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MCAP, Maryland Comprehensive Assessment Program

This page shows a list of test questions in the American Government public release collection at MSDE. American Government
Standard "4.0 Economics," Indicator "4.1.4"

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Expand All Official Practice Test

This is a multiple choice question that allows you to select only one option.

Which of these government actions is designed to lower inflation?

  1. A.
    hiring more government workers
  2. B.
    increasing government loans
  3. C.
    selling government securities
  4. D.
    increasing government spending

This is a multiple choice question that allows you to select only one option.

Read the headline below.

A newspaper headline reads, Unemployment Rates Rise Following Defense Cutbacks.

Which of these does the headline suggest about unemployment rates?

  1. A.
    Rates vary among different geographical areas.
  2. B.
    Rates are affected by government fiscal policy.
  3. C.
    Rates increase as the economy expands.
  4. D.
    Rates decrease as businesses become automated.

This is a multiple choice question that allows you to select only one option.

Which of these sets monetary policy in the United States?

  1. A.
    Federal Reserve System
  2. B.
    Secretary of the Treasury
  3. C.
    Senate Budget Committee
  4. D.
    Federal Trade Commission

This is a multiple choice question that allows you to select only one option.

Which of these actions would the Federal Reserve most likely take to help end a recession?

  1. A.
    print more currency
  2. B.
    reduce the interest rate
  3. C.
    sell government securities
  4. D.
    increase the reserve requirement

This is a multiple choice question that allows you to select only one option.

Which of these best reflects how the federal government manages the economy through fiscal policy?

  1. A.
    taxing and spending
  2. B.
    buying and selling securities
  3. C.
    controlling the money supply
  4. D.
    controlling interest rates

This is a multiple choice question that allows you to select only one option.

Which of these is represented by the Gross Domestic Product (GDP)?

  1. A.
    the amount of reserve that banks are required to hold
  2. B.
    the rate of interest charged on reserves lent to banks
  3. C.
    the total value of goods and services produced within a nation
  4. D.
    the change in the average price of consumer goods and services

This is a multiple choice question that allows you to select only one option.

Which of these consumer activities is most influenced by the Federal Reserve?

  1. A.
    getting a home mortgage
  2. B.
    purchasing a discount airplane ticket
  3. C.
    using a prescription drug
  4. D.
    reading nutritional labels on foods

This is a multiple choice question that allows you to select only one option.

Which of these persons would the United States government count as unemployed?

  1. A.
    a photographer who is her own boss
  2. B.
    a waiter who earns most of his money from tips
  3. C.
    a person who is retired
  4. D.
    an accountant who quits her job to look for other work

This is a multiple choice question that allows you to select only one option.

With which of these government actions is the Consumer Price Index (CPI) most associated?
  1. A.
    imposing economic sanctions
  2. B.
    reducing unemployment
  3. C.
    measuring the rate of inflation
  4. D.
    offering federal business loans

This is a multiple choice question that allows you to select only one option.

Which of these would most likely result if Congress increased the minimum wage?

  1. A.
    States would receive less tax revenue.
  2. B.
    Some companies would raise the price of products.
  3. C.
    Interest rates would be lowered to encourage spending.
  4. D.
    Some cities would raise property taxes on homes.

This is a multiple choice question that allows you to select only one option.

Which of these actions by the federal government would most likely reduce inflation?

  1. A.
    increasing both spending and the money supply
  2. B.
    decreasing both spending and the money supply
  3. C.
    increasing loans to consumers
  4. D.
    decreasing the interest rate

This is a multiple choice question that allows you to select only one option.

Study the graph below.

A line graph is titled, gross domestic product percent change, 1980-2000. The horizontal axis shows years from 1980 through 2000, and the vertical axis is labeled percent change and ranges from negative four through 8. A single line is drawn starting at 1980, 0, going up to 1981, a little more than 2, back down to 1982, about negative 2, up to a maximum of 1984, a little less than 8. The graph then goes down to 1986, about 4 but drops to a local minimum at 1991, a little less than 0, before rising back up to 1998, a little more than 4. Source, Bureau of Economic Analysis.

