Unit 2

Define the term "economic system"

an economic system is an organized system for providing for the needs and wants of a nations people. the type of system is determined by the way a society makes decisions governing economy

What is a market economy?

an economy in which decisions are made in response to market forces

What is a mixed economy?

an economy primarily determined by individuals and market forces, with limited framework provided by the government

Which of the following best examines economic growth and population growth?

as an economy grows, a population's needs and wants increase, therefore wise use of resources becomes more important for economic growth

Economic System

collection of institutions, laws and human motivations collectively providing the framework for economy

What is the Economic System?

collection of institutions, laws and human motivations collectively providing the framework for economy

Decisions made by political authorities is what type of economy?

command economy

In a free market system, market prices are determined by (choose all that apply)

competition and self interest

What is an advantage to a command system?

decisions and changes can be made quickly

Division of Labor

dividing a labor task into smaller tasks among workers allowing the workers to perfect their craft

Breaking a large task into smaller ones is ?

division of labor

Choosing you own career is an example of the economic goal of _____

economic freedom

Mercantilism

economic system that developed after the collapse of the feudal system in which heavy government control was used in order to increase the power and wealth of a nation

Traditional Economy

economic system that is governed by the satisfaction of the questions "what" "how" and "for whom"

What is Traditional Economy?

economic system that is governed by the satisfaction of the questions "what," "how," and "for whom"

Under the mercantile system in Europe in the 1700s, governments regulated their economies by

ensuring exports outnumbered imports and that high tariffs were placed on imported goods

What are the strengths of traditional economy?

everyone knows what their role is in society, life and economic activity are stable and predictable

T/F: Laissez Faire Economics refers to a hands on approach..

false

Means of production are privately owned is what?

free enterprise

What is the relationship between government involvement, and the type of economic system a country has?

in a command economy the government is highly involved in answering the three economic decisions

Adam Smith believed that the main advantage of allowing the "Invisible hand" to work in an economy was that

individuals would be driven by incentives rather than force

What are the weaknesses of command economy?

it isn't designed to meet the wants and needs of individuals

Weaknesses of a command system include (choose all that apply)

lack of incentives, fewer choices available, changes made slowly, unique ideas are stifled

Decisions made in response to market forces is what type of economy?

market economy

In a ____________ economy decisions of what to produce, who to produce for, and how to produce are decided by individuals.

market economy

Karl Marx

philosopher responsible for laying the foundations for communism and socialism

Adam Smith

philosopher who wrote "an inquiry into the wealth of nations" in which he introduced the idea of the "invisible hand" which became the basis of capitalism

What are the weaknesses of market economy?

some people are elderly, too young or too sick to provide for themselves in a market economy the government does not provide for all of the needs of their citizens the market can also fail which can cause unemployment inflation and poverty

What are the strengths of command economy?

the focus of the economy can change quickly and still be successful

What are the weaknesses of traditional economy?

this type of economy discourages new ideas and new ways of doing things, many times this lack of progress lead to a lower standard of living because economic progress isn't usually made

The main goal of Karl Marx was to create an economy in which

to do away with private property

In a ___________ economy one positive attribute is the fact that everyone knows their role. Such roles are defined by the customs of culture and elders.

traditional economy

T/F: Karl Marx believed that common ownership of resources was the only way to have a classless society.

true

T/F: Mercantilism dominated Europe in the 1700s.

true

T/F: There is no competition in a command economy.

true

What are the three basic economy questions of market economy?

who and what decisions are made based on what consumers demand/want to buy. how decisions are made by sellers in order to have efficiency and make a profit

Define each of the three types of economic systems and list on advantage and on disadvantage of each.

Traditional economies are ruled by the customs and traditions of the people's economic past. This allows for certainty of position in the economy, but discourages progress. A command economy is ruled by the government. This allows for changes to be made quickly and efficiently, but breeds lack of quality in work as the workers have no say in their economy. Market economies are governed by the people. This allows for gradual progress, but puts those who don't produce at a disadvantage in the economy..

What are the three basic economic questions of command economy?

a central planner decides what how and who. leaders make the economic decisions and the people are expected to go along with the choices of their leaders, many communist countries have command economies

Laissez Faire

a policy of letting economics take care of themselves with little or no interference from people

Communism

a socialist economic theory promoting the elimination of private property in an attempt to have a classless society in which all are equal

Free Enterprise Economy

a system of production in which the means of production are privately owned and operated for profit

What is Free Enterprise Economy?

a system of production in which the means of production are privately owned and operated for profit.

What are the strengths of market economy?

adjusts to change quickly, individual freedom of choice is encouraged. government stays out of most economic decisions and allows the interactions between buyers and seller to determine the course of the economy

What are the three basic economic questions for traditional economy?

all economic activities and decisions are made based on ritual, habit or custom that was established by the ancestors and elders in a society

What are the three basic economic questions of mixed economy?

all economic decisions are made with some combination of the above types of economies for example, the us has a mixed economy we are mostly a market economy but sometimes the government steps in and set certain prices to protect industries

What is Command Economy?

an economic system in which decisions are made by political authorities rather than influenced by market forces