GED Social Studies : Relationships and Operation

Study concepts, example questions & explanations for GED Social Studies

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Example Questions

Example Question #1 : Supply And Demand

If there is a surplus of a product and little demand for it, the price of the product can be expected to __________

Possible Answers:

increase slightly.

stay roughly the same.

fall dramatically.

increase dramatically.

fall slightly.

Correct answer:

fall dramatically.

Explanation:

The law of supply and demand states that if the supply of something goes up and the demand for something goes down, then the price will fall significantly. A surplus means having more of something than is needed. For example, a company produces 100,000 dolls for the holiday season. There is a demand for only 20,000 at the price for which the company wants to sell them. This leaves a surplus of 80,000. If the company wants to increase the demand for the rest of the dolls they will have to lower the price they are willing to sell them at dramatically. This is the law of supply and demand.

Example Question #1 : Supply And Demand

Economic equilibrium occurs when __________.

Possible Answers:

the economy is in a depression

the economy is in a recession

supply matches demand

supply cannot meet demand

supply outstrips demand

Correct answer:

supply matches demand

Explanation:

The term Economic equilibrium refers to a state where the supply of a product is equal to the demand for the product. This is an ideal situation that would in theory keep prices and profits consistent. When supply outstrips demand, the price of something will fall, and when the supply cannot meet the demand, the price of something will rise.

Example Question #1 : Relationships And Operation

New York State wishes to encourage new businesses to come and open in many small towns in Northern New York, so it plans to offer __________ to provide cheaper land and lower taxes for start-up companies.

Possible Answers:

incentives

justifications

edicts

moralizers

abstracts

Correct answer:

incentives

Explanation:

An "incentive" is some advantage (lower taxes, cheaper land, access to resources or market, etc.) that a government can offer to a business or a type of businesses to encourage the growth and spread of business in their area.

Example Question #1 : Individuals And Institutions

The degree or intensity of wealth and material comfort experienced by a group of people is referred to as __________.

Possible Answers:

the Consumer Price Index

the Reverse-Income Effect

gross national product

the standard of living

the Butterfly Effect

Correct answer:

the standard of living

Explanation:

The Standard of Living in a country, or region, refers to the quality of life, material wealth, and comfort experienced by the people living there. America and Europe have comparatively high standards of living, while the majority of Africa and Asia have comparatively low standard of living.

Example Question #11 : Economic Principles

The American banking system is controlled by __________

Possible Answers:

The Federal Deposit Insurance Corporation.

The Federal Trade Commission.

The Department of the Interior.

The Federal Reserve.

The Secretary of State.

Correct answer:

The Federal Reserve.

Explanation:

The Federal Reserve System was created in 1913 in response to a series of financial panics. It is tasked with regulating and controlling the American banking system, which includes controlling the money supply, setting interest rates, and regulating the behavior of financial institutions.

Example Question #12 : Economic Principles

Which of the following institutions is the central bank of the United States and charged with conducting monetary policy?

Possible Answers:

United States Mint

Federal Reserve System

Department of the Treasury

Security and Exchange Commission

Department of Commerce

Correct answer:

Federal Reserve System

Explanation:

The Federal Reserve System is comprised of the Federal Open Market Committee, which conducts monetary policy for the US economy, and a set of regional banks that provide services and regulation for private banks in a given region. The Federal Reserve System (often shortened to Federal Reserve or simply "the Fed") was established in 1913 in response to a number of financial crises that had plagued the United States throughout its history. It functions as a central bank that provides credit and banking services to all private banks in the country. Through its operation as a "bank for the banks", it controls the supply of money within the US economy. Economists widely believe that the Fed's maintenance of the money supply is an important factor in preserving growth and fighting of recessions. 

Example Question #1 : Monetary Policy And System

The seminal economic text of capitalism, The Wealth of Nations, was written by __________.

Possible Answers:

Oliver Cromwell

Adam Smith

Thomas Malthus

Nicholas Copernicus

John Locke

Correct answer:

Adam Smith

Explanation:

Adam Smith was a British economist and writer in the eighteenth century. He was a famous advocate of laissez-faire capitalism (the idea that the government should have minimal interference in the economy). His most famous work, The Wealth of Nations, remains influential to this day, and is something of a shrine to free-market capitalism.

Example Question #1 : Monetary Policy And System

The Panic of 1837 is an example of __________.

Possible Answers:

America’s nineteenth-century isolationism

the negative effects of the media

an economic collapse

America’s worsening relations with Great Britain

a loss of faith in the political system

Correct answer:

an economic collapse

Explanation:

The Panic of 1837 was an economic crisis, or collapse, that lasted for several years and dramatically worsened the state of the American economy. The term, "panic," is frequently used to describe a period of economic recession, depression, or instability.

Example Question #1 : Monetary Policy And System

The economic system of European colonialism, whereby the colony exists solely to facilitate the redistribution of wealth, prosperity, and resources back to the mother country, is called __________.

Possible Answers:

mercantilism

restricted capitalism

progressivism

socialism

recidivism

Correct answer:

mercantilism

Explanation:

Mercantilism was the prevailing economic theory of the sixteenth and seventeenth centuries of European history. It was gradually replaced by free-market capitalism in the eighteenth and nineteenth centuries as, essentially, the European nations realized they could make even more money this way. In the mercantilist system, the primary economic goal of government was to establish trade monopolies and colonies to help with the redistribution of wealth and resources back to the mother country. Mercantilism was particularly influential in the histories of the Dutch, French, English, and Spanish Empires.

Example Question #1 : Investment

The British East India Company that would eventually come to effectively rule the whole Indian subcontinent started as a(n) __________.

Possible Answers:

religious group fleeing persecution

joint stock company

combined venture with the Dutch East India Company

missionary mission to South East Asia

experiment in early socialism

Correct answer:

joint stock company

Explanation:

The English (later British) East India Company was founded in 1600 by Elizabeth I, who gave the company a trading monopoly on all trade with the East Indies (India and much of South Asia). The company was a combined venture of several investors who pooled their resources and shared in the profits, much in the way of a modern corporation owned by shareholders. This practice is called a joint stock company.

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