about postsecondary education options.
- Demonstrate knowledge of the financial responsibility of planning for and paying local, state, and federal taxes; how other deductions from gross pay affect take-home pay; and how tax credits and deductions affect total tax liability.
- Demonstrate knowledge of laws and agencies that regulate the economic and financial system and protect consumers, investors, and debtors from fraud and potential loss.
- Demonstrate knowledge of the variety of financial institutions (e.g., banks, online banks, credit unions, brokerage houses), the products and services they offer (e.g., savings accounts, checking accounts, debit cards, financial planning services), and other advocates and organizations that provide information and protection to consumers and investors.
- Demonstrate knowledge of tools to protect consumers from the potential loss of personal and business assets and income (e.g., warranties and service plans; product liability lawsuits; health, life, disability, auto, homeowners, renters, and liability insurance; protections against identity theft).
- Apply knowledge of key investing concepts, principles, and strategies to help achieve the goal of increasing net worth (e.g., assets, liabilities, compound interest, the time value of money and the cost of delay, diversification) and analyze options among investment products in terms of costs and fees, tax implications, time horizon, liquidity, rate of return, and various types of risk.
- Apply knowledge of the risks that can arise from the contractual terms and conditions of credit cards, lines of credit, loans from banks, and loans from payday lenders and apply knowledge of the effective balancing of credit and debt to maintain a good credit score and achieve other financial goals.
Sample Item:
A person is in significant debt and has no immediate prospect of increasing sources of income. It is most important for this person's budget to distinguish between which of the following categories of expenditures?
- large and small
- monthly and annual
- known and unpredictable
- necessary and discretionary
Correct Response and Explanation (Show Correct ResponseHide Correct Response)
D. Distinguishing between necessary and discretionary expenditures allows this person to prioritize their spending and ensure that they have enough money for essential needs, such as food, housing, and utilities. By prioritizing necessities, the person can avoid falling further into debt due to overspending on non-essential items.
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