CSET Social Science 116

Scarcity is best defined as

A) the difference between limited wants and limited economic resources. B) the difference between the total benefit of an action and the total cost of that action. C*) the difference between unlimited wants and limited economic resources. D) the opportunity cost of pursuing a given course of action. E) the difference between the marginal benefit and marginal cost of an action.

Excess reserves in the banking system will increase if

A) the reserve ratio is increased. B*) the checking deposits increase. C) the discount rate is increased. D) the Fed sells Treasury securities to commercial banks. E) income tax rates increase.

Which of the following best describes a filibuster?

A*) A filibuster is an oratory that can only be used in the Senate. B) A filibuster is an oratory that can only be used in the House. C) It is used in both houses to stop or slow down action on legislation. D) It can easily be avoided or stopped. E) It is used quite often by the members of Congress and is usually very successful.

Which of the following best illustrates how economic incentives cause changes in a firm's behavior?

A*) A firm revises its corporate bylaws to clarify the rights of shareholders. B)A firm raises worker wages after achieving an increase in earnings. C) A firm modifies the way it measures productivity after changing its product line. D) A firm reduces output of a product because of declining consumer demand.

Which of the following is a tool used by the Fed to increase the money supply?

A*) A lower discount rate B) Selling Treasury securities to commercial banks C) A higher reserve ratio D) A lower personal income tax rate E) A lower investment income tax rate

Which of the following tax systems is designed to redistribute income from the wealthy to the poor?

A*) A progressive tax system. B) A regressive tax system. C) A proportional tax system. D) An excise tax system. E) A tariff system.

The market structures of perfect competition and monopolistic competition share which of the following characteristics?

A*) Ease of entry and exit in the long run. B) Homogenous products. C) Perfectly elastic demand for the firm's product. D) Long-run positive profits. E) Rigid or "sticky" prices.

The study of how living organisms interact is called:

A*) Ecology B) Sociology C) Anthropology D) Political Science

The study of the ways in which different societies around the world deal with the problems of limited resources and unlimited needs and wants is in the area of:

A*) Economics B) Sociology C) Anthropology D) Political Science

The membership of the House of Representatives

A*) is dependent on the national census B) is a continuous body C) is permanently restricted to 435 members D) is elected in 50 statewide at-large elections E) is apportioned according to the provisions of the New Jersey Plan

Interest groups are most often associated with

A*) matters of economic interest B) matters of political interest C) military issues D) methods of increasing voter participation E) matters of social interest and value

In order to ratify the Constitution of the United States

A*) nine of the 13 states had to approve the document B) the people had to approve the Constitution by popular vote C) the document had to have unanimous approval by all of the states D) a two-thirds vote by both houses of the new government was necessary E) a three-fourths vote of all state legislatures had to approve the document

In developing the United States Constitution, which of the following plans called for a strong national government with three separate branches?

A*) the Virginia Plan B) the New Jersey Plan C) the Connecticut Plan D) the Philadelphia Plan E) the Hamilton Plan

Which of the following best illustrates the continuing effect of Progressive era reforms in California?

A. nonpartisan elections B*) bank regulation C. taxation of corporate income D. initiative lawmaking

In McCulloch v. Maryland (1819), the U.S. Supreme Court ruled that "the States have no power, by taxation or otherwise, to retard, impede, burden, or in any manner control, the operations of the constitutional laws enacted by Congress to carry into execution the powers vested in the general government." The court's decision in this case clarified which of the following features of the government established by the U.S. Constitution?

A. separation of powers B. federalism C*) checks and balances D. bicameralism

Analyze the significance of the changing role of international political borders and territorial sovereignty in a global economy (e.g., General Agreement on Trade and Tariffs (GATT), North American Free Trade Agreement (NAFTA), World Trade Organization (WTO), European Union (EU).

GATT, NAFTA, WTO and EU are all forms of trade liberalization. The GATT or General Agreements on Tariffs and Trade was founded in 1947. Today, the organization is known as the World Trade Organization or WTO. The WTO is the successor to the GATT and came into being in 1995. Its objective is to promote free trade. As such it administers trade agreements, settles disputes, and provides a forum for trade discussions and negotiations. It has close to 150 member nations and is based on three principles. The first is Most Favored National status for all members. This means trade based on comparative advantage without tariffs or trade barriers. The second principle is the elimination of quotas; third, the reduction of trade barriers through multi-lateral trade negotiations. The North American Free Trade Agreement or NAFTA and the EU are both forms of regional economic integration. Economic integration is a method of trade liberalization on a regional basis. NAFTA represents the lowest form or first step in the regional trade integration process. A free trade area consists for two or more countries abolishing tariffs and other trade barriers among themselves but maintaining their own trade barriers against the rest of the world. A free trade area allows for specialization and trade on the basis of comparative advantage within the area. The next stage in the integration process is a customs union, which is a free trade area that has common external tariffs against non-members. The third stage is a common market which is a customs union with free factor mobility within the area. Factors migrate where they find the best payment within the area. The fourth stage is economic union where the common market members have common or coordinated economic and social policies. The final stage is monetary union where the area has a common currency. This is what defines the European Union. They have a common market and a single currency, the Euro. The WTO does not change or blur the significance of political borders and territorial sovereignty in the same way that economic integration does. The WTO is a way settling trade disputes that arise from the different integration agreements. In the advanced stages of economic integration the political borders remain but economic and social policies are common currency. Each nation is its own independently entity but each gives up some sovereignty in the interest of a successful union. Trade agreements proliferate in the world today. The Smoot-Hayley Tariff and the rounds of retaliation in the 1930s laid the basis for what today are the WTO and the European Union (EU). The GATT and the beginnings of the EU came into being as organizations that tried to undo the effects of the Great Depression and World War II. Free trade without trade barriers results in the most efficient use of resources, with higher consumption, employment and income levels for all participants. This is why there are so many free trade agreements being negotiated in today's world.

When referring to government, who said: "the good of the many outweighs the good of the few and also of the one"?

A) Plato B*) Aristotle C) Cicero D) Gaius

The study of "spatial relationships and interaction" would be done by people in the field of:

A) Political Science B) Anthropology C*) Geography D) Sociology

Which of the following is true about the voting process in America?

A) The federal government regulates voter registration in all states. B*) State governments regulate voter registration within their respective state. C) All individuals over the age of 18 are required to register to vote. D) Anyone may vote regardless of registration status. (E) Local governments are responsible for voter registration laws.

If the economy is operating below full employment, which of the following will have the greatest positive impact on real GDP?

A) The government decreases spending with no change in taxes. B*) The government increases spending with no change in taxes. C) The government decreases spending and matches it with a decrease in taxes. D) The government holds spending constant while decreasing taxes. E) The government increases spending and matches it with an increase in taxes.

Aristotle believed the best achievable governments was one with mixed constitution that combined elements of oligarchy and democracy. This belief most influenced how the Founding Fathers framed which of the following features of the U.S. Constitution.

A) The process for and amending the Constitution B*) The electoral process C) Relations between federal government and state government D) The structure of executive branch

The primary purpose of major U.S. political parties is to control government by:

A) affecting public policy B) defining party principles C*) winning elections through peaceful legal actions D) pushing legislation through Congress E) promoting an individual political cause

An incumbent is a

A) first-time office holder B) candidate running for office C*) current office holder D) most recently defeated candidate E) candidate with the most votes

If the CPI increases by 2 percent and your nominal income increases by 8 percent, your real income has

A) increased by 4 percent. B) decreased by 4 percent. C*) increased by 6 percent. D) decreased by 6 percent. E) increased by 10 percent.

The Phillips Curve represents the relationship between

A) inflation and the money supply. B) unemployment and the money supply. C) the money supply and the real interest rate. D*) inflation and unemployment. E) investment and the real interest rate.

The president's cabinet is designed to

A) issue executive orders B) negotiate executive agreements C) run the executive branch of the government D) set the president's agenda before the Congress E*) both advise the president and administer a department of government

Before the Supreme Court hears the oral arguments of a case presented for its review, each side must present written documents supporting that side's legal viewpoint. These written documents are known as

A) legal documents B*) briefs C) viewpoints of the court D) a prospectus E) a writ

Senatorial elections

A) occur within single-member districts B) attract less media attention than elections of representatives C) promote frequent personal contact with senatorial constituencies D*) provide for a continuous body in the Senate E) result in less diverse constituencies than those of representatives

How many courts of appeals are there in the federal court system?

A) one B) 90 C) six D) three E*) 12

A private organization that attempts to get government officials to respond to its philosophy and way of thinking on particular issues is called a(an)

A) pressure group B) political pressure group C*) interest group D) political power group E) lobbyist

Explain the process by which competition among buyers and sellers determines a market price.

Market prices are the result of the competition between buyers and sellers in the market place. Prices are determined by supply and demand. The supply side of the market represents the scarcity of resources that determines the price the producer pays for his inputs. The firm has to compete with other firms for the available supply of inputs. The firm has to be able to pay the market price or better in order to attract the inputs that it needs. The supply curve is calculated for the firm's cost curves. A change in the firm's costs results in a change in the supply curve. The lower the firm's costs are at any given price level, the greater the amount of output the firm can produce. Firms want to be cost efficient in order to be competitive because the firm also has to compete for the consumer's-dollar in the output market. If the firm's production costs are higher than its competitors, than its competitors will be able to charge a lower price for their product and still be profitable. The cost inefficient firm will experience losses at that price and eventually be forced out of business. On the buying side of the market, the consumers' demand curve is based on their preferences, tastes, income and other goods. The consumer has numerous goods that he wants to buy but is constrained by his income. The demand curve indicates what consumers are willing and able to do subject to their income constraint. An increase in the consumer's income, results in an increase in demand for most goods. Theses goods are referred to as normal goods. A decrease in income comes from the input market where he sells whatever skills he has at the best rate. He has to compete with other laborers for the available income he receives that he can spend on goods and services. Putting the demand side together with the supply side, we arrive at a market price. The intersection of demand and supply represents the market equilibrium price and quantity at which buyers and sellers are willing to transact. Buyers who want the product bid up the price for the available supply. A higher price will result in a larger quantity supplied because it is more profitable for the firm. All of these markets function on the basis of competition and it is the competition that results in market prices that reflect and efficient allocation of resources. If prices do not accurately reflect the scarcity of an input, then there is a distortion in production costs (as in the case of pollution) that carries through to the output market and the price of the product. In this case the output price does not accurately reflect the production costs or the scarcity of the factors of production used in its production. The result is an under allocation or over allocation of resources, depending on the situation. This means that society is not getting exactly what it wants for its dollar.

What is the total current membership of the electoral college?

A) 435 B) 535 C*) 538 D) 438 E) 270

The only president to resign from office was

A) Calvin Coolidge B) Spiro Agnew C) Lyndon Johnson D*) Richard Nixon E) Zachary Taylor

Competition leads to:

A) Fights B) Manipulation C) Demand and Supply D*) Planning

Which of the following Supreme Court cases established the principle of judicial review in the American court system?

A) McCulloch v. Maryland B) Gibbons v. Ogden C*) Marbury v. Madison D) Mapp v. Ohio E) Miranda v. Arizona

Geography was first studied in an organized manner by:

A) The Egyptians B*) The Greeks C) The Roman's D) The Arabs

Unions were founded on the basis of the beliefs of:

A) Thomas Robert Malthus B) John Stuart Mill C*) Samuel Gompers D) John Maynard Keynes

A primary election open only to the known voters of a political party would best be described as a(an)

A) open primary B) indirect primary C) blanket primary D) wide-open primary E*) closed primary

A planned economy functions on the basis of:

A*) Public ownership B) Private ownership C) Stockholder control D) An elected management board

Analyze the forces of cooperation and conflict among peoples and societies that influence the division and control of the earth's surface (e.g., boundaries and frontiers, the control of resources, centripetal vs. centrifugal forces, spheres of influence).

Competition for control of areas of the earth's surface is a common trait of human interaction. Societies and groups have sought control for a variety of reasons including religion, economics, politics and administration. Numerous wars have been fought for the control of territory for each of these reasons. At the same time, groups of people, even societies, have peacefully worked together to establish boundaries around regions or territories that served specific purposes in order to sustain the activities that support life and social organization. Individuals and societies have divided the earth's surface through conflict for a number of reasons -The domestication of peoples or societies, e.g., colonialism -The control of valuable resources, e.g., oil -The control of strategic routes, e.g., the Panama Canal Conflicts can be spurred by religion, political ideology, national origin, language, or race. Conflicts result for disagreement over how lands, ocean or national resources will be developed, shared and used and form trade, migration and settlement rights. They can occur between small groups of people, between cities, between nations, between religious groups and between multinational alliances. Today, the world is primarily divided by political/administrative interests into state sovereignties. A particular region is recognized to be controlled by a particular government, including its territory, population and natural resources. The only area of the earth's surface that today is not defined by state or national sovereign=nay is Antarctica. Alliances are developed among nations on the basis of political philosophy, enconomic concerns, cultural similarities, religious interests, or for military defense. Some of the most notable alliances today are: -The United Nations -The North Atlantic Treaty Organization -The Caribbean Community -The Council of Arab Economic Unity -The European Union Large companies and multinational corporations also compete for control of natural resources for manufacturing, development and distribution. Throughout human history there have been conflicts over the right to divide the Earth according to differing perceptions, needs and values. These conflicts have ranged from tribal conflicts to world wars. While these conflicts have traditionally centered on control of land surfaces, new disputes are beginning to arise over the resources of the oceans and space. Nations will develop spheres of interest. Shapers of interest are geographical areas over which a country exerts political or economic influence. On smaller scales, conflicts have created divisions between rival gangs, use zones in cities, water supply, schools districts while economic divisions include franchise areas and trade zones.

"A President's power originates in his ability to persuade others." This statement can best be attributed to which of the following individuals?

A) James David Barber B) Bill Clinton C*) Richard Neustadt D) Richard Nixon E) John Locke

A famous canal is the:

A) Pacific Canal B) Arctic Canal C*) Panama Canal D) Atlantic Canal

Historically, it would be most accurate to say that in the United States the power of judicial review:

A) Was authorized in Article III of the U.S. Constitution. B) Confirmed the supremacy of the judicial branch in the U.S. system of government. C) Has been inferred from the logic, structure, and theory of the U.S. Constitution. D*) Evolved out of jurisdictional disputes between federal and state courts.

The best example of a negative supply shock to the economy would be

A) a decrease in government spending. B) a decrease in the real interest rate. C) an increase in the money supply. D*) unexpectedly higher resource prices. E) technological improvements.

What is the minimum age requirement for a member of the House of Representatives?

A*) 25 B) 30 C) 35 D) same age requirement as the president E) There is no minimum age requirement.

Which of the following is an organization or alliance for defense purposes?

A*) North Atlantic Treaty Organization B) The Common Market C) The European Union D) North American Free Trade Organization

Explain the nature of map projections and use maps, as well as other geographic representations and technologies (including remote sensing and geographic information systems) to quire, process and report information form a spatial perspective.

