﻿Simply Put: A Study in Economics Teachers’ Key Catherine McGrew Jaime Copyright 2013 by Catherine McGrew Jaime Smashwords Edition, License Notes This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then please return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author. ~ ~ ~ Author’s Note Simply Put: A Study in Economics Student Book was written as a high school economics textbook – with Conservative homeschoolers in mind. (Though it certainly can be enjoyed by anyone wanting to know more about economics from an Austrian perspective.) The student book includes 36 lessons, and is the equivalent of a half credit in high school economics. It is available as a paperback, a pdf, and for a variety of e-book readers, at a variety of sites, including at https://www.smashwords.com. The student book includes an optional mid-term exam and final exam. The printed copy of the Teacher Key includes the answers to the Mid-Term and the Final Exams, and two classroom activities. (This, the e-book version, only includes the Mid-Term and Final answers.) ~ ~ ~ Table of Contents Mid-Term Answers Final Answers About the Author Economics Mid-Term Answers (These Questions come from the first eighteen chapters.) Note: On the short answer questions, students’ answers are likely to be worded differently – the important thing is that they have the concept. 1.What is the difference between Microeconomics and Macroeconomics? Microeconomics deals with individual consumers while macroeconomics looks at economics on a national or world level. 2.What causes Shortages? When the government sets price floors, demand increases artificially and supplies will not generally keep pace. 3.What are Unintended Consequences? The results of a law or other action that were not planned for. 4.What are the components of our first important triad, supply, demand and what? Price is the third component. 5.What is the difference between incentives and disincentives? Incentives motivate people to act in a certain manner and disincentives motivate them not to act a certain way. 6.Is the supply of a particular consumer good generally fixed? Why or why not? No, the supply of most consumer goods is not fixed because more companies can generally get into the market if demand increases. 7.Does the demand for a good generally go up or down when the price goes up? Generally rising prices will drive demand down. 8.What do we call demand if it doesn’t change with price changes? Inelastic. 9.Which chamber (the House or the Senate) is constitutionally charged with originating bills for raising revenue? The House. 10.Who does the Constitution say is authorized to coin money and who may not coin money? Congress is authorized to coin money; states may not coin money. 11.What does laissez faire refer to? “Let it be” or “leave it alone.” 12.How were transactions accomplished before the medium of money was developed? Through barter. 13.Name several things that have served as money in the past. Examples in the book included sea shells, salt, and gold (allow other legitimate examples). 14.Do banks have to keep all the money in their vaults that their customers deposit? Why or why not? No, generally they are only required to keep a fraction of the money that has been deposited. The rest is lent out to other customers. 15.Who started the departure from the gold standard for the United States? President Franklin D. Roosevelt. 16.What is the current Central Bank in the U.S. called? The Federal Reserve. 17.Does having money equate to wealth? Why or why not? No, our wealth is based on how long it takes us to earn our money and what we can purchase with it. 18.What happens when hyperinflation occurs? With hyperinflation prices go up at alarming rates. 19.Whose interest do the baker and butcher have in mind, according to Adam Smith? Is that a good thing or a bad thing? Their own interests, which Smith believed was a good thing. 20.What happens when a government outlaws profits? The result is massive shortages of critical consumer goods. 21.What do profits (or lack of) tell the market? When losses or insufficient profits occur, a company is motivated to pursue alternative processes or to devote the labor and capital to something else altogether. 22.Will a society improve dramatically without division of labor? Why or why not? No, until a society develops division of labor individuals need to produce everything they will consume, which seriously limits a society’s improvement. 23.Did machinery hurt or aid the textile workers in England? It aided them by making them more productive. More textile workers ended up with jobs as a result, not less. 24.Do machines generally aid producers, or consumers, or both? Machines aid both consumers and producers. 25.What economic system did the Pilgrims initially practice? Did Governor Bradford think it was a success or a failure? Initially the Pilgrims practiced a form of communism, which Governor Bradford considered a failure. 26.Who coined the term capitalism? Was it a positive or a negative term? Karl Marx coined the term. It was a negative term in his mind. 27.Is freedom more prevalent in capitalist societies or socialized ones? Freedom is much more prevalent in capitalist societies. 28.Who does the planning in a socialized economy? What are some of the downfalls to central planning? Central planners (in the government) do the planning in socialized economies. Resources are not used efficiently and shortages typically occur. 29.In a capitalist economy how are decisions made? Individuals make the decisions, using prices to guide them. 30.Which country was socialist, West or East Germany? Which of the two Germanys prospered after World War II? East Germany was socialist and West Germany was the one that prospered. Economics Final Exam Answers (Questions come from Chapters 19 – 36) 1.What two areas are speculators prevalent in? Oil and Food 2.How did Frederic Bastiat describe interest and how did he say interest rates should be regulated? He described interest as the price we pay to borrow money and said it should be regulated by the law of supply and demand. 