Chapter 2 Test Review

Name some other mixed market economies.

Denmark, Germany, France, China, South Korea, India, and Thailand

Why are former socialist and command economies, like those of China, Cuba, and Russia, adopting more free market practices?

The benefits of economic growth, which come from more privatization, are beneficial to the country's' leadership

Describe the reason Sweden is no longer considered a socialist country. When did it change, and what is its economy today?

Citizens objected to the taxes in the 1980s, so now it's a mixed market economy because it has not given up all of its social programs.

Define communism. What is the difference between communism and a command economy?

Communism is an economic and political system in which factors of production are collectively owned and directed by the state and is based on a theoretically classless society in which everyone works for the common good. In communism, there is no government, since all members of society contribute to the common good, but a command economy relies on government.

War devastated South Korea went from exporting ________ consumer goods to becoming a leader in production and export of ________ appliances, televisions, and even durable goods, such as ________

inexpensive; home; automobiles

Most countries in South America have tended towards socialism and ________ . ________'s conversion to a free market has been a great success. Political instability and ________ have affected Argentina's transition, and ________ continues to resist capitalism

isolationism; Chile; nationalism; Venezuela

In Russia, after the Soviet Union collapse, influential ________ retained power by acquiring large numbers of ________ , so the ruling class gained ________ power in place of ________ power.

politicians; vouchers; economic; political

Why might rulers of command and socialist economies see market oriented reforms as a threat to their leadership?

A prosperous population may wish to continue to move away from the command economic model, threatening the government's control.

Name the significant disadvantages to a market economy

Does not provide for everyone; may not provide enough of basic goods and services, like roads, libraries, education, and health care; high degree of uncertainty

In an economic downturn, what can happen in countries that depend on high taxes to fund social programs?

In an economic downturn, the government collects fewer taxes, so less money is available for these programs.

Explain the difference between capitalism and a market economy.

The term capitalism draws attention to the private ownership of resources, while the term market economy focuses on where the goods and services are exchanged; the two terms focus on different features of the same economic system

How do command or socialist economies benefit their citizens?

They can change direction drastically; many citizens receive goods and services that they might not otherwise be able to afford.

The main difference between capitalism in Japan and in the United States is intense ________ involvement with the private sector. Additionally, tightly knit firms governed by a board of directors, called the ________ , reduces the threat of ________

government; keiretsu; competition

Even after capitalist practices are in place, people may have trouble adjusting to new ________ , such as taking ________ , interpreting ________ , making their own ________ , and fending for themselves in the marketplace.

incentives; initiative; prices; decisions

Transitioning countries must take into account the costs of capitalism, because they will experience its ____________such as the Great Depression's ____________ and _______ ______before they experience its benefits.

instabilities; unemployment; social unrest

Who owns most of the resources in a market or capitalistic economy? In a socialist or command economy? What determines ownership in a traditional economy?

private individuals or businesses; the government; tradition

To help convert state owned property to ________ property, transitioning countries have used ________certificates that individuals or groups can use to purchase that property.

private; vouchers

Numerous Eastern European countries transitioned to capitalism in a relatively ________ time period after the fall of the Soviet Union. ________ was the first, with its labor union called ________ . Poland joined the ________ Union, an association of European nations to develop a single market, in 2004. Hungary's transition was helped by the fact that it had a thriving ________ ________ where entrepreneurs and merchants sold goods illegally.

short [or small]; Poland; Solidarity; European; black market

Capitalism has led many countries to an improved ________ of ________ , and ________ coverage broadcasts information about the wealth capitalist countries can generate. This, plus the ________ of the Soviet Union, has inspired countries to attempt the difficult transition to capitalism.

standard; living; media; collapse

What advantages does a mixed economy have over a purely market capitalist economy?

Mixed economies have policies in place that provide for those too young, too old, or too sick to provide for themselves. Even if government does not own resources, voters in a democracy can grant the government the authority to use some of a country's resources for public projects. Mixed economies tend to grow faster than former command economies.

What is an example of a command economy today? What are some socialist economies?

North Korea; Cuba, Vietnam, and Hugo Chavez' Venezuela

Formerly the model of European socialism, ________ now mixes ________________ capitalism and generous ________

Sweden; high tech; welfare

How did nineteenth century Inuit people ensure their scarce resources would support them through harsh Canadian winters?

A traditional means of dividing the spoils of the hunt ensured all people got enough food, even though first choice of the meat cuts went to the hunters who killed the animal.

Are most economies purely capitalistic, purely command, purely traditional, or mixed? Of the economies that are mixed, what is the most dominant type of mixed economy?

Most economies in the world are mixed economies. The majority of those are mostly capitalistic with market features.

Are there any true communist economies today? Which economies call themselves communist, and what are they actually, if not communist?

No, communism is a theoretical ideal that has never been reached. Laos, North Korea, and Vietnam describe themselves as being communist when they are actually a version of extreme socialism, with modest elements of tradition and sometimes even economies.

Is the United States a purely market capitalist economy? Why or why not?

No. The U.S. economy has elements of traditional, free market, and socialist economies.

Although China has adopted many ________ practices since the 1980s, two significant barriers to its growth are its ________ population and air and water ________

capitalistic; aging; pollution

In Russia, the economy has gone from Stalin's ________________ Plans, directed by the central committee, or ________ , to Mikhail Gorbachev's ________ in the 1980s. This led to increased ________ of property, which continued until ________ , Boris Yeltsin's successor, took power.

Five-Year; Gosplan; perestroika; privatization; Putin

China's 1958 Five Year Plan, the ________ , tried to communalize Chinese ________ and ________ . The results of its performance led China to ________ the Soviet model.

Great Leap Forward; industry; agriculture; abandon

What are some advantages to a traditional economic system? What are disadvantages?

In a traditional economic system, there is stability and certainty about questions of production, but there is also little opportunity for innovation and growth. Stagnation and low quality-of-life are likely.

Explain the difference between socialism and a pure command economy.

In socialism, the government owned some, but not all, factors of production. In a pure command economy, the government owns all factors of production.

What factors can lead to the development of mixed economies? What led to the development of U.S. government economic programs in the 1920s and 1930s?

Mixed economies can develop through contact with other cultures, revolution, and dissatisfaction with the way their economy performs. In the United States, the conditions were so harsh during the Great Depression that many government programs were introduced.

What do people do in a market economy to guide production?

People spend their money on the products they like the most, and this acts as a signal to tell the producers what to produce more of.

________ has always been a feature of the Taiwanese economy, but experts warn that the ________ ________ ________ will hamper growth in the future

Planning; centralized planning process

Singapore's high GDP is largely due to its specialization in ________ services, ________ , and ________

telecommunications; biotechnology; software