Although map have advantages over globes and photographs, they do have a major disadvantage. The major problem of all maps comes about because most maps are flat and the Earth is a sphere. It is impossible to reproduce exactly on a flat surface an object shaped like a sphere. In order to put the earth's features onto a map they must be stretched in some way. This stretching is called distortion. Distortion does not mean that maps are wrong, it simply means that they are not perfect representations of the Earth or its parts. Cartographers, or mapmakers, understand the problems of distortion. They try to design them so that there is as little distortion as possible in the maps. The process of putting the features of the Earth onto a flat surface is called projection. All maps are really map projections. There are many different types. Each one deals in a different way with the problem of distortion. Map projections are made in a number of ways. Some are done using complicated mathematics. However, the basic ideas behind map projections can be understood by looking at the three most common types. 1) Cylindrical Projections- These are done by taking a cylinder of paper and wrapping it around a globe. A light is used to project the globe's features onto the paper. Distortion is least where the paper touches the globe. For example, suppose that the paper was wrapped so that it touched the globe at the equator, the map from this projection would have just a little distortion near the equator. However, in moving north or south of the equator, the distortion would increase as you moved further away from the equator. The best known and most widely used cylindrical projection is the Mercator Projection. It was first developed in 1569 by Gerardo's Mercator, a Flemish mapmaker. This distortion effect is why Greenland appears to be larger than Africa on a Mercator map. 2) Conical Projections- The name for these maps comes from the fact that the projection is made onto a cone of paper. The cone is made so that it touches a globe at the base of the cone only. It can slo be made so that it cuts through part of the globe into two different places. Again, there is the least distortion where the paper touches the glob. If the cone touches at two different points, there is some distortion at both of them. Conical projections are most often used to map areas in the middle latitudes. Maps of the United Sates are most often conical projections. This is because most of the country lies within these latitudes. 3) Flat-Plane Projections- These are made with a flat pice of paper. It touches the globe at one point only. Areas near this point show little distortion. Flat-plane projections are often used to show the areas of the north and south poles. One such flat projection is called a Gnomonic Projection. On this kind of map all meridians appear as straight lines, Gnomonic projections are useful because any straight line drawn between points on it form a Great-Circle Route. Great-Circle Routes can best be described by thinking of how on a globe the shortest route between two points can be found by stretching a string from one point to the other. However, if the string were extended in reality, so that it took into effect the globe's curvature, it would then make a great-circle. A great-circle is any circle that cuts a sphere into two equal parts. Because of distortion, most maps do not show great-circle routes as straight lines, Gnomic projections, however, do show the shortest distance between the two places a straight line, because of this they are valuable for navigation. They are called Great-Circle Sailing Maps. Top properly analyze a given map one must be familiar with the various parts and symbols that most modern maps use. For the most part, this is standardized, with different maps using similar parts and symbols, these can include: The Title- All maps should have a title, just like all books should. The title tells you what information is to be found on the map. The Legend- Most maps have a legend. A legend tells the reader about the various symbols that are used on that particular map and what the symbols represent (also called a map key) The Grid- A grid is a series of lines that are used to find exact places and locations on the map. There are several different kinds of grid systems in use, however, most maps use the longitudes and latitudes system, known as Geographic Graphic System. Directions- Most maps have some directional system to show which way the map is being represented. Often on a map, a small compass will be present, with arrows showing the four basic directions, north, south, east and west. The Scale- This is used to show the relationship between a unit of measurement on the map versus the real-world measure on the Earth. Maps are drawn to may different scales. Some maps show a lot of detail for a small area. Others show a greater span of distance. One should always be aware of just what scale is being used. For instance the scale might be something like 1 inch= 10 miles for a small area of for a map showing the whole world it might have a scale in which 1 inch= 1,000 miles. The point is that one must look at the map key in order to see what units of measurements the map is using. Maps have four main properties: the size of the areas shown on the map, the shapes of the areas, consistent scales, and straight line directions. A map can be drawn so that it is correct in one or more of these properties. No map can be correct in all of them. Equal areas- One property which maps can have is that of equal areas. In an equal area map, the meridians and parallels are drawn so that the areas shown have the same proportions as they do on the Earth. For example, Greenland is about 118th the size of South America, thus it will appear as 118th the size on an equal area map. The Mercator projection is an example of a map that does not have equal areas. In it, Greenland appears to be about the same size of South America. This is because the distortion is very bad at the poles and Greenland lies near the North Pole. Conformality- A second map property is conformality, or correct shapes. There are no maps which can show very large areas of the earth in their exact shapes. Only globes can really do that, however Conformal Maps are as close as possible to true shapes. The United States is of often shown by a Lambert Conformal Conic Projection Map. Consistent Scales- Many maps attempt to use the same scale on all parts of the map. Generally, this is easier when maps show relatively small part of the earth's surface. For example, a map of Florida might be Consistent Scale Map. Generally maps showing large areas are not consistent-scale maps. This is also because of distortion. Often such maps will have two scales noted in the key. One scale, for example, might be accurate to measure distances between points along the Equator. Another might be then used to measure distances between the North Pole and the South Pole. Maps showing physical features often try to show information about the elevation or relief of the land. Elevation is the distance above or below the sea level. The elevation is usually shown with colors, for distance, all areas on a map which are at a certain level will be shown in the same color. Relief Maps- Show the shape of the surface, flat, rugged, or steep. Relief maps usually give more detail than simply showing the overall elevation of the land's surface. Relief is also sometimes shown with colors, but another way to show relief is with contour lines. These lines connect all points of a land surface which are the same height surrounding the particular area of land. Thematic Maps- These are used to show more specific information, often on a single theme, or topic. Thematic maps show the distribution or amount of something over a certain given area such as population density, climate economic information, cultural and political information. In order to obtain information about an object, such as one that is needed in making maps of geographic regions, remote sensing is used. Remote sensing means that the information is obtained without making physical contact or on-site investigation. Mountain heights and depths of bodies of water may be measured in this way. Remote sensing is a field of geography. Geographic information needs to be stored and geographic information systems are used for that purpose. The systems can be configured in various ways and are used to store, analyze and display geographic information.

Describe the criteria for defining regions and identify why places and regions are important.

The earth's surface is made up of 70% water and 30% land. Physical features of the land surface include mountains, hills, valleys and plains. Other minor landforms include deserts, deltas, canyons, mesas, basins, foothills, marshes and swamps. Earth's water features include oceans, seas, lakes, rivers and canals. Mountains are landforms with rather steep slopes at least 2,000 feet or more above sea level. Mountains are found in groups called mountain chains or mountain ranges. At least one range can be found on six of the earth's seven continents. North America has the Appalachian and Rocky Mountains; South America the Andes; Asia the Himalayas; Australia the Great Dividing Range; Europe the Alps; and Africa the Atlas, Ahaggar, and Drakensburg Mountains. Hills are elevated landforms rising to an elevation of about 500 t0 2000 feet. They are found everywhere on earth including Antarctica where they are covered by ice. Plateaus are elevated landforms usually level on top. Depending on location they range from being and area that is very cold to one that is cool and healthful. Some plateaus are dry because they are surrounded by mountains that keep out any moisture. Some examples include the Kenya Plateau in East Africa, which is very cool. The Plateau extending north form the Himalayas is extremely dry while those in Antarctica and Greenland are covered in ice and snow. Plains are described as areas of flat or slightly rolling land, usually lower than the landforms next to them. Sometimes called lowlands (and sometimes located along sea coasts) they support the majority of the world's people. Some are found inland and many have been formed by large rivers. This resulted extremely fertile soil for successful cultivation of crops and numerous large settlements of people. In North America, the vast plains areas extended from the Gulf of Mexico north to the Arctic Ocean and between the Appalachian and Rocky Mountains. In Europe, rich plains extend east from Great Britain into Central Europe on into the Siberian region of Russia. Plains in river valleys are found in China (the Yangtze River Valley), India (the Ganges River Valley), and Southeast Asia (the Mekong River Valley). Valleys are land areas found between hills and mountains. Some have gentile slopes containing trees and plants; others have steep walls and are referenced to as canyons. One example is Arizona's Grand Canyon of the Colorado River. Deserts are large dry areas of land receiving ten inches or less of rainfall each year. Among the better-known deserts are Africa's large Sahara Desert, the Arabian Desert on the Arabians Peninsula, and the desert Outback covering roughly one third of of Australia. Deltas are areas of lowlands formed by soil and sediment deposited at the mouths of rivers. The soil is generally very fertile and most fertile river deltas are important crop-growing areas. One well-known example is the delta of Egypt's Nile River, known for producing cotton. Mesas are the flat tops of hills or mountains usually with steep sides. Sometimes plateaus are also called mesas. Basins are considered to be low areas drained by rivers or low spots in mountains. Foothills are generally considered a low series of hills found between a plain and a mountain range. Marshes and swamps are wet lowlands providing growth of such plants as rushes and reeds. Oceans are the largest bodies of water on the planet. The four oceans of the earth are the Atlantic Ocean, one-half the size of the Pacific and separating North and South America from Africa and Europe; the Pacific Ocean, covering almost one-third of the entire surface of the Earth and separating North and South America from Asia and Australia; the Indian Ocean, extending from North America and Europe to the North Pole. The waters of the Atlantic, Pacific and Indian Oceans also touch the shores of Antarctica. Seas are smaller than oceans and are surrounded by land. Some examples include the Mediterranean Sea found between Europe, Asia and Africa; and the Caribbean Sea, touching the West Indies, South and Central America. A lake is a body of water surrounded by land. The Great Lakes in North America are a good example. Rivers, considered a nation's lifeblood, usually begin as very small streams, formed by melting snow and rainfall, flowing from higher to lower land, emptying into a larger body of water, usually a sea or an ocean. Examples of important rivers for the people and countries affected by and/or dependent on them include the Nile, Niger, and Zaire Rivers of Africa; the Rhine, Danube and Thames Rivers of Europe; the Yangtze, Ganges, Mekong, Hwang He, and Irrawaddy Rivers of Asia; the Murray-Darling in Australia; and the Orinoco in South America. River systems are made up of large rivers and numerous smaller rivers or tribulations flowing into them. Examples include the vast Amazon Rivers system in South America and the Mississippi River system in the United States. Canals are man-made water passages constructed to connect two larger bodies of water. Famous examples include the Panama Canal across Panama's isthmus connecting the Atlantic and Pacific Oceans and the Sues Canal in the Middle East between Africa and the Arabian Peninsula concerting the Red and Mediterranean Seas. Weather is the condition of the air which surrounds the day-to-day atmospheric conditions including temperature, air pressure, wind and moisture or precipitation which includes rain, snow, hail, or sleet. Climate is average weather or daily weather conditions for a specific region or location over an extended period of time. Studying the climate of an area includes information gathered on the area's monthly and yearly temperatures and its monthly and yearly amounts of precipitation. In addition, a characteristic of an area's climate is the length of its growing season. Four reasons for the different climate regions on the earth are differences in: -Latitude -The amount of moisture -Temperatures in land and water -The earth's land surface There are many different climates through the earth. It is most unusual if a country contains just one kind of climate. Regions of climates are divided according to latitudes -0-23 1/2 degrees are the low latitudes -23 1/2 - 66 1/2 degrees are the middle latitudes - 66 1/2 degrees to the Poles are the high latitudes The low latitudes are comprised of the rainforest, savanna, and desert climates. The tropical rainforest climate is found in equatorial lowlands and is hot and wet. There is sun, extreme heat and rain-everyday. Although daily temperatures rarely rise above 90 degrees F, the daily humidity is always high, leaving everything sticky and damp. North and south of the tropical rainforests are the tropical grasslands called Savanna's, the lands of two seasons: a winter dry season and a summer wet season. Further north and south of the tropical grasslands or Savanna's are the deserts. These areas are the hottest and driest parts of the earth receiving less than 10 inches of rain a year. These areas have extreme temperatures between night and day. After the sun sets, the land cools quickly dropping the temperature as much as 50 degrees F. The middle latitudes contain the Mediterranean, humid-subtropical, humid-continental, marine, steppe, and desert climates. Lands containing the Mediterranean climate are considered sunny lands found in six areas of the world: lands bordering the Mediterranean Sea, a small portion of southwestern Africa, areas in southern and southwestern Australia, a small part of the Ukraine near the Black Sea, central Chile and Southern California. Summers are hot and dry with mild winters. The growing season usually lasts all year and what little rain falls are during the winter months. What is rather unusual is that the Mediterranean climate is located between 30 and 40 degrees north and south latitude on the western coasts of countries. The humid subtropical climate is found north and south of the tropics and is moist. The areas with this type of climate are found on the eastern side of their continents and include Japan, mainland China, Australia, Africa, South America, and the United States. An interesting feature of their locations is that warm ocean currents are found there. The winds that blow across these currents bring in warm moist air all year round. Long, warm summers, short, mild winters and a long growing season allow for different crops to be grown several times a year. All contribute to the productivity of this climate type which supports more people than any of the other climates. The marine climate is found in Western Europe, the British Isles, the U.S. Pacific Northwest, the western coast of Canada and southern Chile, along with southern New Zealand and southeastern Australia. A common characteristic of these lands is that they are ether near water or surrounded by it. The ocean winds are wet and warm bringing mild, rainy climate to these areas. In the summer, the daily temperatures average at or below 70 degrees F. During the winter, because of the warming effect of the ocean waters, the temperatures rarely fall below freezing. In northern and central United States, northern China, south central and southeastern Canada, and the western and southeastern parts of the former Soviet Union is found the "climate of four seasons," the humid continental climate. Cold winters, hot summers, and enough rainfall to grow a variety of crops are the major characteristics of this climate. In areas where the humid continental climate is found are some of the world's best farmlands as well as important activities such as trading and mining. Differences in temperatures throughout the year are determined by the distance a place is form the coasts. The steppe or prairie climate is located in the interiors of large continents like Asia and North America. These dry flatlands are far from ocean breezes and are called prairies or the Great Plains in Canada and the United Sates and steppes in Asia. Although the summers are hot and the winters are cold, the big difference is rainfall. In the steppe climate, rainfall is light and uncertain, 10 to 20inches a year mainly in spring and summer is considered normal. Where rain is more plentiful, grass grows; in areas of less, the steppes or parries gradually become deserts. Theses are found in the Gobi Desert of Asia, central and Western Australia, southwestern United Sates, and in the smaller deserts in Pakistan, Argentina, and Africa south of the Equator. The two major climates found in the high latitudes are tundra and taiga. The world tundra is a Russia word that means marshy plain and aptly describes the climate conditions in the northern areas of Russia, Europe and Canada. Winters are extremely close and very long. Most of the year the ground is frozen but becomes rather mushy during the very short summer months. Surprisingly, less snow falls in the area of the tundra than in the eastern part of the United States. However, due to the harshness of the extreme cold, very few people live there and no crops can be raised. Despite having a small human population, many plants and animals are found there. The taiga is the northern forest region and is located south of the tundra. In fact, the Russian word taiga means forest. The world's largest forest lands are found here along with vast mineral wealth and fur bearing animals. The climate is extreme and very few people live there, not being able to raise crops due to the extremely short growing season. The winter temperatures are colder and the summer temperatures are hotter than those in the tundra because the taiga climate region is farther from the waters of the Arctic Ocean. The taiga is found in the northern parts of Russia, Sweden, Norway, Finland, Canada and Alaska with most of their lands covered with marshes and swamps. In certain areas of the earth there exists a type of climate unique to areas with high mountains, usually different from their surroundings. This type of climate is called a verticle climate because the temperatures, crops, vegetation and human activities change and become different as one ascends the levels of elevation. At the foot of the mountain, a hot and rainy climate is found with the cultivation of many lowland crops. As one climbs higher, the air becomes cooler, the climate changes sharply and different economic activities change, such as gazing sheep and growing corn. At the top of many mountains, so now is found year-round.

If a bank has $1000 in checking deposits and the bank is required to reserve $250, what is the reserve ratio? How much does the bank have in excess reserves? What is the size of the money multiplier?

A) 25%, $750, M = 1 ⁄ 4 B) 75%, $250, M = 4 C*) 25%, $750, M = 4 D) 75%, $750, M = 1 ⁄ 4 E) 25%, $250, M = 4

Gross Domestic Product is:

A) A measure of well being B) A well-known social indicator C*) A measure of a nation's output D) A measure of a nation's trade

Which of the following is a specific power of the House of Representatives? A. impeachment of the president B. election of the president when the electoral college fails C. initiation of revenue bills

A) A only B) B only C) C only D*) A, B, and C E) A and B

Which of the following best describes a public interest group?

A) A public interest group seeks to benefit its self-interest. B*) A public interest group seeks to benefit the nation as a whole rather than its self-interest. C) A public interest group seeks to destroy government bureaucracy. D) A public interest group seeks to provide information to certain groups within the Congress. E) A public interest group seeks to win the support of the president.

Which of the following is true of equilibrium in a purely (or perfectly) competitive market for good X?

A) A shortage of good X exists. B*) The quantity demanded equals the quantity supplied of good X. C) A surplus of good X exists. D) The government regulates the quantity of good X produced at the market price. E) Dead weight loss exists.

Which of the following is the best example of a public good?

A) A visit to the orthodontist. B) A session at the tanning salon. C) A large pizza. D) A cup of coffee. E*) The Hubble telescope.

Which of the following is most likely to decrease the demand for kindergarten teachers?

A) An increase in K-12 funding. B) Increased immigration of foreign citizens and their families. C*) A decrease in the average number of children per household. D) Subsidies given to college students who major in elementary education. E) The state decreases the number of classes required to receive a teaching certificate.

