GED Social Studies Practice Questions: Economics

By Achim K. Krull, Dale E. Shuttleworth, Murray Shukyn

Economics questions make up about 15 percent of the GED Social Studies test. If you want to ace them, you should have a basic understanding of the major economic theories, such as supply and demand, as well as the role of government policies in the economy.

The best way to solve these questions is with good analysis and evaluation skills; by carefully reading the supplied passage or graphic, you should be able to figure out the correct answer, even if the topic is unfamiliar to you. The following practice questions are based on a book excerpt that describes the Panic of 1873. Even if you know nothing about this event, as long as you don’t panic, you should do fine…

Practice questions

The practice questions refer to the following passage, which is excerpted from CliffsQuickReview U.S. History I, by P. Soifer and A. Hoffman (John Wiley & Sons, Inc.)

The Panic of 1873

During his second term, Grant was still unable to curb the graft in his administration, Secretary of War William Belknap was impeached by the House, and he resigned in disgrace for taking bribes from dishonest Indian agents. The president’s personal secretary was involved with the Whiskey Ring, a group of distillers who evaded paying internal revenue taxes. A much more pressing concern though was the state of the economy.

In 1873, over-speculation in railroad stocks led to a major economic panic. The failure of Jay Cooke’s investment bank was followed by the collapse of the stock market and the bankruptcy of thousands of businesses; crop prices plummeted and unemployment soared. Much of the problem was related to the use of greenbacks for currency. Hard-money advocates insisted that paper money had to be backed by gold to curb inflation and level price fluctuations, but farmers and manufacturers, who needed easy credit, wanted even more greenbacks put in circulation, a policy that Grant ultimately opposed. He recommended and the Congress enacted legislation in 1875 providing for the redemption of greenbacks in gold. Because the Treasury needed time to build up its gold reserves, redemption did not go into effect for another four years, by which time the longest depression in American history had come to an end.

  1. What were the main problems President Grant had in his second term with his government?

    A. problems with his administration
    B. problems with whiskey
    C. problems with the IRS
    D. problems with personal bankruptcy

  2. What type of money was used for investment?

    A. British pounds
    B. silver
    C. gold
    D. greenbacks

Answers and explanations

  1. The correct answer is Choice (A).

    The main problems President Grant faced involved grafts in his administration, which means that members of his administration faced all sorts of problems and left their jobs under pressure. The other answers are incorrect, based on the passage.

  2. The correct answer is Choice (D).

    Greenbacks—not British pounds, gold, or silver—were used as a source of investment capital.