American Economic System

Question 1

command economy

Answer 1

economic system wherein the government makes all economic decisions

commonly associated with communist countries

Question 2

characteristics of command economy

Answer 2

means of production controlled by government

prices set by government

job security ensured by government

less freedom for individuals

Question 3

problems with command economy

Answer 3

less incentive

quality problems

less choice for consumers

Question 4

market economy

capitalism

free-enterprise system

Answer 4

economic system wherein individual consumers and producers make basic economic decisions based upon principles of supply and demand

commonly associated with democracy

Question 5

characteristics of market economy

Answer 5

private property is essential

entrepreneurs are encouraged

capital is necessary

dependent on competition

means of production is controlled by individuals

Question 6

globalization

Answer 6

growing integration of national economies that is leading to a more interdependent global economy

Question 7

causes of globalization

Answer 7

human nature drives people to want to work together

improved technology

end of Cold War

policy changes by governments

Question 8

costs of globalization

Answer 8

corporatization

offshoring

outsourcing

Question 9

offshoring

Answer 9

pulling people from other places to do jobs in a country

Question 10

outsourcing

Answer 10

moving jobs to people of another country to do it in their country

Question 11

macroeconomics

Answer 11

study of economics that is concerned with economics as a whole with basic subdivisions

Question 12

microeconomics

Answer 12

study of economics that is concerned with specific economic units and detailed consideration of the behavior of these units

Question 13

standard of living

Answer 13

measurement of how effective an economy meets needs by looking at purchasing power and quality of life (based on leisure time)

Question 14

full employment

Answer 14

maximum number of those willing to work in suitable jobs

Question 15

inflation

Answer 15

general rise in price of goods and services

Question 16

determination of needs

Answer 16

comparison of countries

comparison of classes

needs change over time

Question 17

production possibilities curve

Answer 17

shows possible combinations of 2 types of goods that can be produced when available resources are employed fully and efficiently

Question 18

efficiency

Answer 18

production of maximum possible output from available resources

Question 19

opportunity cost

Answer 19

value of best alternative that must be passed up

Question 20

measurement of opportunity cost

Answer 20

dollars

personal choice based on preference

Question 21

problems with opportunity cost

Answer 21

humans defy logic

humans can make decisions based on incorrect or misleading information

Question 22

variance of opportunity cost

Answer 22

based on person

based on options

Question 23

sunk cost

Answer 23

expense that has already been incurred and cannot be recovered

Question 24

demand

Answer 24

amount of goods or services that consumers are willing and able to buy at specific prices

Question 25

law of demand

Answer 25

states that the proportion of price and demand is inverse

Question 26

factors which influence demand

Answer 26

tastes and preferences of consumers number of consumers income of consumers price of related goods consumer expectations for future price and income

Question 27

supply

Answer 27

amount of goods or services that producers are willing and able to sell at specific prices

Question 28

law of supply

Answer 28

states that the proportion of price and supply is direct

Question 29

factors which influence supply

Answer 29

number of sellers advancement of technology change in resource prices change in expectations for future prices change taxes or subsidies change in prices of other goods

Question 30

equilibrium of supply and demand

Answer 30

point of price and quantity at which supply and demand are in balance

Question 31

importance of equilibrium of supply and demand

Answer 31

no resources are wasted at equilibrium of supply and demand

Question 32

location of shortage on graph of supply and demand

Answer 32

Question 33

location of surplus on graph of supply and demand

Answer 33

Question 34

gross domestic product (GDP)

Answer 34

measurement of amount of goods and services that an economy produces within a year

Question 35

John Maynard Keynes

Answer 35

provided basis of fiscal policy

Question 36

Jerome Powell

Answer 36

current chairman of Federal Reserve System

Question 37

Adam Smith

Answer 37

author of *The Wealth of Nations* ideas gave basis of capitalism

Question 38

Karl Marx

Answer 38

author of *Das Kapital* focused on role of worker in economy ideas gave basis of communism