The "wall of separation between church and state' came from:

A) Aristotle B) Alexander Hamilton C*) Thomas Jefferson D) Thomas Paine

While the president has the power to make appointments, he or she also has the power to remove some appointed officials from office. Where in the United States Constitution is this power located?

A) Article I B*) Article II C) Article III D) Article IV E) Article V

Which of the following monetary policies would lessen the effectiveness of expansionary fiscal policy?

A) Decreasing the value of the domestic currency. B) Lowering the income tax rate. C*) Selling Treasury securities to commercial banks. D) Lowering the discount rate. E) Lowering the reserve ratio.

The independent regulatory commission responsible for the supervision of the nation's banking system and regulation of the money supply is the

A) Federal Trade Commission B) Securities and Exchange Commission C) Consumer Product Safety Commission D) Department of the Treasury E*) Federal Reserve System

Which of the following is necessarily a characteristic of oligopoly?

A) Free entry into and exit from the market. B*) A few large producers. C) One producer of a good with no close substitutes. D) A homogenous product. E) No opportunities for collusion between firms.

The competitive market for gasoline is currently in a state of equilibrium. Which of the following would most likely increase the price of gasoline?

A) Household income falls. B) Technology used to produce gasoline improves. C) The price of subway tickets and other public transportation falls. D*) The price of crude oil, a raw material for gasoline, rises. E) The price of car insurance rises.

Which of the following statements describes a profit-maximizing monopolist? 1) Output is set where marginal revenue equals marginal cost, creating an efficient allocation of economic resources. 2) Dead weight loss is eliminated in the long run. 3) Price is set above marginal cost, creating allocative inefficiency.

A) I only B) II only C*) III only D) I and II only E) II and III only

Which of the following is NOT an accurate description of the president's ability to deal with the Congress?

A) In dealing with Congress, the president works under a system of checks and balances. B) The president must work with political party influences in Congress. C*) The president is able to enact legislation that he or she deems necessary. D) The president may veto acts of Congress. E) The president must work with Congress on issues important to both branches of the government.

Which of the following presidents appointed the first woman to the Supreme Court of the United States?

A) Jimmy Carter B) Bill Clinton C*) Ronald Reagan D) Franklin Roosevelt E) Gerald Ford

One method of trade restriction used by some nations is:

A) Limited treaties B) Floating exchange rates C) Bill of exchange D*) Import quotas

Suppose the reserve ratio is 10 percent and the Fed buys $1 million in Treasury securities from commercial banks. If money demand is perfectly elastic, which of the following is likely to occur?

A) Money supply increases by $10 million, lowering the interest rate and increasing AD. B) Money supply remains constant, the interest rate does not fall, and AD does not increase. C*) Money supply increases by $10 million, the interest rate does not fall, and AD does not increase. D) Money supply decreases by $10 million, raising the interest rate and decreasing AD. E) Money supply decreases by $10 million, the interest rate does not rise, and AD does not decrease.

Which of the following is a likely effect of a higher tariff imposed by the U.S. on imported automobiles?

A) Net exports will fall and the dollar will appreciate in value. B) Net exports will fall and the dollar will depreciate in value. C) The price of automobiles in the U.S. will fall. D) Net exports will rise and the dollar will depreciate in value. E*) Net exports will rise and the dollar will appreciate in value.

Which of the following is a true statement about political parties in the United States?

A) Political parties are addressed in the constitution. B*) Membership is voluntary and represents a good cross-section of the country's population. C) Membership is voluntary, but only a small portion of the voting public belongs. D) Party membership is strengthening. E) Political parties are becoming less diverse in their membership.

In Lemon v. Kurtzman, the court established the "Lemon test." According to this test, which of the following would apply?

A) Prayer in public schools is unconstitutional. B) Prayer in public schools is constitutional. C) Religious freedom is guaranteed by the constitution. D) Education laws do not apply to religious freedom. E*) State aid must be of a secular purpose if it is to be applied to a church school.

Which U.S. president held the most press conferences?

A) Richard Nixon B) George Bush C) Jimmy Carter D*) Franklin Roosevelt E) John Kennedy

In the case of a tie vote in the electoral college during the selection of the president, who is charged with electing the president?

A) Senate B*) House of Representatives C) Supreme Court D) Senate and Supreme Court E) Supreme Court and House of Representatives

Impeachment cases must be tried in the A. Senate only B. House only C. Senate and House D. Senate and House with the Supreme Court presiding

A) Senate only B*) House only C) Senate and House D) Senate and House with the Supreme Court presiding

Which of the following is a major defect of the electoral college?

A) The Senate, not the people, decides elections for president. B*) Electors are not legally pledged to their candidate. C) Electors are directed by the Constitution as to how to cast their ballot. D) The candidate winning the popular vote always wins. E) Federal law apportions an equal number of electors to each state.

In the short run, a firm employs labor and capital to produce gadgets. If the annual price of capital increases, what will happen to the short-run cost curves?

A) The marginal cost and average variable cost curves will shift upward. B*) The average fixed cost and average total cost curves will shift upward. C) The marginal cost and average fixed cost curves will shift upward. D) The marginal cost, average fixed cost, average variable cost, and average total cost curves will all shift upward. E) Only the average fixed cost curve will shift upward.

Which of the following is an accurate statement of the money supply in the U.S.?

A) The money supply is backed by gold reserves. B) The least liquid measure of money is M2. C) M1 is larger than M3. D) Paper money can be exchanged at commercial banks for an equal amount of gold. E*) The most liquid measure of money is M1.

Which of the following is NOT true about the Senate?

A) The most influential member is the Senate majority leader. B) Revenue bills cannot be introduced in the Senate. C) The Senate works with the president when treaties are involved. D*) The Senate's larger number makes it more powerful. E) The Senate contains 100 members.

If the perfectly competitive price is currently below minimum average total cost, we can expect which of the following events in the long run?

A) The price will rise and each firm's output will fall as firms exit the industry. B) Market equilibrium quantity will increase as firms exit the industry. C) Nothing. The industry is currently in longrun equilibrium. D) Profits will fall as the market price increases. E*) The price will rise to the breakeven point as firms exit the industry.

Which of the following is NOT true of the seniority rule?

A) The seniority rule ignores ability. B) The seniority rule discourages hard work. C) The seniority rule is not as important today as in the past. D) The seniority rule is significant in the selection of committee chairpersons. E*) The seniority rule allows the most qualified individual to be selected for the job.

Bicameralism is

A) a legislative body dominated by two major political parties B) a legislative body composed of one house C*) a legislative body composed of two houses D) a legislative body that shares power with a judiciary E) a legislative body that shares power with an executive

In a recession, expansionary monetary policy is designed to

A) decrease AD so that real prices will decrease, which is good for the economy. B*) increase AD, which will increase real GDP and increase employment. C) increase unemployment, but low prices negate this effect. D) keep interest rates high, which attracts foreign investment. E) boost the value of the dollar in foreign currency markets.

The "crowding out" effect is the result of

A) decreasing interest rates from contractionary fiscal policy. B*) increasing interest rates from expansionary fiscal policy. C) increasing interest rates from expansionary monetary policy. D) increasing unemployment rates from expansionary monetary policy. E) a depreciating dollar versus other currencies.

In the United States, the powers of government are divided between a national government, state governments, and several regional and local governments. This system is called

A) delegated government B*) federalism C) democracy D) republican government E) checks and balances

If the price of firm A's long distance service rises by 5 percent and the quantity demanded for firm B's long distance service increases by 10 percent, we can say that

A) demand for firm B is price elastic. B) supply for firm B is price elastic. C*) firms A and B are substitutes because the cross-price elasticity is greater than zero. D) firms A and B are complements because the cross-price elasticity is less than zero. E) firms A and B are complements because the cross-price elasticity is greater than zero.

The purpose of a poll watcher is to

A) direct the voter to the proper polling station B) help the election judge count the votes C) determine exit poll results D*) ensure the election process at the poll is fair and honest E) ensure that enough ballots are on hand to meet the needs of voter turnout

Of the following choices, the one most likely to be preferred by supply-side economists would be

A) increased government spending. B) higher tariffs on imported goods. C) lower taxes on household income. D) higher welfare payments. E*) a tax credit on capital investment.

Automatic stabilizers in the economy serve an important role in

A) increasing length of the business cycle. B) balancing the budget. C) increasing a budget surplus in a recession. D) decreasing net tax revenue during economic growth. E*) lessening the impact of a recession.

Which of the following terms best describes the legislative tactic of acquiring funds or projects for a Congressman's home district?

A) logrolling B*) pork barrel legislation C) gerrymandering D) congressional campaigning E) lobbying

The political party system in the United States is based on the principle of a(an)

A) multi-party system B) single-member district system C) moderate-liberal system D) independent system E*) two-party system

States, which require the winning candidates of each party to have an absolute majority in a primary election, may also require the holding of a(an)

A) open primary B) closed primary C*) runoff primary D) nonpartisan primary E) direct primary

Adding amendments to the United States Constitution is a two-step process that includes

A) proposal by the United States House of Representatives and ratification by the Senate B) proposal by the United States Senate and ratification by the House of Representatives C) proposal and ratification by both houses of Congress D*) proposal by the United States Congress and ratification by the states E) proposal by the executive branch and ratification by the legislative branch

What right is protected by the Second Amendment of the United States Constitution?

A) quarter troops B*) bear arms and maintain a militia C) serve in a militia D) petition the federal government E) express and exhibit free speech

Which of the following is an executive power of the Senate?

A) reviewing presidential vetoes B) trying impeachment cases C) keeping a check on the House of Representatives D) proposing constitutional amendments E*) approving appointments and treaties

How many judges currently serve on the Supreme Court?

A) six B*) nine C) four D) ten E) five

In the United States, the Congress has created two types of federal courts. These courts are

A) special and legislative courts B) district and constitutional courts C) constitutional and appellate courts D*) constitutional and legislative courts E) district and appellate courts

Monopolistic competition is often characterized by

A) strong barriers to entry. B) long-run price that exceeds average total cost. C) price that exceeds average variable cost, causing excess capacity. D) a homogenous product. E*) many resources devoted to advertising.

The civil service system in the United States was created by:

A) the Constitution B) executive order C*) the Pendleton Act D) the Hatch Act E) the Civil Service Act of 1850

An example of a government corporation would be

A) the U.S. Treasury Department B*) the U.S. Postal Service C) the U.S. armed forces D) the Internal Revenue Service E) any independent regulatory agency found within the U.S. government

The Supreme Court of the United States has both original and appellate jurisdiction. The court usually hears cases on appeal and decides only a few cases each year. Who decides which cases the court will hear?

A) the chief justice of the Supreme Court B*) the members of the Supreme Court as a group C) the attorney general of the United States D) the solicitor general of the United States E) the chief associate judge of the Supreme Court

The size of the House of Representatives is determined by

A) the president B*) Congress C) the Constitution D) the population of the states E) the Supreme Court

Members of the federal executive bureaucracy tend to represent the interests of

A) the president B*) the departments in which they work C) the special interests to which they belong D) the political party to which they belong E) themselves

If a special session of Congress is necessary after Congress has adjourned, who has the power to call Congress back into session?

A) the speaker of the House and the president pro-tem B*) the president C) the vice president by virtue of position in the Senate D) the members of Congress E) the members of the House and Senate Special Session Committee

If a consumer is not required to pay a monetary price for each cookie she consumes, the consumer will stop eating cookies when

A) the total utility from eating cookies is equal to zero. B) the substitution effect outweighs the income effect from eating cookies. C) the ratio of marginal utility divided by total utility is equal to one. D*) the marginal utility from eating the next cookie is zero. E) the marginal utility from eating the next cookie is increasing at a decreasing rate.

In the United States, the average person's political participation is limited to

A) voting in local elections B) a basic understanding of government C*) voting in presidential elections D) ignoring government altogether E) working for a political party at some level of government

If the government wishes to regulate a natural monopoly so that it produces an efficient level of output it would be

A) where price is equal to average total cost. B) where marginal revenue equals marginal cost. C) where normal profits are made. D) where price is equal to average variable cost. E*) where price is equal to marginal cost.

Which of the following resources are examples of capital?

A*) An electric typewriter B) A barrel of crude oil C) A registered nurse D)A share of corporate stock

American civil liberties were granted by the

A*) Bill of Rights B) Articles of Confederation C) Declaration of Independence D) Judiciary Article of the United States Constitution E) Supreme Court decision in Marbury v. Madison

Which of the following describes the theory behind the demand curve?

A*) Decreasing marginal utility as consumption rises. B. Increasing marginal cost as consumption rises. C. Decreasing marginal cost as consumption rises. D. Increasing total utility at an increasing rate as consumption rises. E. The substitution effect is larger than the income effect.

Which of the following statements is true about the demand for labor?

A*) It rises if the price of a substitute resource falls and the output effect is greater than the substitution effect. B) It falls if the price of the output produced rises. C) It falls if the price of a complementary resource falls. D) It falls if the demand for the output produced by labor increases. E) It falls if the labor becomes more productive.

If the world price of copper exceeds the domestic (U.S.) price of copper, we would expect

A*) The U.S. to be a net exporter of copper. B) The U.S. to impose a tariff on imported copper to protect domestic producers. C) The demand for U.S. copper to fall. D) A growing trade deficit in the U.S. in goods and services. E) The dollar to depreciate relative to the currencies of other copper-producing nations.

The idea that increasing government spending would end depressions was:

A*) The basis of modern economics B) Called Classical e-commerce economics C) Known as federalism D) Called isolationism

The political belief that the president is the steward of the people and should continually act in the best interests of the people is known as the stewardship theory. Which president first promoted this theory?

A*) Theodore Roosevelt B) Thomas Jefferson C) George Washington D) Franklin Roosevelt E) Woodrow Wilson

Which court was considered to be the most liberal court of the 20th century?

A*) Warren Court B) Burger Court C) Marshall Court D) Taney Court E) Taft Court

The doctrine of comparative advantage explains:

A*) Why nations trade B) How to fight a war C) Time zones D) Political divisions

The Founding Fathers envisioned a president who would fulfill all of the following roles EXCEPT:

A*) a shaper of public opinion B) a check on bills enacted into law C) the head of state D) the commander of the armed forces E) the executor of bills passed by Congress

An interest group, a bureaucratic government agency, and a committee of Congress working together would be an example of

A*) an iron triangle B) a government corporation C) an issue network D) an independent government agency E) an independent regulatory agency

When a case is appealed to the Supreme Court of the United States on the request of a lower court that is not sure on the point of law, the lower court must present a(an)

A*) certificate B) appeal C) writ of assistance D) writ of certiorari E) brief solicitation

Suppose the price of beef rises by 10 percent and the quantity demanded of beef falls by 20 percent. We can conclude that

A*) demand for beef is price elastic and consumer spending on beef is falling. B) demand for beef is price elastic and consumer spending on beef is rising. C) demand for beef is price inelastic and consumer spending on beef is falling. D) demand for beef is price inelastic and consumer spending on beef is rising. E) demand for beef is unit elastic and consumer spending on beef is constant.

To deflate nominal GDP, you must

A*) divide nominal GDP by the GDP deflator. B) multiply real GDP by the GDP deflator. C) divide real GDP by the GDP deflator. D) multiply nominal GDP by the GDP deflator. E) divide nominal GDP by real GDP.

If the demand for grapes increases simultaneously with an increase in the supply of grapes, we can say that

A*) equilibrium quantity rises, but the price change is ambiguous. B) equilibrium quantity falls, but the price change is ambiguous. C) equilibrium quantity rises, and the price rises. D) equilibrium quantity falls, and the price falls. E) the quantity change is ambiguous, but the equilibrium price rises.

If DVD players are a normal good, an increase in household income will

A*) increase the equilibrium quantity and increase the price. B) decrease the equilibrium quantity and increase the price. C) increase the equilibrium price, but the change in quantity is ambiguous. D) decrease the equilibrium quantity and decrease the price. E. increase the equilibrium quantity but the change in price is ambiguous.

The purpose of the 22nd Amendment, passed in 1951, was to

A*) limit presidential terms of office B) allow the president to choose a vice presidential running mate C) provide more checks and balances on the executive office D) allow voters in the District of Columbia to vote E) allow for presidential impeachment

Primary elections are held to

A*) narrow down the field of candidates within a political party B) expand the field of candidates within a political party C) give the voters more choice in the general election D) allow state legislatures the opportunity to determine political districts E) increase participation of third-party candidates

A negative externality from the production of a good exists when

A*) the market overallocates resources to the production of this good. B) spillover benefits are received by society. C) the marginal social benefit equals the marginal social cost. D) total welfare is maximized. E) the marginal private cost exceeds the marginal social cost.

