Economics: Supply & Demand — Answer Key
Part A: Fix the Sentence
Each sentence has an error. Rewrite it correctly on the line.
1. Fix the sentence:
Putting money into a savings account means you can never use it again.
Corrected: Putting money into a savings account means you are keeping it safe and can use it later.
The corrected sentence is: "Putting money into a savings account means you are keeping it safe and can use it later." The error was factual error — savings accounts hold money for future use, not permanently: the original sentence "Putting money into a savings account means you can never use it again." needed to be fixed.
2. Fix the sentence:
Banks only lend money to other banks, never to people or businesses.
Corrected: Banks lend money to people, businesses, and other banks.
The corrected sentence is: "Banks lend money to people, businesses, and other banks." The error was factual error — banks lend money to individuals and businesses as well: the original sentence "Banks only lend money to other banks, never to people or businesses." needed to be fixed.
3. Fix the sentence:
Interest is a fee the bank charges you for keeping your savings safe.
Corrected: Interest is money the bank pays you for keeping your savings in the account.
The corrected sentence is: "Interest is money the bank pays you for keeping your savings in the account." The error was factual error — banks pay interest to savers, not charge them for saving: the original sentence "Interest is a fee the bank charges you for keeping your savings safe." needed to be fixed.
Part B: Fill in the Blank
Write the missing word or number on each line.
1. Setting aside money to use in the future is called saving.
Saving means choosing not to spend money right now so it is available later for emergencies, goals, or large purchases you cannot afford all at once.
2. A bank pays interest on your savings as a reward for depositing money.
Banks pay interest to savers because the bank uses deposited money to make loans, and the interest is the saver's reward for letting the bank use their funds.
3. Using money to buy goods and services right now is called spending.
Spending is the act of exchanging money for goods or services you use now, which is the opposite of saving money for later.
4. A bank is a place that keeps money safe and lends money to borrowers.
Banks serve two key roles: they protect depositors' money in secure accounts and lend that money to borrowers who need funds for homes, businesses, or other purposes.
Part C: Short Answer
Answer each question in one or two complete sentences.
1. Why is it important for people to save some of their money instead of spending it all?
Sample answer: Saving money is important because it helps people pay for unexpected expenses or large purchases in the future. Without savings, a person may not have enough money when an emergency happens.
A good answer includes: Saving money is important because it helps people pay for unexpected expenses or large purchases in the future. Without savings, a person may not have enough money when an emergency happens.
2. How do banks help both savers and borrowers?
Sample answer: Banks help savers by keeping their money safe and paying them interest. Banks help borrowers by lending them money so they can buy things like houses or start businesses.
A good answer includes: Banks help savers by keeping their money safe and paying them interest. Banks help borrowers by lending them money so they can buy things like houses or start businesses.