The information in the graph is mostly about

  1. A.
    the economic growth of the country
  2. B.
    the tax revenues of the country
  3. C.
    the prices of consumer goods
  4. D.
    the tariffs placed on imports

This is a multiple choice question that allows you to select only one option.

Which of these is most closely associated with an economic recession?

  1. A.
    an increase in stock prices
  2. B.
    a decrease in demand for labor
  3. C.
    a decrease in the minimum wage
  4. D.
    an increase in consumer spending

This is a multiple choice question that allows you to select only one option.

Which of these economic indicators would be most useful for determining the rate of inflation?

  1. A.
    the prime interest rate
  2. B.
    the unemployment rate
  3. C.
    Consumer Price Index (CPI)
  4. D.
    Gross Domestic Product (GDP)

This is a multiple choice question that allows you to select only one option.

Read the headline below.

A newspaper headline reads, Continued Rise in Unemployment Rate Leads Federal Reserve to Increase Money Supply.

Which of these best explains the reason for the Federal Reserve's action?

  1. A.
    to encourage consumers to stop spending money
  2. B.
    to make it easier for businesses to borrow money to expand
  3. C.
    to give businesses incentives to decrease their production of goods and services
  4. D.
    to provide more funds for the federal government to use for entitlement programs

This is a multiple choice question that allows you to select only one option.

Which of these is an economic benefit of lower tax rates?

  1. A.
    better public services
  2. B.
    more consumer spending
  3. C.
    expanded government programs
  4. D.
    larger number of government employees

This is a multiple choice question that allows you to select only one option.

Which of these is an example of government fiscal policy?

  1. A.
    creating budgets
  2. B.
    adjusting the discount rate
  3. C.
    conducting open-market operations
  4. D.
    changing the reserve requirement

This is a multiple choice question that allows you to select only one option.

Which of these is a responsibility of the Federal Reserve System?

  1. A.
    collecting taxes
  2. B.
    lending money to individuals
  3. C.
    controlling the money supply
  4. D.
    approving government budgets

This is a multiple choice question that allows you to select only one option.

Which of these is a characteristic of an economic downturn?

  1. A.
    increased employment levels
  2. B.
    increased consumer spending
  3. C.
    decreased government regulation
  4. D.
    decreased production of goods and services

This is a multiple choice question that allows you to select only one option.

Which of these government regulatory agencies enforces legislation to limit or reduce water pollution?

  1. A.
    the Federal Trade Commission (FTC)
  2. B.
    the Food and Drug Administration (FDA)
  3. C.
    the Environmental Protection Agency (EPA)
  4. D.
    the Federal Aviation Administration (FAA)

This is a multiple choice question that allows you to select only one option.

Study the graph below.

A line graph shows a time series entitled, Percent Change in Real Gross Dometic Product (GDP). The horizontal axis is labeled year and ranges from 1973 to 1980 in increments of 1 year. The vertical axis is labeled, Percent Change from Previous Year, and ranges from negative 4.0 to 8.0 percent. A line show jagged points at 1973, midway between 4 and 6 percent, 1974, a little less than 0 percent, 1975, midway between negative 2.0 and 0 percent, 1976 midway between 4 and 6 percent, 1977, a little lower than the point at 1976, 1978, a little higher than the point at 1976, then drops to 1980, a little less than 0 percent.

Which of these best characterizes the condition of the United States' economy between 1975 and 1978?

  1. A.
    a rapidly rising unemployment rate
  2. B.
    increased economic growth
  3. C.
    a constant inflation rate
  4. D.
    steady interest rates

This is a multiple choice question that allows you to select only one option.

If government statistics show rising unemployment and a falling Consumer Price Index, which of these actions should the Federal Reserve take to help the economy?

  1. A.
    increase government spending
  2. B.
    decrease interest rates
  3. C.
    increase the reserve requirements for banks
  4. D.
    decrease tariffs placed on imported products

This is a multiple choice question that allows you to select only one option.

