D089 - Study Guide Questions Module 1-9
Principles of Economics Study Guide Questions and
Answers 2023 / 2023
D089 - Study Guide Questions
Module 1 – The Economic Way of Thinking
1. What are the three fundamental questions every economy must answer? Give an example
of a
“What” question.
What to produce, how it will be produced, and for whom the goods or
services are produced. What to produce example: What to produce to feed
farm animals?
2. What do economists mean when they say that people “think at the margin”?
People will think about what the next step or additional action means
for them. (Principle 3)
3. According to the 10 Principles of Economics, what determines a nation’s standard of living?
The standard of living for a nation is determined by its ability to produce
goods and services. (The more productive a society, the better its people live.)
(Principle 8)
4. Using the 10 Principles of Economics, explain why trade is beneficial?
Trade can leave everyone in a better position. It allows people to concentrate
on what they do best and exchange their ability with others to supplement
their own needs. (Principle 5)
5. How does printing money impact prices?
Printing too much money causes prices to rise. Consistently rising prices for
goods and services results in inflation. The more a government prints money,
the less the money is worth, thus making goods and services more expensive.
(Principle 9)
6. What are the differences between the Traditional and the Market economy?
In a Traditional Economy, individuals make decisions based on traditions,
beliefs, and customs.
In a Market Economy, businesses make decisions based on consumer demand.
7. Identify two disadvantages of a Command economy?
Rationing commonly occurs due to poor planning and an inability to meet
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