Interactive Reading — Economics

When demand for a product exceeds supply, prices tend to rise. Conversely, when supply exceeds demand, prices usually fall. This basic principle of supply and demand is fundamental to understanding how markets set prices for goods and services. Prices tend to rise when ___. A) supply exceeds demand B) demand exceeds supply C) neither supply nor demand changes D) the government sets a fixed price

A monopoly exists when a single company controls the entire market for a particular product or service. Without competition, monopolies can set prices higher than they would be in a competitive market, potentially harming consumers. Governments often regulate monopolies to prevent abuse of market power. Governments regulate monopolies to ___. A) help them increase their profits B) encourage more monopolies to form C) prevent abuse of market power D) reduce the number of products available

Gross domestic product, or GDP, measures the total value of all goods and services produced within a country over a specific period. It is widely used as an indicator of economic health, though critics argue that it does not account for income inequality, environmental damage, or unpaid work. A criticism of GDP is that it does not measure ___. A) the total value of goods produced B) economic growth over time C) income inequality and environmental damage D) the number of businesses in a country

Inflation is the general increase in prices over time. Moderate inflation is considered normal in a growing economy, but high inflation can erode purchasing power, meaning people can buy fewer goods with the same amount of money. Central banks use interest rates as a tool to control inflation. Central banks control inflation by ___. A) printing more money B) adjusting interest rates C) reducing the number of banks D) setting prices for all goods

Free trade agreements remove tariffs and other barriers between countries, making it cheaper to import and export goods. Supporters argue that free trade increases economic efficiency and consumer choice. Critics, however, worry that it can lead to job losses in industries that cannot compete with cheaper imports. Critics of free trade worry about ___. A) higher prices for consumers B) too much government regulation C) job losses in uncompetitive industries D) a decline in international cooperation

Microfinance provides small loans to individuals in developing countries who lack access to traditional banking services. These loans help people start small businesses, pay for education, or invest in farming equipment. Studies show that microfinance can reduce poverty, though its impact varies depending on local conditions. Microfinance helps people by ___. A) providing large corporate loans B) replacing traditional banks entirely C) giving small loans for business and education D) eliminating poverty in all regions