3.Are high interest rates a bad thing? Why or why not? No, not if they are set by the free market. If they are too high, a borrower can choose not to borrow the money, or to look elsewhere. 4.According to Bastiat, which came first, property or laws? Why is that distinction important? Property came first; therefore Bastiat argued that laws came into existence to protect property. 5.How did the Pilgrims resolve “the tragedy of the commons”? Families were given their own plots of land and the responsibilities and rights that went with them. 6.Does Friedman argue that people should start at the same place or finish the same? What is the important difference? He argued that we should start at the same place, because that would give us equality of opportunities (but doesn’t guarantee equality of results). 7.What did President Kennedy have to say about high tax rates? That they were restrictive and hampered the economy. 8.Does arguing against something being done by the government equate to arguing against it being done at all? No, it can mean the belief that it should be done by private citizens instead. 9.Where does the money for public projects come from? It comes from taxpayers. 10.What does the Declaration of Independence promise us about happiness? It promises us the pursuit of happiness. 11.Did Bastiat believe the government could be a universal physician? No, he did not. 12.Which department was added to the federal government most recently and why? The Department of Homeland Security, after 9/11. 13.What happens when the government risks taxpayer money instead of private citizens taking the risks? Private citizens are incentivized to pay attention to risks and losses, since they are spending their own money or someone else’s to whom they are responsible, but members of the government have no such incentives. 14.Did President Reagan think the government should protect us from ourselves? No, he thought that was an overreach of the government. 15.Why is competition a good thing? Competition encourages other producers to get into that market when demand goes up. Competition also keeps a producer from raising prices too high. 16.When do we usually hear cries of price gouging? We usually hear cries of price gouging after a natural disaster. 17.Are high prices after a crisis the same thing as price gouging? No, high prices at this time are due to increased demand. Given time, they will help increase supply. 18.What do price floors do to supplies? Price floors generally cause prices to be too high, which lead to supplies rising faster than the demand, causing a glut. 19.What do price ceilings do to demand? The artificially lower prices generally result in too much demand. 20.What is an example of price ceilings? Rent control is an example of price ceilings. 21.Are minimum wages an example of price floors or price ceilings? Minimum wages are a price floor. 22.Are minimum wages a good thing? Why or why not? Minimum wages are not a good thing. Like other price floors they cause a glut (in this case, of labor). 23.Who did Davy Crockett come to believe should help after a crises, the government or individuals? Individuals. 24.Is rationing the only solution to shortages? No, increased prices will solve shortages. (And black markets often arise to deal with them.) 25. were some of the early accomplishments of unions? Unions succeeded in improving working conditions and bringing working hours down. 26.What are imports? What are exports? Imports are the goods a country buys from other countries. Exports are the goods a country sells to other countries. 27.What is meant when people refer to a “balance of trade”? The idea that a country’s exports and imports should be equal. 28.What are tariffs and how do they hurt both countries involved? Tariffs are taxes on certain imported items. They hurt the country that is being taxed by limiting its ability to export. Tariffs hurt consumers in the importing country who are then forced to pay higher prices. (Tariffs also hurt other domestic producers who suffer in their ability to export their products.) 29.What is outsourcing? Is it good or bad for a country? Outsourcing is the act of sending jobs overseas. It helps both countries involved. 30.Who actually pays for it when a company is bailed out by the government? All taxpayers. About the Author Catherine Jaime did her undergraduate work at the Sloan School of Management at the Massachusetts Institute of Technology. She has additional economics training through the Foundation for Teaching Economics and the Foundation for Economic Education. Catherine has taught in grades K-twelve with a concentration in high school economics and government. She has authored a number of history books and several booklets dealing with government and/or economics. She firmly believes in the importance of the U.S. Constitution and the free market, and it shows in her writings. ~ ~ Discover other titles by Catherine Jaime at Smashwords.com: Da Vinci: His Life and His Legacy Leonardo: Masterpieces in Milan (historical fiction) Leonardo: To Mantua and Beyond (historical fiction) Exploring Da Vinci’s Last Supper Understanding the U.S. Constitution Important Constitutional Documents The Philadelphia Convention: A Play for Many Readers A Brief Financial History of the United States Understanding the Electoral College The Declaration of Independence: A Play for Many Readers A Brief Introduction to the Lewis and Clark Expedition York Proceeded On (historic fiction) The Rocky Road to Civil Rights in the United States Tales from the Troubled South: Civil Rights in Alabama Sharing Shakespeare with Students A Novel Approach to Shakespeare’s Much Ado About Nothing A Novel Approach to Shakespeare’s Comedy of Errors ~ ~ Connect with Catherine Online: Smashwords: https://www.smashwords.com/profile/view/CatherineJaime www.CatherineJaime.com ~ ~ ~~ ~ ~~ ~