# ✅ Checkpoint: Economics and Institutions

By Better Wise



## Quiz

1. A city council fixes potholes on residential streets, even though no private firm finds it profitable to do so. Which concept best explains why government steps in here?
   - The free rider problem: everyone benefits from a smooth road whether they pay or not, so markets undersupply it.
   - Households are not supplying enough labour to the road-building firms.
   - Courts have ruled that potholes are a contract violation.
   - The central bank's policy rate is too low, so firms cannot borrow to fix roads.
2. Which statement correctly separates the roles of the central bank and the government (treasury)?
   - The central bank sets the policy interest rate (monetary policy); the government sets taxes and spending (fiscal policy).
   - The central bank runs most businesses, and the government supervises the banks.
   - Both the central bank and the government set the policy rate together each month.
   - The central bank decides the government budget, and the government sets the policy rate.
3. Your wage rises 3% this year while prices rise 5%. What happened to your real wage?
   - It fell by about 2%, because prices outran your pay.
   - It stayed the same, because both numbers are percentages.
   - It rose by about 8%, because you add the two numbers.
   - It rose by about 3%, because your wage went up.
4. A savings account pays 3% interest while inflation is 4%. What is the real return, and what does it mean?
   - About +3%, because the quoted rate is what you earn.
   - About -7%, because you subtract the rate from inflation and then double it.
   - About +7%, because you add the rate and inflation.
   - About -1%, so the balance loses purchasing power over the year.
5. A pay slip shows gross pay of $4,000, income tax of $700 and social insurance of $320. Which line is the net pay, and what does the slip hide?
   - Net pay is $1,020; the slip hides the social insurance contributions.
   - Net pay is $2,980; the slip hides consumption taxes such as VAT, paid on spending.
   - Net pay is $3,300; the slip hides only the corporate income tax.
   - Net pay is $4,000; the slip hides nothing because all taxes are shown.
6. A government budget spends 35% on pensions and transfers, 20% on health and 15% on education. If the average household pays about $1,300 a year in all taxes, roughly how much of that goes to health?
   - About $195, which is 15% of $1,300.
   - About $455, which is 35% of $1,300.
   - About $260, which is 20% of $1,300.
   - About $1,300, because the whole budget is spent on health.
7. Courts, property registries and standards bodies are examples of ____: durable rules and organisations that make other people's behaviour predictable enough to trade with them.
8. The central bank's everyday lever is the ____, the rate it sets to influence the other interest rates in the economy.
9. A tax under which higher slices of income face higher rates is called a ____ tax.
10. Take a real headline about a price change (for example, a rent cap or a fuel price rise). Trace it through the map of the economy: name which player acted (household, firm, government, central bank), which lever they used, and whether the effect on a household budget is nominal or real. Then state one piece of evidence that would change your reading.


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## Contents

Part of [🏛️ Civic Literacy and Media Awareness](https://everwise.study/courses/civic-literacy-and-media-awareness.md)

- **🏛️ How Economies and Institutions Work**
  - [🏗️ Who Does What: Governments, Markets, and Institutions](https://everwise.study/courses/civic-literacy-and-media-awareness/governments-markets-institutions-who-does-what.md)
  - [📈 Inflation and Interest Rates in Everyday Life](https://everwise.study/courses/civic-literacy-and-media-awareness/inflation-and-interest-rates-in-everyday-life.md) (sign-in required)
  - [🧾 Taxes and Public Spending: Who Pays, Who Benefits](https://everwise.study/courses/civic-literacy-and-media-awareness/taxes-and-public-spending-who-pays-who-benefits.md)
  - [✅ Checkpoint: Economics and Institutions](https://everwise.study/courses/civic-literacy-and-media-awareness/checkpoint-economics-and-institutions.md) — this lesson
- **🔍 Reading News and Numbers Critically**
  - [📰 Sourcing and Framing: Who Made the Claim, and Why](https://everwise.study/courses/civic-literacy-and-media-awareness/sourcing-and-framing-who-made-the-claim-and-why.md)
  - [📊 Spotting Statistical Manipulation: Baselines, Charts, and Risk](https://everwise.study/courses/civic-literacy-and-media-awareness/spotting-statistical-manipulation-baselines-charts-risk.md)
  - [🧪 Misinformation Patterns and a 5-Minute Verification Routine](https://everwise.study/courses/civic-literacy-and-media-awareness/misinformation-patterns-and-verification-routine.md)
  - [✅ Checkpoint: Media and Statistical Literacy](https://everwise.study/courses/civic-literacy-and-media-awareness/checkpoint-media-and-statistical-literacy.md)
- **⚖️ Forming Balanced, Evidence-Based Views**
  - [🧩 Separating Evidence from Values in a Policy Debate](https://everwise.study/courses/civic-literacy-and-media-awareness/separating-evidence-from-values-in-policy-debate.md)
  - [🛡️ Steelmanning and Stress-Testing Your Own View](https://everwise.study/courses/civic-literacy-and-media-awareness/steelmanning-and-stress-testing-your-own-view.md) (premium content)
  - [✅ Checkpoint: Forming Balanced Views](https://everwise.study/courses/civic-literacy-and-media-awareness/checkpoint-forming-balanced-views.md) (premium content)
- [Course cheatsheet](https://everwise.study/courses/civic-literacy-and-media-awareness/cheatsheet.md) (premium content)