2.2 Economic systems Flashcards
1
Q
What government policies are involved in macroeconomics?
A
Fiscal, monetary & supply side
2
Q
What are the three main economic systems?
A
(Free) market system, mixed economy, & planned economy
3
Q
What three main questions define the different economic systems?
A
- What to produce
- How to produce
- For whom
4
Q
How does a market system answer the three main questions?
A
- What to produce: decided by demand/supply
- How to produce: most efficient, profitable way possible
- For whom: those who can afford it
5
Q
How does a mixed economy answer the three main questions?
A
- What to produce: decided by demand/supply & government
- How to produce: some efficiency but also focus on welfare/wellbeing
- For whom: those who can afford it, also some provision to those who can’t
6
Q
How does a planned economy answer the three main questions?
A
- What to produce: decided by government
- How to produce: ensure everyone has a job
- For whom: everyone
7
Q
What is the market clearing price?
A
The price at which demand = supply
