In a Market Economy economic questions are answered by the free interaction of consumers and producers. This interaction determines market prices. In a Command Economy economic decisions are made by the government. In a Traditional Economy economic decisions are answered by custom and tradition. Most economies are Mixed Economies that blend features of traditional, command, and free markets.

B. Explain how the U.S. government provides public services, redistributes income, regulates economic activity, and promotes economic growth and stability.

In the United States, the government’s role in the economy has increased dramatically in the 20th century, as a result of three primary factors—the creation of the Federal Reserve, the Great Depression and New Deal, and World War II. The Federal Reserve System, established in 1913, was designed to strengthen the banking activities of the nation. The Fed can affect the supply of money available in three important ways: setting the reserve requirement for member banks, buying or selling Treasury securities in the financial markets, and raising or lowering the discount rate.

To learn more about these benchmarks, read Chapter 8: Economics, pp. 112-135 in Mastering the Ohio Graduation Test Social Studies.