Each state in the House of Representatives is allowed a certain number of representatives. That number is determined by:

A*) the population of each state B) constitutional amendment C) presidential mandate D) the number of electors each state has in the electoral college E) a number called for in the Constitution of each state

The continuing influence of the views expressed in the excerpt above can best be seen in the policies of which of the following contemporary organizations?

A. Organization of Petroleum Exporting States B. World Trade Organization C. World Bank D*) U.S. Federal Reserve Board

At the beginning of the sixteenth century, most American Indians in southern and south central California were members of:

A. small, independent groups organized on the basis of lineage and clan. B*) large political confederacies that controlled substantial amounts of land. C. unstratified societies without chiefs or social hierarchies. D. nomadic bands that were constantly on the move throughout the region

Apply the principles of economic decision-making to a current or historical social problem in America (e.g., land development, resource availability, environmentmental quality, composition of the economy).

America, like other countries, has experienced the social problem of discrimination. Discrimination occurs when one group does not have the same opportunities in spite of having the same qualifications as other members of society. Opportunities refer to things like salary, job access, promotion and occupations. Qualifications mean things like education, training, abilities and experiences. Equals are not treated equally. The existence and practice of discrimination are contrary to economic theory. Economics assumes that all economic agents act rationally. The practice of discrimination, especially in labor markets, is not consistent with economic theory because it is not rational because it prevents people for working in their most productive capacity. This results in lower output levels and higher costs. There are several economics theories that try to explain discrimination. Theorists tried explaining discrimination in terms of market power: to explain the discriminated against entity. In the output market this would mean charging a higher price to the discriminated against entity and in the input market this means paying a lower wage to the discriminated against entity. Discrimination would have to be industry wide for practice of wage discrimination to exist or the discriminated against worker would just find employment elsewhere. However, if there is industry-wide wage discrimination, the result is a lower wage bill for the employer. If this is true, then the conclusion is that the market promotes discrimination and it won't be eliminated without some kind of legal action to eliminate the practice. The market power model is not based on prejudice. If discrimination is based on prejudice of some kind a situation results where the employer is willing to pay to distance himself from the discriminated-against group. Employer prejudice results in the employer paying the discriminated against employee a lower wage than he pays to other workers: the greater amount of prejudice, the lower the wage, even if the employee is a better worker. In other words, the employer is willing to pay a premium wage to employees who are not a member of the discriminated group. This explains the existence of wage differential. Discrimination has to be in some way profitable for the employer or it couldn't last. Discrimination with prejudice can involve non-monetary factors that enter into the situation. There are other kinds of labor market discrimination. Human capital discrimination refers to individuals not having the same training or educational opportunities. Wage, employment and job discrimination occur in the labor market when individuals don't have the same opportunities in these areas. Employment discrimination refers to the working group that bears the burden of unemployment. Wage and job discrimination mean that a group does not have the same opportunity in terms of salary and occupation. Economic decision-making can sometimes be linked to social problems, such as resource availability or environmental quality. If it becomes economically feasible to extract more minerals than necessary from the ground, the resource availability will decrease and may become depleted. Environmental quality can be affected when refineries have the goal of producing vast quantities of oil while polluting the air or ground. In cases such as these, economic decision-making is based on the financial bottom line rather than on how the production benefits society as a whole.

Analyze how unique ecological settings are encouraged by various combinations of natural and social phenomena, including bio-geographic relationships with climate, soil and terrain.

Ecology is the study of how living organisms interact with the physical aspects of their environment, soil, water, air and other living things. Biogeography is the study of how the surface features of the earth (form, movement, and climate) affect living things. There levels of environment understanding are critical 1) An ecosystem is a community (of any size) consisting of a physical environment and the organisms that live within it. 2) A biome is a large area of land with characteristic, climate, soil and mixture of plants and animals. Biomes are made up of groups of ecosystems. Major biomes are: desert, chaparral, savanna, tropical rain forest, temperature grassland, temperate deciduous forest, taiga, and tundra 3) A habitat is the set of surroundings where members of a species normally live. Elements of the habitat include soil, water, predators and competitors. Within habitats interactions between members of the same species occur. These interactions occur between member of the same species and between members of a different species. Interaction tends to be of three types: competition, predation and symbiosis. Competition occurs between members of the same species or between members of different species for resources required to continue life, to grow, or to reproduce. For example, competition for acorns can occur between squirrels or it can occur between squirrels or woodpeckers. One species can either push out or cause the demise of another species if it is better adapted to obtain the resource. When a new species is introduced into a habitat, the result can be a loss of the native species and/or significant change to the habitat. For example, the introduction of the Asian plant Kudzu to the AMerican South, has resulted in the destruction of several species because Kudzu grows and spreads very quickly and smothers everything in its path. Predation occurs when one animal feeds upon another. Predators are organisms that live by hunting and eating other organisms. The species best suited for hunting other species in the habitat will be the species that survives. Larger species that have hunting skills reduce the amount of prey available for smaller and/or weaker species. This affects both the amount of available prey and the diversity of species that are able to survive in the habitat. Symbiosis is a condition in which two organisms of different species are able to live in the same environment over an extended period of time without harming one another. In some cases one species may benefit without harming the other. In other cases both species benefit. Different organisms are by nature best suited for extensive in particular environments. When an organism is displaced to a different environment or when the environment changes for some reason, its ability to survive is determined by its ability to adapt to the new environment. Adaptation can take the form of structural change, physiological change, or behavior modification. Biodiversity refers to the variety of species and organisms, as well as the variety of habitats available on earth. Biodiversity provides the life-support system for the various habitats and species. The greater the degree of biodiversity, the more species and habitats will continue to survive. When human and other population and migration changes, climate changes, or natural disasters disrupt the delicate balance of a habitat or an ecosystem, species either adapt or become extinct. Natural changes can occur that alter habitats such as floods, volcanoes, storms earthquakes. These changes can affect the species that exist within the habitat, either by causing extinction or by changing the environment in a way that will no longer support the life systems. Climate changes can have similar effects. Inhabiting species, however, can also alter habitats, particularly through migration. Human civilization, population growth, and efforts to control the environment can have many negative effects on various habitats. Humans change their environments to suit their particular needs and interests. This can result in changes that result in the extinction of species or changes to the habitat itself. For example, deforestation damages the stability of mountain surfaces. One particularly devastating example is in the removal of the grasses of the Great Plains for agriculture. Tilling the ground and planting crops left the soil unprotected. Sustained drought dried out the soil into dust. When wind storms occurred, the topsoil was stripped away and blown all the way to the Atlantic Ocean.

Economists argue that regulations should be removed to achieve economic growth, while some economists argue for regulations. Debate these arguments on regulations in a market economy.

One of the main issues in economics is the extent to which the government should intervene in the economy. Free market economists argue that government intervention should be strictly limited as government intervention tends to cause an inefficient allocation of resources. However, others argue there is a strong case for government intervention in different fields, such as externalities, public goods, and monopoly power. Greater equality - redistribute income and wealth to improve equality of opportunity and equality of outcome. Overcome market failure - Markets fail to take into account externalities and are likely to under-produce public/merit goods. For example, governments can subsidize or provide goods with positive externalities. Macroeconomic intervention. - intervention to overcome prolonged recessions and reduce unemployment. Disaster relief - only government can solve major health crises such as pandemics. Arguments against government intervention Governments liable to make the wrong decisions - influenced by political pressure groups, they spend on inefficient projects which lead to an inefficient outcome. Personal freedom. Government intervention is taking away individuals' decisions on how to spend and act. Economic intervention takes some personal freedom away. The market is most efficient at deciding how and when to produce. Arguments for government intervention to improve equality Fairness. In a free market, inequality can be created, not through ability and handwork, but a privilege and monopoly power. Without government intervention, firms can exploit monopoly power to pay low wages to workers and charge high prices to consumers. Without government intervention, we are liable to see the growth of monopoly power. Government intervention can regulate monopolies and promote competition. Therefore government intervention can promote greater equality of income, which is perceived as fairer. Government intervention to overcome market failure Public goods. In a free market, public goods such as law and order and national defense would not be provided because there is no financial incentive to provide goods with a free-rider problem (you can enjoy without paying them). Therefore, to provide public goods like lighthouses, police, roads, e.t.c it is necessary for a government to pay for them and out of general taxation. Regulation of monopoly power. In a free market, firms may gain monopoly power; this enables them to set higher prices for consumers. Government regulation of monopoly can lead to lower prices and greater economic efficiency. See: Regulation of monopoly power Disaster relief. In a major disaster such as Coronavirus, there is a strong need for government intervention in many forms as the market cannot solve. Firstly, governments are needed to slow the spread of a very infectious virus. This may involve imposing lockdowns and quarantines. Secondly, there is a need for government intervention to deal with the economic costs of these health measures. For example, giving loans and subsidies to firms to keep hiring workers during a difficult time period.

Analyze the patterns and networks of economic interdependence across the earth's surface during the agricultural, industrial and post-industrial revolutions, including the production and processing of raw materials, marketing, consumption, transportation, and other measures of economic development.

The Agricultural Revolution, initiated by the invention of the plow, led to a transformation of human society by making large-scale agriculture production possible. During the period which the plow was invented, the wheel, numbers and writing were also invented. Coinciding with the shift from hunting wild game to the domestication of animals, this period was one of dramatic social and economic change. Numerous changes in lifestyle and thinking accompanied the development of stable agriculture communities. Rather than gathering a wide variety of plants as hunter-gatherers, agriculture communities become dependent on a limited number of plants or crops that are harvested. Subsistence becomes vulnerable to the weather and dependent upon planting and harvesting times. Agriculture also required a great deal of physical labor and the development of a sense of discipline. Agriculture communities become sedentary or stable in terms of location. This makes the construction of dwellings appropriate. These tend to be built relatively close together, creating villages or towns. Stable communities free people from the need to carry everything with them. This facilitates the invention of larger, more complex tools. As new tools are envisioned and developed it begins to make sense to have some specialization within the society. Skills begin to have greater value, and people begin to do work on behalf of the community that utilizes their particular skills and abilities. Settled community life also gives rise to the notion of wealth. It is now possible to keep possessions. In the beginning of the transition to agriculture, the tools that were used for hunting and gathering were adequate to the tasks of agriculture. The initial challenge was in adapting to a new way of life. Once that challenge was met, attention turned to the development of more advanced tools and sources of energy. Six thousand years ago the first plow was invented in Mesopotamia. This plow was pulled by animals. Agriculture was ten possible on a much larger scale. Soon tools were developed that make such basic tasks as gathering seeds, planting and cutting grain faster and easier. It became necessary to maintain social and political stability to ensure that planting and harvesting times were not interrupted by internal discord or a war with a neighboring community. It also was necessary to develop way to store the crop and prevent its destruction by the elements, animals and thieves. Settled communities that produce the necessities of life are self-supporting. Advances in agriculture technology and the ability to produce a surplus of produce create two opportunities: first, the opportunity to trade the surplus goods for other desired goods, and the second, the vulnerability to others who steal to take those goods. Protecting domesticated livestock and surplus, as well as stored, crops become an issue for the community. This, in turn, leads to the construction of walls and other fortifications around the community. The ability to produce surplus creates the opportunity to trade or barter with other communities in exchange for desired goods. Traders begin to develop trade routes between villages and cities. The domestication of animals expands the range of trade and facilities and exchange of ideas and knowledge. The Industrial Revolution of the eighteenth and nineteenth centuries resulted in changes in human civilization and greater opportunities for trade, increased production, and the exchange of ideas and knowledge. The first paste of the Industrial Revolution (1750-1830) saw the mechanization of the textile industry, vast improvements in mining, the steam engine, the development and improvement of turnpikes, canals and the railroad. The second phase (1830-1910) resulted in vast improvements in a numeber of industries that had already been mechanized through such inventions as the Bessemer steel process and the invention of steam ships. New industries, such as photography, electricity and chemical processes, arose as a result of the new technological advances. New sources of power were harassed and applied, including petroleum and hydroelectric power. Precision instruments were developed and engineering was launched. It was during this second phase that the Industrial Revolution spread to other European countries, Japan, and the United States. The direct results of the industrial revolution, particularly as they affected industry, commerce and agriculture included: -Enormous increases in productivity -Huge increases in world trade -Specialization and division of labor -Standardization of parts and mass production -Growth of giant business conglomerates and monopolies -A new revolution in agriculture facilitated by the steam engine, machinery chemical fertilizers, processing, canning and refrigeration The political results included -Growth of complex government by technical experts -Centralization of government, including regulatory administrative agencies -Advantages to democratic development, including extension of franchise to the middle class, and later to all the population, mass education to meet the needs of an industrial society, the development of media of public communication, including radio, television and cheap newspapers -Dangers to democracy included the risk of manipulation of the media of mass communication, facilitation of dictatorial centralization and totalitarian control, subordination of the legislative function to administrative directives, efforts to achieve uniformity and conformity, and social impersonalization. The economic results were numerous -The conflict between free trade and low tariffs and protectionism -The issue of free enterprise against government regulation -Struggles between labor and capital, including the trad-union movement -The rise of socialism -The rise of the utopian socialists -The rise of Marxian or scientific socialism The social results of the Industrial Revolution -Increase in population, especially in industrial centers. -Advances in science applied to agriculture, sanitation and medicine -Growth of great cities -Disappearance of the difference between city dwellers and farmers -Faster tempo of life and increased stress from the monotony of the work routine -The emancipation of women -The decline of religion -Rise of scientific materialism -Darwins's theory of evolution Increased mobility produced a rapid diffusion and ideas, Increased mobility also resulted in wide-scale immigration to industrialized countries. Cultures clashed and cultures melded.

A political system in which there is a one-party state, centralized control, and a repressive system which private ownership is called:

A) Communism B*) Fascism C) Socialism D) Constitutional Monarchy

Which of the following is not a tool of monetary policy?

A) Open market operations B) Changing the discount rate C*) Changing the exchange rate D) Changing the reverse ratio

The significance of a free press does not include which of the following:

A) Providing information B) Reporting illegal actions C*) Libel C) Reporting in a responsible and civic-minded manner

Constructed Response: complete the exercise that follows. One important feature of U.S. leadership in the globalization of the world economy has been American efforts to remove restrictions on the international flow of capital and goods. Using your knowledge of economics, analyze why some U.S. economists support and other U.S. economists have reservations about a model of global economic development that calls for the removal of all restraints on the flow of capital and goods.

The American government has lately been pursuing policies that favor international free trade. Economists who argue in favor of this generally cite the free market rationales of Adam Smith, whereby an utterly unrestricted economy allows the greatest efficiency, fostered by competition. Unprotected, industries that cannot compete will be forced to improve or go out of business, leaving behind those whose production and pricing succeed in the market. This is supposed to produce the greatest prosperity for everyone. This would also allow us to export our goods worldwide, and to manufacture our goods wherever the costs of production are lowest. Economists who argue against globalization note that worldwide competition drives down wages for labor and tends to concentrate jobs in the cheapest labor markets, leading to the exportation of American manufacturing. Companies that relocate abroad are also not subject to American laws regulating wages, working conditions, or environmental effects. Developing countries are likely to tolerate poor working conditions and environmental costs for the sake of economic development. American investments tend to flow out of the country as well and some are highly speculative, creating a vulnerability to major losses when loans are defaulted on. Also, when we have a major economic interest in another country, our political options are thereby limited, even though that country may be in violation of human rights standards, or be controlled by a repressive government.

Constructed Response: complete the exercise that follows. The migration of Americans to California from other parts of the country from 1930 to 1945 constituted one of the largest internal migrations in U.S. history. Using your knowledge of California history, analyze two reasons for this migration to California.

