GED and HiSET social studies — economics

Economics is about a fifth of the social studies test, and it is the part of it a candidate is most likely to meet again outside the exam room. So these twelve questions are written with the numbers in them, and most of them are decisions rather than definitions.

The one to look at first is the loan. You need a thousand dollars for a car repair. One lender wants 12 percent simple interest for a year; another wants 8 percent a year for three years. The second has the lower rate and the smaller monthly payment, and it costs twice as much — 240 dollars against 120. A rate is a price per year, and the number of years is the other half of the multiplication. That single item is worth more to an adult than any definition of interest.

The pay stub works the same way. Gross pay of 1,600 dollars, four deductions, and four different destinations: federal income tax and state income tax to two governments, 122 dollars and 40 cents to Social Security and Medicare — exactly 7.65 percent of the gross, with the employer paying that same percentage again out of its own pocket — and a health insurance premium that is not a tax at all. The employer keeps none of it, which is not obvious from looking at a stub.

The rest covers the ground the test covers: opportunity cost as a real choice between a car repair and a television; a drought that cuts the strawberry supply while demand holds; a phone with a three-month waiting list, which is what a shortage looks like when a seller holds the price still; inflation measured by what a fixed wage buys this year against last; a progressive tax set beside a flat one with two incomes and two rates; what the unemployment rate counts and what it silently drops, including the person who has stopped looking; what GDP measures; what a rent ceiling below the market rate produces; what a tariff does to the price a domestic buyer pays; and who decides what gets produced in a market economy as against a planned one.

No charts, no tables, no images: where a figure matters it is written into the sentence, so the arithmetic is visible and can be done on paper. Everything here is written for this exercise.

Zestly is an independent study tool. It is not affiliated with GED Testing Service, which owns the GED test, or with the HiSET program, and it is not a test centre.

• Name the opportunity cost of a decision, as against its price
• Predict what happens to price when supply falls, and what a queue at a fixed price means
• Describe inflation in terms of what a fixed wage buys
• Work out total simple interest on two offers and see why a lower rate over a longer term can cost more
• Read a pay stub: which deduction goes to which recipient, and which one the employer matches
• Compare a progressive tax with a flat tax at two income levels
• State what the unemployment rate counts and who it leaves out, and what GDP measures
• Explain why a price ceiling below the market rate produces a shortage, what a tariff does to a buyer's price, and who decides production in a market economy

Written for this exercise, with all figures inside the questions. From the bank: "You need to borrow 1,000 dollars for a car repair. Offer A charges 12 percent simple interest for one year. Offer B charges 8 percent simple interest each year for three years." Offer B has the lower rate and the smaller monthly payment and costs 240 dollars against Offer A's 120.