Econ: lesson 1, chapter 2

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.

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.

name seven main advantages to a market economy. give at least one illustration of each of these advantages

A. High degree of individual freedom: people are free to buy whatever products and goods they choose, decide where and when to work, and what investments to make in their own education. B. A market economy adjusts gradually to change: For example, the adjustment that happened when higher gas prices drove people away from large gas-guzzling SUVs. C. Relatively small degree of government interference: Instead of dictating every economic decision, the government only gets involved in certain concerns like defense and justice. D. Decision making is decentralized: decisions are made by consumer spending, not by a central authority. E. The variety of goods and services produced: if a product can be imagined, then it will likely be produced in the hopes that people will buy it. F. High degree of customer satisfaction: The choices of one group do not limit the choices of another group. G. Goods are privately owned and therefore last longer: people take better care of property they own, and this care helps scarce resources go further.

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.

Name some other mixed-market economies

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

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 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 the 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.

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 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.

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 countries' leadership.

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

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

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

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

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

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

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

name seven main disadvantages of a command economy. give at least one illustration of each of these disadvantages.

A. Leaders provide for themselves at the expense of the general population. IN the former Soviet Union, people were forced to go without basic consumer goods and adequate housing while high ranking government officials had nice cars, houses, and food. B. Loss of Individual Freedom to choose: People have to pay for health care they do not use and free state-controlled media limits people's choices about what information they get. C. Production of low-quality goods: Workers focus on filling quotas rather than producing quality goods, resulting in things like massively heavy chandeliers to fill weight based quotas. D. Requires a large decision-making bureaucracy: planners may be more concerned with their political goals than efficient production. E. Rewards for individual initiative are rare: In former Soviet Union, doctors were paid the same as factory workers, so there was no incentive to go through the extensive education and training to become a doctor. F. Planning bureaucracy lacks the flexibility to deal with problems: command economies tend to lurch from one crises to the next or collapse. G. Economies remain small because there are too many decisions to handle efficiently; it is hard for an economy the size of the former Soviet Union to effectively coordinate all economic decisions.

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.

Are most economies purely capitalistic, purely command, purely traditional, or mixed? Of the economies that are mixed, what is the most dominate 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, 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.

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

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

what do people do in a market economy do 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

Formerly the model of European socialism, __________________ now mixes _________________capitalism and generous __________________.

Sweden; high-tech; welfare

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

Singapore's high GDP is largely due to is specialization in _________________________________ services, ___________________________, and ______________________.

telecommunications; biotechnology; software