A large number of people moved to California in the fifteen-year span between 1930 and 1945. A major cause of this migration was the widespread drought in the southwest, especially Oklahoma, Texas, and Kansas: the so-called Dust Bowl. Farmers and ranchers, already suffering economic hardships brought by the Great Depression, were unable to provide for their families without fertile soil. Consequently, these refugees, who became known as "Okies," sought better conditions in California. An incentive luring them to California was the burgeoning agribusiness and other industrial development in areas such as movies, oil and manufacturing, especially in the rapidly expanding defense industry. California's warm climate and large areas of open, available land, had long given California the reputation as the land of opportunity, which was enhanced by its economic boom of the 1930s. The "Okie" migration to this "land of milk and honey" was facilitated by increased automobile ownership and a state road building program initiated in the 1920s. This demographic increase led to the growth of many cities and suburbs, which further attracted the refugees from the Dust Bowl. Consequently, the migration to California occurred because of the agricultural disaster from which people fled and the economic, social and climatic conditions that lured them to California.

An increase in investor optimism will have which of the following effects in the market for loanable funds?

A) An increase in supply, lowering the interest rate. B) A decrease in demand, increasing the interest rate. C) An increase in both supply and demand, and an ambiguous change in interest rates. D) A decrease in supply, decreasing the interest rate. E*) An increase in demand, increasing the interest rate.

For years you work as a grocery checker at a supermarket and one day you are replaced by self-serve checkout stations. What type of unemployment is this?

A) Cyclical B*) Structural C) Seasonal D) Frictional E) Discouraged

The American labor union movement started gaining new momentum:

A) During the building of the railroads B*) After 1865 with the growth of cities C) With the rise of industrial giants such as Carnegie and Vanderbilt D) During the war years of 1861-1865

Which one of the following does not affect climate?

A) Elevation or altitude B) Ocean currents C) Latitude D*) Longitude

Which of the following will most likely occur if the federal government imposes a minimum wage that is below the equilibrium?

A) Employment in high-skill jobs will decrease. B*) Wages in low-skill jobs will remain unchanged. C) Wages in high-skill jobs will fall. D) Employment in low-skill jobs will increase

The programs such as Medicaid and Food Stamps are the responsibility of:

A) Federal government B) Local government C*) State government D) Communal government

If the economy is experiencing a recession, how will a plan to decrease taxes for consumers and increase spending on government purchases affect real GDP and the price level?

A) GDP rises and the price level falls. B) GDP falls and the price level rises. C*) GDP rises and the price level rises. D) GDP falls and the price level falls. E) GDP stays the same and the price level rises.

In a market economy, markets function on the basis of:

A) Government control B) Manipulation C*) Demand and Supply D) Planning

The study of the exercise of power and political behavior in human society today would be conducted by experts in:

A) History B) Sociology C*) Political Science D) Anthropology

The economic system promoting individual ownership of land, capital and business with minimal government regulations is called:

A) Macro-economy B) Micro-economy C) Laissez-faire D*) Free enterprise & market economy

Meridians, or line of longitude, not only help pinpointing locations but are also used by

A) Measuring distance from the Poles B) Determining direction of ocean currents C*) Determining the time around the world D) Measuring distance on the equator

Which of the following statements is true of these production possibilities?

A) Nation X has comparative advantage in paper production and should trade paper to Nation Y in exchange for crepes. B*) Nation X has comparative advantage in crepe production and should trade crepes to Nation Y in exchange for paper. C) Nation X has absolute advantage in paper production and Nation Y has absolute advantage in crepe production. No trade is possible. D) Nation Y has absolute advantage in paper production and Nation X has absolute advantage in crepe production. No trade is possible. E. Nation Y has comparative advantage in crepe production and should trade paper to Nation X in exchange for crepes.

Potential customers for any product or service are not only called consumers but can also be called:

A) Resources B) Bases C) Commodities D*) Markets

Suppose the economy is operating beyond full employment. Which of the following is true at this point?

A) The short-run AS curve is horizontal. B) Further increases in AD will result in a lower price level. C) A decrease in AD will result in a lower price level if prices are sticky. D*) Further increases in AD will not lower the unemployment rate, but will create inflation. E) The unemployment rate is higher than the natural rate of unemployment.

If an American firm moves a plant from the U.S. to Brazil,

A) U.S. GDP falls and Brazil's GDP falls. B) U.S. GDP rises and Brazil's GDP falls. C) U.S. GDP falls and U.S. GNP rises. D*) U.S. GDP falls and Brazil's GDP rises. E) U.S. GDP rises and Brazil's GDP rises.

In creating the Electoral College, the Founding Fathers assumed that the electors would be able to exercise their independent judgment among a large number of presidential candidates. The Founders' vision of how the Electoral College should function did not become a reality primarily because of the:

A) expansion of the electorate. B*) influence of campaign financing on the political system. C) growth of sectionalism. D) emergence of national political parties.

Historically, debates about the role of a free press in U.S. society have arisen most frequently during

A) international conflicts involving the United States. B) tightly contested presidential elections. C) political scandals involving the judicial branch of government. D*)periods of widespread economic dislocation

The spending multiplier is often smaller than predicted because of

A) lower taxes. B) increasing net exports. C) falling unemployment. D) lower interest rates. E*) rising price levels.

Use the excerpts below from John Winthrop's "A City Upon a Hill" (1630) and John F. Kennedy's Inaugural Address (1961) to answer the question that follows. We shall find that the God of Israel is among us, when ten of us shall be able to resist a thousand of our enemies; when he shall make us a praise and a glory that men shall say of succeeding plantations, "The Lord make it like that of New England." For we must consider that we shall be as a city upon a hill. The eyes of all people are upon us. With a good conscience our only sure reward, with history the final judge of our deeds, let us go forth to lead the land we love, asking His blessing and His help, but knowing that here on earth God's work must truly be our own. The excerpts above best illustrate how U.S. leaders have used religion to:

A) promote the general welfare of the community. B) resolve partisan conflicts. C*) sanction America's historical mission. D) set goals for the nation.

The function of government is to provide for the welfare of the people is the philosophy of:

A*) Aristotle B) John Locke C) Plato D) Thomas Hobbes

What term does not describe a settlement in the physical and cultural sense?

A*) Climate B) Religion C) Shared values D) Shared language

In which of the following disciplines would the study of physical mapping, modern or ancient, and the plotting of points and boundaries be least useful?

A*) Sociology B) Geography C) Archaeology D) History

In its formative years during the 1930s, the United Automobile Workers of America not only faced opposition from intransigent employers but also had to contend with obstructionism from:

A*) skilled workers who viewed themselves as a "labor aristocracy." B) communist organizers who believed unionization would undermine the potential for revolutionary change. C) leaders of craft-based unions who opposed industrial unionism. D) federal officials who feared the impact of unionization on the global competitiveness of auto firms.

Read the excerpt below from the writings of Adam Smith; then answer the two questions that follow. To give the monopoly of the home market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must, in almost all cases, be either a useless or hurtful regulation. If the produce of domestic can be brought there as cheaply as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful. The author's argument in the excerpt above is based primarily on which of the following economic concepts?

A. law of supply and demand B. opportunity cost C. law of diminishing returns D*) economies of scale

Which of the following was a major cause of the conflicts within and among the emerging democracies of Africa during the second half of the twentieth century?

A. national economies that focused on the production of export crops B. rulers who had been educated in colonial institutions of higher learning C*) population movement from rural to urban areas D. political boundaries that had been established by colonial powers

The U.S. government's current relationship with American Indian tribal governments is most similar to its relations with:

A.) U.S. corporations, since American Indian tribes have incorporated as business entities. B.) political interest groups, since American Indian tribal governments are voluntary organizations with no powers for actual self- government. C.) U.S. states, since American Indian tribal governments have the right to assert jurisdiction over their members. D*) Other sovereign nations, since American Indian tribal governments have the right to make agreements with foreign governments.

Describe the functions of the financial markets.

All markets function to affect an efficient allocation of resources, even financial markets. Theses markets also function on the basis of supply and demand and serve to allocate loanable funds to those who are willing to transact at the market price. The market price of loanable funds is the interest rate. The supply of loanable funds come from savings. Since savings represent dollars of postponed spending, households have to have some form of inducement to save. They have to be compensated in some way to postpone their spending and holding dollars in the form of saving. This inducement or payment for saving dollars is the interest rate. The higher the interest rate is the more dollars households will save. The interest rate is an opportunity cost. At higher interest rates, the opportunity cost of not saving dollars is higher than at lower interest rates. Thus, the supply of loanable funds curve is upward sloping. Loanable funds are needed for investment purposes by businesses and by individuals. Borrowers will pay a price for the funds they barrow. This price is the interest rate. Borrowers want more funds at lower interest rates than they do at higher interest rates. This means that the demand for loanable funds curve is downward sloping. We now have the downward sloping demand for loanable funds curve and the upward sloping supply of loanable funds curve. If we put the two curves together then we have the market equilibrium at the point of intersection of demand and supply. This gives the equilibrium rate of interest that equates the quantity demanded and quantity supplied of loanable funds. Lenders and borrowers who transact at that interest rate are included in the market. Lenders and borrowers who can't or won't transact at that interest rate are excluded for the market. The market interest rate performs an allocative function just as a market price does. The interest rate will adjust to guarantee the equality of quantity demanded and quantity supplied, keeping the market equilibrium. Since investment is a component of Gross Domestic Product or GDP, the financial markets and their stability is an important part of the economy. Economies need investment funds in order to grow. Economies with higher rates of savings have higher rates of investment and therefore higher growth rates. This is what leads to economic growth. Economics with low rates of savings are economies that don't domestically supply enough funds for investment purposes. These are economies that have lower growth rates. The banking sector with its financial markets is very important for economies. Without a well-developed banking center there is no mechanism for savings. Without savings the economy lacks the investment funds that are required for economic growth. This was the position the former Soviet countries were in after the dissolution of the Soviet Union. The banking system went with the country Russia and the remainder of the countries had to form their own banking system before they could supply the savings fund needed for investment.

Constructed Response: complete the exercise that follows. The concept of equal opportunity has been a fundamental ideal of American democracy since it was proclaimed in the Declaration of Independence. Ever since, the proper role of government in ensuring equal rights and equality of opportunity has been a source of debate and contention in American life. Using your knowledge of American democracy: • analyze one way in which the principles, structure, or process of government in the United States has fostered the ideal of equality; and • analyze one way in which the principles, structure, or process of government in the United States has restricted that same ideal.

Americans look on the Constitution and the Bill of Rights as documents that lay out the essential tenets of democracy: equal rights, guaranteed freedoms. But the idea of freedom is always conditioned by historical circumstances. The Constitution permitted, and the courts upheld, slavery until the passage of the 13th Amendment. Blacks were not given the right to vote until the passage of the 15th Amendment, nor were women until the passage of the 19th. The provisions for amending the Constitution, therefore, can be seen as an important process of government that has allowed the evolution of our ideas about freedom and justice to be expressed in law. Our structure as a representative democracy, however, has limited equal opportunity in some ways. We elect legislators who represent us. But these legislators are strongly influenced by large donors, often corporate, who fund the very expensive campaigns that win them their seats in Congress. The result is that rich and poor do not have equal representation or equal rights.

Describe and analyze ways in which human societies and settlement patterns develop in response to the physical environments, and explain the social, political, economic and physical processes that have resulted in today's urban and rural landscapes.

By nature, people are essentially social creatures. They generally live in communities or settlements of some kind and of some size. Settlements are the cradles of culture, political structure, education and the management of resources. The relative placement of these settlements or communities are shaped by the proximity to natural resources, the movement of raw materials, the production of finished products, the availability of a work force, and the delivery of finished products. The composition of communities will, at least to some extent, be determined by shared values, language, culture, religion and subsistence. Settlements begin in areas that offer the natural resources to support life-food and water. With the ability to manage the environment one finds a concentration of populations. With the ability to transport raw materials and finished products, comes mobility. With increasing technology and the rise of industrial centers, comes a migration of the workforce. Cities are the major hubs of human settlement. Almost half of the population of the world now lives in cities. These percentages are much higher in developed regions. Established cities continue to grow. The fastest growth, however is occurring in developing areas. In some regions there are metropolitan areas made up of urban and sub-urban areas. In some places cities and urban areas have become interconnected into megalopoli (e.g., Tokyo-Kawasaki-Yokohama). The concentrations of populations and the divisions of those areas among various groups that constitute the cities can differ significantly. North American cities are different for European cities in terms of shape, size, population density, and modes of transportation. While in North America, the wealthiest economic groups tend tp live outside the cities, the opposite is true in Latin American cities. There are significant differences among the cities of the world in terms of connectedness to other cities. While European and North American cities tend to be well liked both by transportation and communication connectedness, there are other places in the world in which communication between the cities of the country may be inferior to communication with the rest of the world. Rural areas tend to be less densely populated due to the needs of agriculture. More land is needed to produce crops or for animal husbandry than for manufacturing, especially in a city in which the buildings tend to be taller. Rural areas, however, must be connected via communication and transportation in order to provide food and raw material to urban areas

Identify the difference between monetary and non-monetary incentives and how changes in incentives cause changes in behavior.

Economics differs from other disciplines in that it considers both monetary and non-monetary factors in decision making. Monetary factors are those that have a dollar value attached, like the cost of a unit input. These are referred to as explicit costs of accounting costs. Non-monetary factors are referred to as implicit costs. These include the opportunity costs or the value of the sacrificed alternative. If we talk about entrepreneurial activities, then we have to include the value of what that factor could earn in its next best activity, because this is the minimum amount of return that is required to keep that factor performing its present function. If a factory can earn X dollars in its next best alternative activity, then X dollars is the minimum amount required to keep that factor performing its present activity. If it doesn't earn those X dollars, it will shift into its next best alternative activity. In calculating the total cost of decision, both monetary and non-monetary factors have to be considered. The economic costs of a decision will always be greater than the accounting costs of the same decision, because economics includes the non-monetary aspects of that decision. For example, using a study guide has monetary and non-monetary costs associated with it. The monetary cost is the cost of the guide. The non-monetary costs are the value of what you are not doing because you are studying. If there is a change in the cost of any of these monetary or non-monetary factors or incentives, there will be a change in behavior. For example, if teacher salaries double, obtaining that teaching certificate becomes more important because it represents greater future income. Therefore, the student will work harder to obtain it. On the other hand, if your present salary doubles, then you are not willing to sacrifice hours of work to study and the certificate is not as valuable as it was before. The same thing is true for other factors of production. If the rate of return in widget production is higher than the rate of return in other industries in the economy, you will see an expansion of the widget industry as factors of production shift into widget production. This shift is caused by a change in monetary incentives in the widget and other industries. This change in a monetary incentive causes a realignment of resources throughout the economy as resources shift out of the relatively lower return industries into the relatively higher return industry.

Describe the casual relations between scarcity and choices, and explain opportunity cost and marginal benefit and marginal cost.

Economics is defined as the study of how scarce resources are allocated to satisfy unlimited wants. Resources refer to the four factors of production: labor, capital, land and entrepreneurship. The fact that the supply of these resources is finite means that society cannot have as much of everything that it wants. There is a constraint on production and consumption and on the kinds of goods and services that can be produced and consumed. Scarcity means that chooses have to be made. If society decides to produce more of one good, this means that there are fewer resources available for the production of other goods. Assume a society can produce two goods, good A and good B. The society uses resources in the production of each good. If producing one unit of good A results in an amount of resources used to produce three units of good B than producing one more unit of good A costs three units of good B. This cost is referred to as opportunity cost. Opportunity cost is the value of the sacrificed alternative, the value of what had to be given up in order to have the output of good A. Opportunity cost does not just refer to production. Your opportunity cost of studying math content is the value of what you are not doing because you are studying and not doing the other thing you would be doing instead. Every choice has an opportunity cost. Marginal analysis is used in the study of economics. The term marginal always means "the change in". There are benefits and costs associated with every decision. The benefits are the gains or the advantages of a decision or action. If we are talking about production, the gains are the increases in output. If we are talking about an additional hour of study, the gains are the amount of material covered. There are also costs associated with each. The production costs involve the cost of the resources involved an the cost of their alternative uses. The costs of studying are the opportunity costs of what you have to give up, whatever it is sleep, socializing or working. In terms of marginal analysis, the marginal benefit of the additional unit of output is the change in total benefits form one unit change in output. The marginal benefit is the benefit weighed against the status quo. This can be expressed mathematically as the change in total benefits divided bt the change in the quantity of output. The same is true for marginal cost. Marginal cost is the increase in costs from producing one more unit of output, or the change in total cost divided by the change in quality of output. The marginal cost is the cost weighed against the status quo. Looking at costs and benefits in this way is referred to as making decisions at the margin, and this is the method used in the study of economics.