The Consumer Price Index (CPI) reports on price changes for over 90,000 items.

Which of these is most likely the reason the federal government uses the CPI?

  1. A.
    to help measure inflation
  2. B.
    to determine the unemployment rate
  3. C.
    to analyze worker productivity
  4. D.
    to measure the national average income

This is a multiple choice question that allows you to select only one option.

Which of these is a function of the Federal Reserve?

  1. A.
    to set the level of income tax
  2. B.
    to establish export laws
  3. C.
    to regulate the money supply
  4. D.
    to pass spending legislation

This is a multiple choice question that allows you to select only one option.

Which of these is a goal of the United States government in stabilizing the economy?

  1. A.
    to increase the national debt
  2. B.
    to decrease the unemployment rate
  3. C.
    to increase the Consumer Price Index (CPI)
  4. D.
    to decrease the Gross Domestic Product (GDP)

This is a multiple choice question that allows you to select only one option.

Study the chart below.

INSTRUMENTS OF THE FEDERAL RESERVE SYSTEM
Instrument Function
Interest Rate Interest rate charged to banks by other banks or the Federal Reserve
Reserve Requirements Requirements on the amount of funds banks must hold in reserve against deposits
Open Market Operations The buying and selling of United States government securities in the open market

Based on the chart, which of these would be a result of open market operations by the Federal Reserve System?

  1. A.
    interest rates on loans decrease
  2. B.
    new types of currency are created
  3. C.
    the operating hours of banks change
  4. D.
    the size of the money supply changes

This is a multiple choice question that allows you to select only one option.

Study the graph below.

A LINE GRAPH titled percent change in real gross domestic product, GDP, from 1973 to 1980. In 1973, the graph is about 5 percent, in 1974 about negative .6 percent, in 1975 about negative 1 percent, in 1976 through 1978 about 5 percent, in 1980 about negative .2 percent.

Which of these best characterizes the condition of the United States’ economy between 1975 and 1978?

  1. A.
    a rapidly rising unemployment rate
  2. B.
    increased economic growth
  3. C.
    a constant inflation rate
  4. D.
    steady interest rates

This is a multiple choice question that allows you to select only one option.

Read the headline.

A newspaper headline reads, Gross Domestic Product (GDP) Rises 3%.

What action could Congress take to continue the result described in the headline?

  1. A.
    increase the reserve requirement
  2. B.
    adjust interest rates
  3. C.
    buy government securities
  4. D.
    decrease income taxes

This is a multiple choice question that allows you to select only one option.

Study the cartoon. Use the cartoon to answer the question.

A political cartoon shows mom walking into the house with shopping bags, dad sitting on a chair reading a newspaper with a big headline, Recession, and a child jumping elatedly, saying, Mom bailed out the retailers!

In the cartoon, what is the most likely effect of the woman's actions on the business cycle?

  1. A.
    increased unemployment
  2. B.
    increased production
  3. C.
    decreased interest rates
  4. D.
    decreased inflation

This is a multiple choice question that allows you to select only one option.

Read the headline.

A newspaper headline reads, Job-loss Rate Is Highest in 5 Years.

This headline describes an economy that is showing

  1. A.
    contraction
  2. B.
    fluctuation
  3. C.
    expansion
  4. D.
    stabilization

This is a test question that allows you to enter extended text in your response.

Read the information and use it to answer the constructed-response question.

In December 2007 the U.S. unemployment rate was 5 percent. By June 2009 the U.S. unemployment rate was 9.5 percent.

  • Describe the role of the Federal Reserve.
  • Explain how the Federal Reserve could use monetary policy to address the economic changes described in this information.
  • Include details and specific examples to support your answer.

This is a multiple choice question that allows you to select several options.

Select the three factors that are directly included in the measure of Gross Domestic Product (GDP).

  1. A.
    business investment
  2. B.
    tariffs on foreign goods
  3. C.
    unemployment rate
  4. D.
    government spending
  5. E.
    payroll taxes
  6. F.
    consumer spending
  7. G.
    rate of inflation