1.1.6 Free market economies, mixed economies, command economies

Question 1

Adam Smith

Answer 1

One of the founding fathers of modern economics. Believed in the free market economy and division of labour

Question 2

Capitalist economy

Answer 2

An economic system which uses market determined prices to guide our choices about the production and distribution of goods
•1 key role- for the state to maintain the rule of law and maintain private property

Question 3

Command economy

Answer 3

An economic system where most factor resources are allocated by the government, with few officially sanctioned private markets

Question 4

Consumer sovereignty

Answer 4

Exists when an economic system allows scarce resources to be allocated to producing goods and services that reflect the wishes of consumers

Question 5

Economic policies

Answer 5

Government policies aimed at influencing trends in the economy

Question 6

Economic system

Answer 6

a network of organisations used to resolve the problem of what, how much, how, and for whom to produce

Question 7

Free market

Answer 7

Markets allocate scarce resources through the price mechanism. There is a limited rule for the government, restricting themselves to protecting property rights of people and businesses the protect the real value of money by maintaining a low rate of inflation.

Question 8

Fredrich Hayek

Answer 8

Believed in free market economy

Question 9

Karl Marx

Answer 9

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Question 10

Mixed economy

Answer 10

Where resources are partly allocated by the market and partly by the government

Question 11

Planned economy

Answer 11

decisions about what to produce, how much to produce, and for whom is decided by central planners working for the government rather than allocated using the price mechanism

Question 12

Transition economies

Answer 12

Involved in a process of moving from a centrally planned economy to a mixed or free market economy