Explain the role of profit as the incentive to entrepreneurs in a market economy.

Financial incentives are the key to the functioning of a market economy. All market participants are willing to take a risk for the opportunity of being a financial success. Entrepreneurs are willing to undertake the risk of new business ventures for monetary gain. Resources move into higher than normal rate of return industries because they are attracted by the profit potential. Inventors are willing to take the risk of spending time and money to come up with new products in the hope of monetary gain. All of these represent the ways financial incentives operate in a market economy. The existence of economic profits in a industry functions as a market signal to firms to enter the industry. Economic profits means there is an above normal rate of return in this industry. As the number of firms increase, the market supply curve shifts to the right. Assuming cost curves stay the same, the expansion continues until the economic profits are eliminated and the industry earns a normal rate of return. Depending on the level of capital intensity, this process might take a few years or it might take many years. The easier it is to shift resources from one industry to another, the faster the process will be. But the expansion will continue as long as there are economic profits to attract firms. Resources will go where they earn the highest rate of return especially if they earned a lower than normal rate of return. Without a profit incentive there would be no reason for firms to spend millions and billions on research and development and technological progress would be almost nonexistent. This was a problem in the planned economies in the Soviet era. There were little or no financial incentives to innovate. Firms met their quotas and targets, workers received their paychecks and that was that. Since the means of production were owned by the state, there was no incentive to improve technology or develop a new production process. The individual had no reason to take the risks involved in entrepreneurial activities because there was noting in it for him/her but a letter of commendation. The results were a slow, inefficient production process. The entrepreneur is willing to take the risks. He/she knows there is a good probability that his/her business will fail, but there is also a chance that will succeed and there is a remote chance that it will be another Microsoft. Given this, entrepreneurs risk their own money and investors risk money on the chance that the business venture will succeed. If the venture isn't successful, the consumers are telling that business that they don't want their scarce resources used in that way. Profits are the market signal that indicate the proper allocation of resources in accordance with consumer preferences. Express prof its, or an above normal rate of return, signal an expansion as resources are attracted into the industry.

Describe the economic and social effects of government fiscal policies

Fiscal policy refers to changes in the levels of government spending and taxation. All three levels of government engage in fiscal policy that has economic and social effects. At the state and local levels, the purpose of government spending and taxes is to run the state and local government. When taxes are raised at the state or local level, the purpose is to provide revenues for the government to function, not to affect the level of aggregate spending in the economy. Even so, these taxes still have economic and social effects on the local population that has less money to spend. Local merchants may see a decrease in their revenues form less spending, in addition to having to pay taxes themselves. When state and local governments spend money through local programs, like repairing or building roads, the effect is to inject money into the local economy even though the purpose is to promote transportation. Fiscal policy at the national levels differs from that at the state and local levels because the purpose of the fiscal policy is to affect the level of aggregate spending in the economy. One of the functions of the federal government is to promote economic stabilization. This means to correct for inflation and unemployment. The way they do this is through changing the level of government spending and/or the level of taxation. Inflation occurs when there is too high a level of aggregate spending and there is too much spending in the economy. Producers can't keep up with the demand and the result is rising prices. In this situation, the government implements contractionary fiscal policy which consists of a decrease in government spending and/or an increase in taxes. The purpose is to slow down an economy that expands too quickly by enacting policies that result in people having less money to spend. These policies, depending on how they are implemented, will affect the components of aggregate demand-consumption, investment and government spending. Spending on imports will also decrease. The result of the contractionary fiscal policy will be, hopefully, to end inflation. Unemployment is another macroeconomic problem that requires expansionary fiscal policy. Unemployment occurs due to lack of spending in the economy. There is not enough aggregate demand in the economy to fully employ the labor force. Here the role for government is to simulate spending. If they can increase spending, producers will increase their output and hire more resources, including labor, thus eliminating the problem of unemployment. Expansionary fiscal policy consists of increasing government spending and/ or lowering taxes. The increase in government spending injects money into the economy. Government programs that build roads mean more jobs, more jobs mean more spending and higher level of aggregate demand. As producers see an increase in the demand for their product, they increase their output levels. As they expand, they require more resources including labor. As more of the labor force works, the level of spending increases still further, and so on. Lowering taxes affects the consumption and possibly the investment components of aggregate demand leaving consumers and business with more money to spend, thus leading to a higher level of spending and eliminating unemployment.

Analyze the effects of federal, state and local policies on the distribution of resources and economic decision-making.

Government policies, whether they are federal, state or local, affect economic decision making and in may cases, the distribution of resources. This is the purpose of most economic policies imposed at the federal level. Governments dont implement monetary and fiscal policy at the state or local level, only the national level. Most state and local laws that affect economic decision making and the distribution of resources have to do with taxation. If taxes are imposed or raised at the state or local level, the effect is less spending. The purpose of these taxes is to raise revenue for the state and local government, not to affect the level of aggregate demand and inflation. At the federal level, the major purpose of these policies is to affect the level of aggregate demand and the inflation rate or the unemployment rate. Governments at all three levels affect the distribution of resources and economic decision-making through transfer payments. This brings about redistribution of income to correct the problem of income inequality. Programs such as Food Stamps, AFDC (welfare), unemployment compensation, and Medicaid all fall into this category. Technically, these government transfer programs result in a rearrangement of private consumption, not a real reallocation of resources. Price support programs in agriculture also result in a redistribution of income and a misallocation of resources. The imposition of artificially high prices results in too many resources going into agriculture and leads to product surpluses. Laws can be enacted at all three levels to correct for the the problem of externalities. An externality occurs when uninvolved third parties are affected by some market activity, like pollution. Dumping noxious or poisonous wastes into the air and water means that the air and water are being treated as a free input by the firm. The market does not register all the costs of production because the firm does not have to pay to use the air or water. The result of free inputs is lower production costs for the firm and over allocation of resources into the production of the good the firm is producing. The role of government here is to cause a redistribution of resources by somehow shifting all or part of the cost onto the offending firm. Government can impose fines, taxes, require pollution abatement equipment, sell pollution permits, etc. Whatever method chosen, this raises the costs of production for the firms and forces them to bear some of the cost. Policies can be. Enacted in order to encourage labor to migrate from one sector of the economy to another. This is primarily done at the national level. The United States economy is so large that it is possible to have unemployment in different areas while the economy is at full employment. The purpose here is to cause unemployed labor in one area to migrate to another area where there are jobs. State unemployment and labor agencies provide the information for these people.

Describe the processes, patterns and functions of human settlements from subsistence agriculture to industrial metropolis.

Human communities subsisted initially as gatherers-gathering berries, leaves etc. With the invention of tools it became possible to dig for roots, hunt small animals and catch fish from rivers and oceans. Humans observed their environments and soon learned to plant seeds and harvest crops. As people migrated to areas in which game and fertile soil were abundant, communities began to develop. When people had the knowledge to grow crops and the skills to hunt game, they began to understand division of labor. Some of the people in the community tended to agricultural needs while others hunted game. As habitats attracted larger numbers of people, environments became crowded and there was competition. The concept of division of labor and sharing of food soon developed in more heavily populated areas. Groups of people focused on growing crops while others concentrated on hunting. Experience led to the development of skills and knowledge that made the work easier. Farmers begin to develop new plant species and hunters began to protect animal species from other predators for their own use. The ability to manage the environments led people to settle down, guard and manage their resources. Camps soon became villages. Villages became year-round settlements. Animals were domesticated to meet the needs of the village. Pottery was developed storing and cooking food. By 8000 BCE, culture began to evolve in these villages. Agriculture was developed for the production of grain crops, which led to a decreased reliance on wild plants. Domesticating animals for various purposes decreased the need to hunt wild game. Life became more settled. It was then possible to turn attention to such matters as managing water supplies, producing tools, making cloth, etc. There were both social interaction and the opportunity to reflect upon existence. Mythologies and religions began. Two things seem to have come together to produce cultures and civilization: agriculture and the development of centers of the community with literate social and religious structures. The members of these hierarchies then managed water supply and irrigation, religious life, and extorted their own right to use a portion of the goods produced by the community for their own subsistence in return for their management. As trade routes developed and travel between cities become easier, trade led to specialization. Thus, in turn, leads to increased attention to refinements of technique and the sharing of ideas. The knowledge of a new discovery or invention provides knowledge and technology that increases the ability to produce goods for trade. As each community learns the value of the goods it produces and improves its ability to produce the goods in greater quantity, industry is born.

Describe the circumstances surrounding the establishment of principal American labor unions, procedures that unions use to gain benefits for their members, and the effects of unionization, the minimum wage and unemployment insurance.

Labor unions in America arose in response to deplorable working conditions. Employees has no say in their working conditions and began to join forces to try to obtain some input. Viewed in this perspective, the history of the labor movement can be traced back to colonial period as workers banned together and with other labor organizations in support of different goals. The workers that engaged in these activities were subject to actions from dismissal to blacklisting. It wasn't until 1881 that the first permanent union structure was founded on the principles of Samuel Gompers. This became known as the American Federation of Labor and was based on three principles-practical business unionism, which is the belief that unions should only concern themselves with the problems of their members: working conditions, hours, wages, job security, etc.; political neutrality; and trade autonomy, the belief that unions should be organized on the basis of trade. Three should be one union for each craft or trade; there should not be unions consisting of members from all trades. The AFL organized only craft or race workers, and not industrial workers. The large pool of industrial workers was eventually organized by Congress of Industrial Organization, and in 1955 the two merged to become AFL-CIO. The unions have various methods they can use to obtain benefits for their members. They have supported the enactment of various kinds of labor law legislation that eventually regulated both sides of the labor market, union and employers from various unfair labor practices such as yellow-dog contracts, boycotts, featherbedding and hot cargo clauses. They have also supported legislation that resulted in a minimum wage and unemployment insurance. The most direct way of obtaining benefits has been through the collective bargaining process. Collective bargaining referees to the negotiation of a labor agreement or the settling of a grievance under an existing contact. When the union and the employee can't come to terms, the union will strike. During a strike the union members withhold their labor service. The purpose is to put financial pressure on the employer. The employer can respond with a lock-out, which pits pressure on the employer. Eventually an agreement is reached, with or without a strike or lock-out. Minimum wage legislation is a legally mandated wage support. Unemployment Insurance is a program that provides for unemployed workers. The unemployed individual does not have to be a union member to collect unemployment.

Analyze the effects of international mobility of capital, labor and trade on the U.S. economy.

Markets, today, are international in almost all respects. In this age of computers and technology, doing business across international business is almost as easy as doing business with the firm down the block. The international mobility of capital, labor and trade effects all markets and sectors of the economy, except defense. International mobility of factors means that the factors will go where they earn the highest rate of return, whether the factor is capital or labor. These events are happening today with foreign outsourcing and relocating plants overseas in response to lower costs. Call centers are being relocated or established in foreign countries like Pakistan, India, and other countries because of lower labor costs. These lower costs make the company more profitable. Relocating a plant in another country means the differential is great enough to cover shipping costs. Financial capital also belongs to international markets. Investment funds are truly international, going wherever the highest rate of return is. If interest rates are higher in country A than in country B, funds will flow from country B to country A. This interest rate differential results in an appreciation in country A's currency relative to country B's currency, as units of currency from country B are converted into country A's currency. The flow will continue as long as the interest rate differential exists. Borrowers needing loans will engage in a international search, if necessary, to obtain the best rate instead of confining themselves to domestic markets with higher rates. None of these activities is difficult in the era of computers. All of these factors tie in tightly with international trade. Markets are international. Firms locate plants where labor costs are low in order to increase their profitability. Workers migrate across international borders in response to better employment terms and conditions. Countries specialize in the production of the goods which the can produce at a lower cost than their trading partners. All these factors combine to cause structural changes in the economy as the various sectors adjust to the changes brought about by membership in the international economy. These displaced workers have to find employment and may require retraining. Businesses must diversify and innovate enough to make them competitive in the international economy. This may mean developing new products and services that are demanded in international markets.

Assess the tradeoff between efficiency and equality in modern mixed economies, using social policies as examples.

Modern mixed economies do not result in an equal distribution of income for all of their members. Some people are very rich and some people are very poor. The remainder of the population is somewhere in-between. The reason is that not everyone has the same resource skills to supply in the input market from which they derive their income. The fact that they don't supply the same skills means that they don't all receive the same income. Resource owners supplying highly demanded rare skills receive more compensation than supplying little or no skills: the more abundant the skills or lack of skills, the lower the compensation. An efficient economy does not result in an equal or equitable distribution of income. This is a fact of capitalism. A role for government then is to implement certain kinds of social policies to correct for the income inequality resulting for a market economy. These policies basically effect a redistribution of income from those in the higher income brackets to those in the lower income brackets. There are different ways to accomplish this redistribution. One way of restricting income is through the federal income tax system. Taxes can be progressive, regressive or proportional. A progressive tax is when the tax rate increases. Those in a higher income brackets pay a larger percentage of their income in taxes than those in lower income brackets. The federal income tax rate decreases as the level of income increases. Here, the tax rate is higher on lower income brackets than on higher income brackets. The social security tax is in this category. A proportional tax is where the tax rate is the same for all income levels. Sales tax is an example of a proportional tax. The progressive tax is based on the idea of equity, that tax burden should be heavier on people with higher income than on people with lower incomes. There are many social programs that distribute transfer payments. This is another way of bringing about distribution of income to correct for the inequities of a mixed economy. Transfer payment programs are programs such as food stamps, Aid to Families with Dependent Children (AFDC) which people refer to as welfare, Medicaid, etc. All of these programs redistribute tax dollars from the upper income levels for a specific purpose, whether its food, medical care, support of children, etc. With the exception of AFDC, they are known as in-kind programs became the aid is geared to a specific area and supplies the good or service instead of supplying cash payments. Agricultural price support programs also bring about a redistribution of income from the population to the agricultural sector by legally mandating prices higher than the market would set. The farmers could not survive without this program and they produce the food for the nation. All of these programs are implemented to try to correct for some of the inequalities that result form a market economy.

Describe how measures of economic output are adjusted using indexes.

Most measures of economic output are expressed in terms of dollars. The purchasing power of the dollar can change due to inflation and economic growth. Output figures, such as Gross Domestic Product, show fluctuations from year to year. There is no way to know whether these fluctuations are due to actual differences in the level of output or whether they are due to inflation and changes in the price level unless the figures are expressed in terms of consistent dollars. This is a way of adjusting for inflation or controlling for the changes in the value of the dollar. Real GDP or consistent dollar GDP is GDP adjusted for inflation. Nominal, current dollar or unadjusted GDP refers to GDP figures in dollars that have not been adjusted for inflation. The construction and use of the GDP deflator is rather simple. The first step is to select one year to be the base year and then use that year to construct the price index. It dosn't matter what year is selected as long as the information is stated. The formula is: Price index= Price in any year/Price in base year X 100 This index number is used to compute the real GDP figure. The formula is given below: Real GDP= Nominal GDP/Index Number This formula takes the GDP figure for any year and expresses it in base-year dollars. GDP figures over any period of time will be expressed in dollars that have same value as the dollar has in the base year. Any differences in GDP are the result of real changes in the level of output and are not due to changes in the dollar's value. Therefore, meaningful comparisons can be made between the years. Economists do not want to work with raw unadjusted data because they will not know if the changes are form actual output levels or changes in the dollar.

How are influential currency exchange rates are determined and what is their significance.

