A: Objectives Of Govt Macro Policy Flashcards
What is the economic problem?
How to allocate limited resources to satisfy unlimited needs and wants
What are the factors of production?
Capital, land, labour and entrepreneurship
Key questions when solving economic problem
- what to produce
- how to produce
- for whom to produce
Opportunity cost
The next best alternative forgone when a choice is made
3 main economic systems we learn about
Free market, command and mixed economies
How are resources allocated in a free market economy?
Through the forces of demand and supply
How are resources allocated in a command economy?
The government makes all these decisions and answers the questions of the economic problem
How does a mixed economy allocate resources?
A mixed economy incorporates both elements of free market and command economies. Governments intervene to correct market failure or promote social welfare
