Chapter 2

Question 1

economic system

Answer 1

the way in which society decides what goods to produce, how to produce them, and for whom goods will be produced

Question 2

free enterprise

Answer 2

economic system in which individuals (not government) own most, if not all, the resources and control their use. Government plays only a small part in the economy

Question 3

socialism

Answer 3

economic system in which government controls and may own many of the resources

Question 4

economic plan

Answer 4

government program specifying economic activities, such as what goods are to be produced and what prices will be charged

Question 5

income distribution

Answer 5

the way all the income earned in a country is divided among different groups of income earners

Question 6

mixed economy

Answer 6

economy that s neither purely capitalist nor purely socialist. Has both elements

Question 7

traditional economy

Answer 7

economic system in which the answers to the three economic questions are based on customs, traditions, and cultural beliefs

Question 8

vision

Answer 8

a sense of how the world works

Question 9

labor theory of value

Answer 9

belief that all value in produced goods is derived from labor

Question 10

surplus value

Answer 10

difference between total value of production and the subsistence wages paid to workers.

Question 11

globalization

Answer 11

phenomenon by which economic agents in any given part of the world are affected by events elsewhere in the world. Trend towards single unified global economy.

Question 12

offshoring

Answer 12

term used to describe work done for a company by persons other than the original company’s employees in a country other than the one in which the company is located