Nations are free to choose their own form of exchange rate regime. Most major world currencies float, with their exchange rate value being determined by supply and demand. This has been the situation since the early 1970s when the regime of fixed exchange rates collapsed. Currency values are relative prices: one currency is expressed in terms of another currency, i.e., U.S. dollars per Euro, Mexican Peso per Venezuelan Bolivar, etc. The term one U.S. dollar has no meaning in world markets without being expressed in terms of another currency. Currency values can be expressed as U.S. dollar, or how many British pounds do you get for one U.S. dollar. One is just the reciprocal of the other. In a clean float, supply and demanded factors for each currency in terms of another are what determine the equilibrium price of the exchange rate. A clean float is a market functioning without any government interference, purely on the basis of demand and supply. Sometimes nations will intervene in the market to affect the value of their currency vis-a-vis the other currency. This situation is referred to as a managed or dirty float. A government is not required to intervene to maintain a currency value , as they were under a regime of fixed exchange rates. A government that intervenes in the currency market does so because it wants to, not because it is required to intervene to maintain a certain exchange rate vale. For example, if the U.S. government thinks the dollar is depreciating too much against the Canadian dollar, the U.S. government will buy U.S. dollars in the open market and pay for them with Canadian dollars. This increases the demand for U.S. dollars and increases the supply of Canadian dollars. The U.S. dollar appreciates, or increases in value, and the Canadian dollar depreciates, or decreases in value, in response to the government intervention. A stronger U.S. dollar means Canadian goods are cheaper for Americans, and American goods are more expensive for Canadians. Not all nations have floating exchange rate regimes. Some nations base the value of their currency on another nation's currency, or they tie or peg their currency value to another currency, usually a trading partner's currency. Then the tied currency moves up or down in the market just as the currency it is tied to does. The exchange rate is basically fixed against the currency it is tied to but floats versus the rest of the world. Fixed exchange rates can lead to various economic problems through the Balance of Payments. The only way that nations could correct for Balance of Payment problems was through the imposition of trade restrictions and trying to bring their exports and imports under control. Since the movement today is toward free trade and specialization according to comparative advantage, floating exchange rates are more suitable goals.

Describe the aims and tools of monetary policy and its economic and social effects.

Nations need a smoothly functioning banking system in order to experience economic growth. The Federal reserve implements monetary policy through the banking system and it is a tool used to promote economic stability at the macro level of economy. There are three components of monetary policy: the reserve ration, the discount rate and open market operations. Changes in any of these three components affect the amount of money in the banking system and thus, the level of spending in the economy. The reserve ratio refers to the portion of deposits that banks are required to hold as vault cash or on deposit with the Federal Reserve. The purpose of this reserve ratio is to give the Fed a way to control the money supply. These funds can't be used for any other purpose. When the Federal Reserve changes the reserve ration, it changes the money creation and lending ability of the banking system. When the Federal Reserve wants to expand the money supply it lowers the reserve ration, leaving banks with more money to loan. This is one aspect of expansionary monetary policy. When the reserve ratio is increased, this results in banks having less money to make loans with, which is a form of contractionary monetary policy, which leads to a lower level of spending in the economy. Another way in which monetary policy is implemented is by changing the discount rate. When banks have temporary cash shortages, they can barrow from the Federal Reserve. The interest rate on the funds they barrow is called the discount rate. Raising and lowering the discount rate controls the money supply. Lowering the discount rate encourages banks to borrow from the Federal Reserve, instead of restricting their lending to deal with the temporary cash shortage. By encouraging banks to borrow, their lending ability is increased and this results in a higher level of spending in the economy. Lowering the discount rate is a form of expansionary monetary policy. Discouraging bank lending by raising the discount rate, then is a form of contractionary monetary policy. The final tool of monetary policy is called open market operations. This consists of the Federal Reserve buying or selling government securities with the public or with the banking system. When the Federal Reserve sells bonds, it takes money out of the banking system. The public and the banks pay for the bonds, thus resulting in fewer dollars in the economy and a lower level of spending. The selling of bonds by the Federal Reserve is a form of contractionary monetary policy that leads to a lower level of spending in the economy. The Federal Reserve is expanding the money supply when it buys bonds from the public or the banking system because it pays for those bonds with dollars that enter the income-expenditures stream. The result of the Federal Reserve buying bonds is to increase the level of spending in the economy.

Describe the effect of price controls on buyers and sellers.

Price controls interfere with the market's ability to arrive at an equilibrium price that equates supply and demand. Price controls rob the market of what is called the rationing function of prices, the ability to adjust to equate demand and supply. Price controls are administratively imposed prices above or below the market equilibrium. A price imposed above the market equilibrium price is called price floor. It represents the lowest price that can be charged for the good. The price of the good cannot fall below the price floor. At the imposed floor price, the market cannot equate supply and demand. The higher legally mandated price results in a larger quantity supplied as sellers are willing to supply larger quantities at higher prices than they are at lower prices. The higher price also means that buyers don't want as many units of output. Buyers are willing and able to buy larger quantities at lower prices than at higher prices. The legally imposed floor price results in a situation where quantity supplied is greater than quantity demanded, or there is a surplus of the good and there is no way that the market can function to eliminate the surplus because it can't lower prices to attract more buyers. This has been the situation in agriculture for years. Price supports needed for the farmer's survival result in overproduction and surpluses in agriculture goods. A price ceiling is a legally imposed price below the market equilibrium. Its purpose is to keep prices from rising, as in periods of severe inflation. With a price ceiling, the lower price results in a smaller quantity supplied by sellers. The lower price means an increase in quantity demanded by buyers, who want to buy larger quantities at lower prices than at higher prices. The result is a situation where quantity demanded exceeds quantity supplied, or a shortage. There is no way for the market to eliminate the shortage with buyers bidding up the price for the available quantity. The legally imposed price means that the price can't rise to eliminate the shortage will remain as long as the price controls are in effect. When the price ceilings are lifted, prices usually shot upward as buyers and sellers try to make up for lost time. Price controls, whether they are ceilings or floors, are never a good way to deal with economic problems. They result in misallocation of resources. Price floors as in agriculture, result in an over allocation of resources to that industry and an overproduction of output that the market cannot eliminate by lowering prices. The resources used in agriculture are not used elsewhere where they might be more productive. The price ceiling causes the opposite: and under allocation of resources and underproduction of output. Consumers don't get enough of the output that they want and resources are used inefficiently. Any interference with market results in a misallocation.

Explain and analyze how prices reflect the relative scarcity of goods and services and perform the function of allocation in a market economy.

Prices serve an important function in a market economy. Prices are determined by the interaction of demand and supply in the market place. Relatively speaking, the scarcer the supply is the higher the price of the resource is: the more abundant the supply is, the lower the price of the resource. Diamonds cost more than water. Water is more abundant than diamonds and water is easier to obtain. Prices function to allocate the supply of a resource or good to those who are willing and able to pay for it. The supply curve is based on the production costs of sellers and embodies the sellers selling decisions. If his production costs increase, he will sell fewer units of the good at each price. This is reflected by a leftward shift in his supply curve. If his production costs decrease, he will sell more units of the good at each price. This is represented by a rightward shift of his supply curve. This is the supply side of the market. On they buying side of the market, the consumers buying decisions are given by the demand curve. This curve represents the quantities of the good the consumer is willing and able to purchase. If a consumer will buy more at each price, there is a rightward shift to his demand curve. A leftward shift of the demand curve represents a decrease in demand. Putting the demand and supply side together, we have the market equilibrium at the intersection of demand and supply. The equilibrium price equates the buying and selling decision of each side. Those buyers and sellers who are willing and able to transact at the equilibrium price are included in the market. Those who can't or won't transact at the market price are excluded from the market. This is true whether the good resources or an output. Both input and output markets function on the basis of supply and demand. Both markets arrive at equilibrium prices that allocate the resource or good to those who are willing to transact at that price. If the resource market is labor, the wage rate is the equilibrium price for occupations like clerks. The frim can hire all of the clerks it wants at the market rate. If the firm won't pay the market wage, the clerk will find employment someplace else. The owner has little incentive to pay higher than the market rate, because of the supply of clerks available at the market rate. If they employer wants to hire a professional, such as an engineer, he has to pay a higher rate because of the greater amount of education and skills involved in the job. If he won't pay the higher rate, he likely will not find an engineer to employ. Again, price performs its allocation function that results in an efficient allocation of resources. If prices weren't based on scarcity, they couldn't perform this allocation and there wouldn't be an efficient allocation of resources.

Debate the role of private property as an incentive in conserving and improving scarce resources, including renewable and nonrenewable natural resources

Private property rights play an important role in the conservation of resources and the improvement in the allocation of scarce resources. We have problems in our society that result from the lack of ownership of resources, whether they are renewable or non-renewable. An example of this is pollution. Why does air and water pollution occur? Why do firms emit noxious emissions into the air, if they are not restrained from doing so? Nobody owns the air; therefore the air is treated as a free input into the production process. It doesn't cost the firm anything to use the air, in terms of monetary cost. The firm, for the most part, just opens the doors and windows and expels the obnoxious emission. If the firm couldn't do this, it would have to devise and pay for a technology that would eliminate noxious emissions. This represents a change in the production process because of the increased equipment and labor activities required to deal with the emissions that the firm no longer can just emit into the air. If the firm had to pay for the air, it would have higher costs of production. It wouldn't waste the air because it would have to pay for it, as it pays for other input. It was the lack of ownership of the air that leads to its use as a free good and its waste. Since nobody owns the air and property rights can't be assigned, there is inefficiency and a misallocation of resources associated with the pollution. What can government do in this situation to try an correct for misallocation of resources? Since they can't assign property rights for the air, they can do things to put a penalty on the creation of pollution. This is the theory behind fines for pollution and the sale of pollution permits. They can also require the installation of new technology to prevent the pollution. Each of these remedies is an attempt to put a price on air. Air no longer is a free input into the production process and the misallocation of resources is somewhat corrected for. Private property rights play an important role in resource allocation in our economy. If the pond next door to you is owned by your neighbor. Since the owner of a resource must be compensated, private ownership results in prices being assigned to resources. These prices, based on scarcity, result in an efficient allocation of resources. Without these prices, there is inefficiency and waste of scarce resources whether they are widgets or water. Without private ownership of resources there is no incentive to be efficient and to conserve scarce resources. This is where a role is defined for government to somehow correct for the misallocation and inefficiency caused by the lack of ownership rights.

Explain and analyze the roles of property right's, competition, and profit in a market economy.

Property rights, competition and profit are all factors involved in the efficient allocation of resources in a market economy. The assignment of property rights prevents waste and inefficient use of resources. An example of this is an industrial firm dumping waste into a river, causing water pollution. The river is a free input to the firm because there is no assignment of property rights with an owner demanding compensation for the use of his property. If the firm had to pay for the use of the river, its production costs would be higher and the firm would produce less output for the given level of costs and change a higher price for its item. The lack of property rights' assignment results in overproduction of the item-too many resources are being used in the production of that item. This may give the firm an undue edge in the market because the firm can change a lower price than competitors who have to pay for a way to deal with their wastes. The misallocation of resources must be corrected for in some way with fines, requiring pollution abandonment technologies, the sale of pollution permits, or other methods the community deems fit. The result is higher costs for the firm who now lowers its production levels. This somewhat corrects for the over allocation of resources and forces the firm to be more competitive. Competition guarantees a more efficient use of society's resources. Firms have to compete with other firms for the available supply of resources to use in production. They have to compete with other firm to win the consumer's dollar. Competition means that they have to be efficient in order to survive. If they aren't using an efficient production process, they will have higher costs than their competitors. This means they will have to change a higher price for their product than their competitors do. Consumers who shop around will buy the product at the lowest possible price. Eventually the higher cost, more inefficient firm will be forced out of business. Consumers, who vote with their dollars, are buying the same product at a lower price for the competitors of the higher priced firm. The lower priced, more efficient firms will have higher sales and profits while the inefficient, higher cost firms will experience losses. Lack of profits result in the inefficient firms leaving the industry as the owner's resources are shifted into industries where they can earn a better rate of return. Markets function on the basis of competition leads to efficiency in the use of resources. Resource owners want to get the best price for their resource. Producers want to get the best price for their output. Buyers want to get the best deal for the product they are purchasing. All of these factors combine to result in an efficient allocation of resources or resources that are used in accordance with the preferences of society. Inefficiency is eliminated by competition in the market place and the inefficient firm goes out of business due to lack of profit.

Define, calculate, and analyze the significance of the changes in rates of unemployment, inflation, and real Gross Domestic Product.

Real GDP, the unemployment rate, and the inflation rate are economic indicators. They reveal what is happening in the economy. Inflation refers to a rise in the general level of prices which causes a decrease in the purchasing power of the dollar. This basically means that one dollar does not buy as much as it did before. Policy makers need information on inflation because it calls for contradictory policies in an economy that is expanding too rapidly. The inflation rate is computed for index numbers. The formula is: Price Index= Price in any year/Price in base year X 100 Any year in the series can be selected as the base year and it is then used to compute the index number for the rest of the years, as given in the above formula. The index numbers are then used to compute the inflation rate using the formula below: Inflation Rate= this year's index# - last year's index #/Last year's index # The unemployment rate refers to the percentage of labor force that is unemployed, or: Unemployment rate refers to the percentage of the labor force that is unemployed, or: Unemployment Rate= Number of People Unemployed X 100/ Number of People in Labor Force The labor force is not one hundred percent of the population. It includes people who are capable of working and are willing to work and are either working or actively seeking employment. Excluded are people who can't work (under the age of sixteen, institutionalized) or who could work but chose not to work, such as stay-at-home parents, full-time students, and retirees. The labor force is roughly one-half of the population. The Gross Domestic Product is a measure of the economy's current output. It is calculated as the sum of its components: consumption, investment, government spending and next exports. GDP= C + I + G + (X-M) Since GDP is a measure of current output and expressed in current dollars, it must be converted to real terms with GDP deflator. This index number The is used to compute the real GDP figure. The formula is given below: Real GDP= Nominal GDP/Index Number Real GDP figures, along with the unemployment figures, tell is the state of the economy. An economy is a recession needs to be stimulated with expansionary monetary and fiscal policy, just as an economy that expands too rapidly needs to be slowed down with contractionary monetary and fiscal policy. Economists and government policy makers can work with the figures and determine the strength of the policy that is needed. They also watch the unemployment, inflation and GDP figures to ascertain whether the policy is working, and, if not, what else needs to be done.

Describe and analyze the relationship of the concepts of incentives and substitutes to the law of supply and demand.

Supply and demand perform important functions in a market economy. Supply and demand make markets function efficiently. Supply is defined as the quantity of a good or service that a producer is willing to make available. Demand is defined as the quantity of goods and services that a buyer is willing and able to buy. The consumers equilibrium occurs where selling decisions of producers are equal to the buying depictions of consumers, or where the supply and demand curves intersect. This gives us the market equilibrium price and quantity and results in an efficient allocation of resources in accordance with consumer preferences. In other words, producers use society's resources to produce the goods and services that society wants. Producers know this because they have a profitable business. Incentives and substitutes affect the market situation. Incentives for consumers are things like sales, coupons, rebates, etc. The results in increased sales for the firm, even through there is a cost to the incentives. There is a change in the market equilibrium situation and possibly market shares. The increased demand coupled with brand loyalty means the firm will be able to raise prices at some point and not lose their customers. On the production side, incentives to innovate result in increased output at lower costs, or more profit and greater market share for the innovating firm. The individual inventor also experiences financial rewards. Many firms reward employees who propose time or money saving suggestions. Many of these effects are absent without the use of markets. Supply and demand serve the function of registering the wishes and decisions of producers and consumers with the market tabulating these results. This leads to efficiency. Using a bare rat to substrate for the role of supply and demand, leads to inefficiency in both production and consumption. Consumers are no longer directing the allocation of resources with their dollars. They may not be getting the goods and services that they want their society's resources used for. Prices are not efficient because they don't have their allocation function. Incentives don't function in the same way. Most consumers don't buy what they don't want even if it's on sale. The result in trying to sub substitute in some way for the supply and demand functions of the market is in both production and consumption. This means higher production costs and more waste.

Analyze the current U.S. economy and the global market that helps support it, including the types of goods and services produced, the types of skills in demand, the effects of rapid technological change, the inter-and intra-regional shifts in employment, and the impact of international competition.

The United States is a well-endowed economy with a diversified resource base, yet it is dependent on the global economy to supply goods and labor that it cannot supply itself or to perform tasks that it cannot perform at the same level of costs. The United States can best be characterized as a capital-technological intensive economy. This means that its strength is in the production of goods requiring capital and technology, which is why we import so many labor intensive goods that other countries can produce cheaper than we can. This is why there is so much outsourcing with call centers moving to India, Pakistan and other countries. The United States also needs foreign labor for its agriculture sector. Without low-cost foreign labor, farmers would have to pay much higher wages to attract domestic workers to the agriculture sector. This would result in higher food costs. Despite its well-diversified resource base, the United States cannot and does not produce all of the goods it consumes, even in agriculture. Coffee and tea as well as other food are imported. We import a great deal of labor intensive clothing products because they can be produced at a relatively lower cost in other parts of the world, which is also a way of providing employment to workers in other parts of the world. There is little demand for labor intensive workers in the United States. There is more of a demand for capital intensive workers or technology oriented providers of services. Rapid technological change causes effects through the economy as firms, industries and workers try to keep up. Rapidly changing technology costs money to implement. Today's labor force is highly mobile and moves around the country for employment purposes. A new plant opening in a particular religion will possibly attract labor from other areas as workers go where the jobs are. So inter- and intra-regional shifts in employment are not uncommon as workers train for new jobs and move to begin new employment. Some of this is also in response to international competition that makes certain job skills obsolete as plants move out of the country to benefit from lower wages. International competition brings about a restructuring of the labor market as firms leave high-wage countries like the United States and locate their operations in low-wage countries to keep their low costs low. The displaced workers must acquire new skills to make them employable in areas where there is a demand for labor. This may include retraining or acquiring the skills for an entirely different occupation.

