Free GED Social Studies Economics Practice Test

Question 1

What is the law of supply?

Accepted Answer

As price increases, the quantity supplied increases

Answer

As price increases, the quantity supplied decreases

Answer

Supply is always equal to demand

Answer

Producers supply more when prices fall

Question 2

What is the law of demand?

Accepted Answer

As price increases, quantity demanded decreases

Answer

As price decreases, demand decreases

Answer

As price increases, demand increases

Answer

Demand is unrelated to price

Question 3

Which term describes the total value of all goods and services produced within a country in one year?

Accepted Answer

GDP (Gross Domestic Product)

Answer

GNP (Gross National Product)

Answer

CPI (Consumer Price Index)

Answer

Trade surplus

Question 4

What is inflation?

Accepted Answer

A general increase in prices over time, reducing purchasing power

Answer

A decrease in the general price level of goods and services

Answer

An increase in the money supply only

Answer

Rising unemployment alongside falling prices

Question 5

In a market economy, prices are primarily determined by:

Accepted Answer

Supply and demand

Answer

The government setting fixed prices

Answer

International trade agreements

Answer

Large corporations alone

Question 6

What is a tariff?

Accepted Answer

A tax on imported goods

Answer

A government subsidy paid to exporters

Answer

A limit on the quantity of goods that can be exported

Answer

A tax on domestic production

Question 7

What is the difference between monetary policy and fiscal policy?

Accepted Answer

Monetary policy involves controlling the money supply and interest rates; fiscal policy involves government spending and taxation

Answer

Monetary policy is controlled by Congress; fiscal policy by the Federal Reserve

Answer

They are the same type of economic policy

Answer

Monetary policy only applies to international trade

Question 8

An economic recession is best described as:

Accepted Answer

Two or more consecutive quarters of declining GDP

Answer

A period of rapid economic growth

Answer

High inflation combined with high unemployment

Answer

An increase in the money supply

Question 9

What does the term 'opportunity cost' mean?

Accepted Answer

The value of the next best alternative given up when making a choice

Answer

The total cost of a product including taxes

Answer

The extra cost of producing one more unit

Answer

The cost of missed business opportunities

Question 10

What happens to the price of a good when demand increases and supply stays the same?

Accepted Answer

The price increases

Answer

The price decreases

Answer

The price stays the same

Answer

The quantity supplied decreases