Distinguish between short and long-term interest rates and explain their relative significance.

The interest rate is the price the borrower pays to the lender for the privilege of borrowing funds. Since loans are for different periods of time, there are different rates of interest. This is where the terms short-term and long-term interest rates comes form. What we are talking about here are the debt obligations of the United States government, or U.S. Treasury securities. These are T-bills, T-notes and T-bonds and they differ for one another in time to maturity. A t-bill is a short-term instrument that matures in one year or less. A T-note has a maturity time form one to ten years. The T-bond is the long term instrument that matures in more than ten years. These fixed income securities are a way of lending money to the U.S. government and they carry a specified rate of interest called the coupon. There is an inverse relationship between bond prices and interest rates. This means that when interest rates rise, bond prices fall and vice-versa. All interest rates are related. Different kinds of bonds of the same time duration that have different coupons, differ in terms of risk. This is called the risk structure of interest rates and it is affected by risk, liquidity and income tax rules. An example of this would be the difference between a T-note and a municipal bond. Risk refers to the chance of default. U.S. government debt obligations are considered to be free of risk. This is not true of other bonds especially private bonds. Some bonds have a risk premium, which is an additional amount of interest to compensate the holder for the risk of default. Another factor affecting the risk structure is liquidity. Bonds do not have to be held to maturity. They can be sold. Liquidity refers to the ease with which the bond can be sold. The more difficult it is to sell the bond, the greater the amount of interest required to compensate the holder of the bond. The income tax rules treat different kinds of bonds in different ways. This also enters into the interest rate. The term structure of interest rates refers to bonds that differ only in their terms of maturity. These bond have the same risk, liquidity and tax treatment so the only difference between them is the amount of time to maturity. Each maturing time period has its own sequence of interest rate bond yields and is referred to as the term structure. The difference between any two securities that mature at different times is the expected interest rate. A plot of the yields these different maturities results in what is called the yield curve. This plot describes the term structure of interest rates or the relationship between interest rates during different times to maturity Longer term interest rates are based on short term interest rate factors and corporate expectations about future interest rates is probably the simplest way of explaining this.

Analyze how domestic and international competition in a market economy affects the quality, quantity, and price of goods and services produced.

The introduction of international competition results in greater efficiency in the allocation of resources. International trade that takes place on the basis of comparative advantage results in lower output prices and higher resources prices. According to trade theory, nations or regions should specialize in the production of the good which they can produce at a relatively lower cost than another country can. In other words, if in country A one unit of X costs one unit of Y, and in country B one unit of X costs three units of Y, X is cheaper in country A. If country B can produce one unit of W for one unit of Y and country A can produce one unit of W for three units of Y, then W is cheaper in country B. This does not take into account shipping costs. Therefore, country A has the comparative advantage in the production of X. Country B has the comparative advantage in the production of good W. Theory says that each country should specialize in the production of the good in which it has the comparative advantage and trade for the other good. This means country B should B should use all of its resources to produce good W and trade for good X. Country A should do the opposite and specialize in the production of good X and trade for good W. Specialization and trade on the basis results in lower prices in both countries, or regions, and greater efficiency in the use of resources. Each country will also experience increased consumption since it is getting the maximum amount of output for its given inputs by specializing according to comparative advantage. Each county, or region, can consume its own goods and the goods it has trade for. The introduction of national or international competition into into a market can result in greater efficiency if the trade is without restrictions, like tariffs or quotas. A tariff is a tax placed on imported goods. Consumers in both countries have more output at lower prices. The introduction of completion forces existing firms to be more efficient as they strive to be more competitive. If they can't compete with the new competition and they don't have any form of protection, they will eventually go out of business. If they go out of business, there will be unemployment until workers find new jobs. Adjustments take place in both economies, as with NAFTA, as input and output markets adjust to the new conditions, but the end results, whether free trade is introduced into a new region or trade barriers are removed between existing trading partners, is that consumers have a wider variety of products, usually of better quality and at lower prices than they had before. There is greater efficiency in the allocation of resources because each resource is being employed in its most productive capacity. The longest run result is increased benefits for both of the most trading partners. Even if the short run effect of trade is unemployment as resources shift into more productive uses, both countries will benefit in the end.

Recognize the interrelationship of environmental and social policy.

The purpose and aim of social policy is to improve human welfare and meet basic human needs within the society. Social policy addresses basic human needs for the sustainability of the individual and the society. The concerns of social policy include food, clean water, shelter, clothing, education, health and social security. Social policy is part of public policy, determined by the city, the state, the nation, or the multinational organization responsible for human welfare in a particular region. Environmental policy is concerned with the sustainability of the earth, the region under the administration of the government group or individual or a local habitat. The concern of environmental policy is the preservation of the region, habitat or ecosystem. Because humans, both individually and communally, rely upon the environment to sustain human life, social and environmental policy must be mutually sustainable. If modern societies act without regard for the sustainability of the earth, it will become impossible for the earth to sustain human existence. Environmental policies must recognize that planet is the home of humans and other species. For centuries, social policies, economic policies, and political policies have ignored the impact of human existence and human civilization upon the environment. Human civilization has disrupted the ecological balance, contributed to the extinction of animal and plant species, and destroyed ecosystems through uncontrolled harvesting. In an age of global warming, unprecedented demand upon natural resources, and a shrinking planet, social and environmental policies must become increasingly interdependent if the planet is to continue to support life and human civilization.

Describe and analyze the debate concerning the role of a market economy versus a planned economy in establishing and preserving political and personal liberty.

The roles of political and personal liberty differ greatly depending on the economic role of the government. The cause of the difference is the role of incentives. A market economy functions on the basis of the financial incentive. Firms use society's scarcest resources to produce the goods that consumers want. Firms know they have a good that society wants when they earn profit. Firms have a good that consumers dont want when they consistently incur losses. Firms with consistent losses eventually go out of business and those resources shift into other industries. Producing goods that consumers do want. Consumers vote for the goods and services they want with their dollars. Technological progress is advanced because of the financial incentives, whether they are personal or corporate. Firms invest in research and development to find newer and more efficient technologies that result in greater output at lower prices. Individuals risk their own time and money on inventions because of the potential financial rewards. They live in the structure of a market economy that allows them the liberty of choosing what to do with their own resources within the confines of the law. Students study whatever it is that they want to major in. There are more scholarships available for certain occupations than others, but the student can still obtain and education whether or not he/she wants to be in one of those needed areas. In a planned economy, particularly one based on public ownership of the means of production, a planning entity substitutes for the market, to varying degrees form partial to total. Instead of so summers voting with their dollars, they have a Burr ratio entity trying to substitute for the functions of supply and demand in making production decisions. This is why panned economies are often plague by a misallocation of resources that result in shortages and surpluses. In most cases, the incentive of financial rewards. There is no financial incentive for the firm to engage in research and development activities, even if they have the authorization to do so. Many planned economies have less personal and political freedom than do market economies. The economy needs resources for a particular area. The labor force is directed into that area by assignment, not by financial incentives. They attract more engineers not by offering a higher salary and more perks for engineers, but by assigning people to be engineer. Their schooling isn't financed if they don't study the required disciplines. It is obvious why there is a differing degree of political freedom in each of the above paradigms. The lack of freedom of choice in a planned economy carries over to the political area. Most planned economies are usually headed by dictators whereas market economies have elected officials. A populace does not vote for and elect those officials who suppress them. A market economy allows for more political and personally freedoms than a planned economy.

Describe the effects of changes in supply and/or demand on the relative scarcity, price, and quantity of particular products.

The supply curve represents the selling and production decisions of the seller and is based on the costs of production. The costs of production of a product are based on the costs of the resources used in its production. The costs of resources are based on the scarcity of the resource. The scarier a resources is relatively speaking, the higher its price. A diamond cost more than than paper because diamonds are scarier than paper. All of these concepts are embodied in the seller's supply curve. The same thing is true on the buying side of the market. The buyer's preferences, tastes, income are embodied in the demand curve. Where the demand and supply and supply curves intersect is where the buying decisions of buyers are equal to the selling decisions of sellers. The quantity that buyers want to buy at a particular price is equal to the quantity that sellers want to sell at that particular price. The market is in equilibrium. What happens when there is a change? Suppose a new big oil field is found. Also suppose there is a technology that allows its recovery and refining at a fraction of the percent costs. The result is a big increase in the supply of oil at lower costs, as reflected by a rightward shifting oil supply curve. Oil is used as an input into almost all production. Firms now have lower costs. This means that the firm can produced the same amount of output at a lower cost. The results is a rightward shift of the industry supply curve. This means that sellers are willing and able to offer for sale larger quantities of output at each price. Assuming buyers' buying decisions stay the same, there is a new market equilibrium, or new point of intersection of the shifted supply curve with the buyers' demand curve. The result is a lower price with a larger quantity of output. The market has achieved a new equilibrium based on the increase in the quality of a resource. If consumer preferences change in favor of widgets there is an increase or rightward shift if the demand curve of widgets. The immediate effects of this change in preference is a shortage of widgets at the given price level. Consumers want to buy more widgets at the original price than sellers want to sell at that price. Consumers who want the widgets will pay a higher price for them, or they will bid up the price of widgets. As a result, there will be a higher price for widgets. The higher price calls forth increased production of widgets to meet the increased demand. Producing more widgets requires the use of more resources, so there is an increase in the demand for the factors used in widget production and a higher price commanded by the resources. The end result of the consumer change in preferences in favor of widgets is increased widget production and a higher cost and price. The price of the output will be affected whenever there is a change in demand or a change in the supply of the resources used to produced the product. Those changes will result in a higher or lower costs to the consumer as the markets adjust to reflect the changes.

Use the concept of comparative advantage to identify the costs of and gains from international trade.

The theory of comparative advantage says that trade should be based on the comparative opportunity costs between two nations. The nation that can produce a good more cheaply should specialize in the production of that good and trade for the good in which it has the comparative disadvantage. In this way both nations will experience gains from trade. A basis for trade exists if there are differing comparative costs in each country. Suppose country A can produce ten units of X with thirty units of Y. Country B can produce 30 units of X with thirty units of Y. What are the relative costs in each country? In country A, one X costs three units of Y and in country B one X costs one unit of Y. Good X is cheaper in country B than it is in country A. Country B has the comparative advantage in the production of X. According to trade theory each country should specialize in the production of the good in which it has the comparative advantage. Country B will devote all of its resources to the production of good X and country A will import good X and specialize in another product. To determine the gains from trade, we must first consider the pre-trade production and consumption positions of both countries. Imagine a country whose pre-trade position was where they could have either 10 units of X or 10 units of Y or any combination in between. Let's assume country A chose a combination of 7Y and 3X. In country B, their resources allowed either 30 units of Y or 10 unites of X or any combination in between. Let's assume country chose the combination of 18Y and 4 X. Now let's consider the the production and consumption situation before and after trade. Before trade, the total production of good Y was 18 from country B and 7 from country A for a total of 25Y. After trade, total world production is 30Y, with country B specializing in the production of Y. For good X, the pre-trade situation was 3 units of X from country A and 4 specializing in the production of X, total world production of X is 10 units. Specialization and trade according to comparative advantage results in the world having 30Y rather than 25Y and 10 X instead of 7 X. This increase is referred to as the gains from trade. Both countries have higher consumption leavers of both goods due to specialization. This example refers to free unrestricted trade. Trade barriers introduce distortions.

Compare and contrast the arguments for and against trade restrictions during the Great Depression with those among labor, business and political leaders today.

Trade theory tells us that free unrestricted trade, without any barriers is best. Free trade leads to the most efficient use of world resources. Any kind of protective measure reduces the volume of world trade and causes higher levels of unemployment and lower levels of income and consumption. Yet nations of the world resort to protective measures when they experience economic difficulties. During the Great Depression in the 1930's, the U.S. enacted the Smoot-Hayley Tariff Act which raised tariffs to their highest level in U.S. history. The result was retaliation from other countries. These actions contributed to the severity and duration of the the Depression. There were basically what are called Beggar Thy Neighbor policies because the purpose was to protect domestic jobs at the expense of the trading partners. The arguments heard for protection today are pretty much the same as they were in the 1930's. The job protection argument is still used. They way to protect American jobs is to restrict imports. Americans will buy more domestically produced goods thus leading to an increase in demand for domestic workers. This is the usual argument heard during periods of recession. Beggar Thy Neighbor policies export unemployment to the trading partners. Another commonly used argument is base on national security. This argument says that industries vital to national defense should be protected from foreign competition: that a nation should be self-sufficient in goods it needs for national defense. Fighters and bombers may be essential but what about the inputs used to make them, such as computers and paper clips? Where do you draw the line? New industries usually as for protection from the more developed foreign competitors. This is called the Infant Industry argument which says give the new industries protection until they can grow and compete in the world market. It makes some economic sense, except the industry will adjust to pirating with protection because it removes the pressure from the companies to be competitive. Another common argument is that the high wage domestic labor should be protected from the low wage country imports. People will buy the lower-priced foreign imports, thus lowering demand for the domestically produced product which could cause unemployment. The problem is that these high wage industries should not try to compete with the comparative advantage of the low wage countries. This kind of behavior isn't consistent with trade theory. And finally, there is the cake for an anti-dumping tariff when a nation catches another selling a good at a lower price in the foreign market than in its own domestic market. Dumping is very difficult to prove. Even through the Great Depression occurred many years ago, we still have the same arguments being used for protective trade measures.

Describe the features and economic decisions of Native Americans in California before contact with Europeans.

Unlike other regions of the United States which were dominant by several closely related tribes, California showed a great deal of diversity among its original inhabitants, with dozens of different groups, many not related to one another by language. This was largely the result of the landscape, with its mountains and valleys making it relatively easy for groups to stay isolated and safe. When explorers arrived centuries later, they would describe most native Californians living in small villages of 100 to 200 people. These villages often traded with one another, but the deserts and mountains kept California isolated from the greater North American trade routes. The landscape played other important roles in the lives of the original tribal people. The most common crops to be grown in American agriculture before the arrival of the Europeans were maize (called 'corn' in the modern United States) and potatoes. However, California actually had such short summer growing season that these crops didn't really flourish, and the California tribes never really developed agriculture, unlike many tribes in modern-day Mexico. Instead, they lived by hunting and gathering, as well as by fishing. Deer, elk, and antelope were common sources of meat for many tribal members, and buckeye, sage seed, and even acorns were popular plants. Acorns were the staple of many tribal diets at the time, as they were shelled and ground into a meal that could be made into a bland porridge. Several tribes used controlled burns to prevent larger fires and to clear off land to be used for small gardens, although agriculture never became predominant. Grass would also be gathered up and dried to make baskets and other needed items. California was rich in natural resources and could support a large population, estimated at 300,000 people during the pre-European era; about 13% of the entire native population of the land we now know as the United States. Coastal Miwok used money (small beads, clambshell). Trade was made when necessary for obsidian, deer and knife blades.

Analyze wage differences between jobs and professions.

Wage differences result because workers and jobs are not all alike. Heterogeneity gives rise to wage differences. Wage differences can exist for a variety of reasons: location, danger, benefits, etc. The greater the differences between the jobs, the learner the wage differentials will be. Heterogeneity among workers also result in wage differences. People move to acquire education, training and skills that qualify them for the characteristics of a different group. This is called investing in human capital. The amount of investment in human capital is a source of wage differences. Workers should be paid based on their skills, education and productivity. More highly skilled workers are paid more than those without skills. Migration to new jobs geographically also equalizes wages as the supply of labor curves shift in both areas reflecting the changes in quantity of workers.