Chapter 2: Economic Systems

Question 1

the method used by a society to produce and distribute goods and services

Answer 1

economic system

Question 2

the income people receive for supplying factors of production, such as land, labor, or capital

Answer 2

factor payments

Question 3

the love of one’s country; the passion that inspires a person to serve his or her country

Answer 3

patriotism

Question 4

government programs that protect people experiencing unfavorable economic conditions

Answer 4

safety net

Question 5

level of economic prosperity

Answer 5

standard of living

Question 6

economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services

Answer 6

traditional economy

Question 7

economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets

Answer 7

market economy

Question 8

economic system in which the central government makes all decisions on the production and consumption of goods and services

Answer 8

centrally planned economy

Question 9

economic system in which a central authority is in command of the economy; a centrally planned economy

Answer 9

command economy

Question 10

market-based economic system with limited government involvement

Answer 10

mixed economy

Question 11

ann arrangement that allows buyers and sellers to exchange things

Answer 11

market

Question 12

the concentration of the productive efforts of individuals and firms on a limited number of activities

Answer 12

specialization

Question 13

a person or group of people living in the same residence

Answer 13

household

Question 14

an organization that uses resources to produce a product, which it then sells

Answer 14

firm

Question 15

market in which firms purchase the factors of production from households

Answer 15

factor market

Question 16

the financial gain made in a transaction

Answer 16

profit

Question 17

the market in which households purchase the goods and services that firms produce

Answer 17

product market

Question 18

one’s own personal gain

Answer 18

self-interest

Question 19

an expectation that encourages people to behave in a certain way

Answer 19

incentive

Question 20

the struggle among produces for the dollars of customers

Answer 20

competition

Question 21

term economists use to describe the self-regulating nature of the marketplace

Answer 21

invisible hand

Question 22

the power of consumers to decide what gets produces

Answer 22

consumer sovereignty

Question 23

a social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society

Answer 23

socialism

Question 24

a political system characterized by a centrally planned economy with all economic and political powers resting in the hands of the central government

Answer 24

communism

Question 25

requiring strict obedience to an authority, such as a dictator

Answer 25

authoritarian

Question 26

large farm leased from the state to groups of peasant farmers

Answer 26

collective

Question 27

industry that requires a large capital investment and that produces items used in other industries

Answer 27

heavy industry

Question 28

the doctrine that states that government generally should not intervene in the marketplace

Answer 28

laissez faire

Question 29

property owned by individuals or companies, not by the government or the people as a whole

Answer 29

private property

Question 30

an economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market

Answer 30

free enterprise

Question 31

a range with no clear divisions

Answer 31

continuum

Question 32

period of change in which an economy moves away from a centrally planned economy toward a market-based system

Answer 32

transition

Question 33

to sell state-run firms to individuals

Answer 33

privatize

Question 34

What are the 3 key economic questions?

Answer 34

1. What goods and services should be produced?
2. How should these goods and services be produced?
3. Who consumes these goods and services?

Question 35

Give an example of a safety net in our economic system or an example of what can be covered by a safety net

Answer 35

food stamps, injury, national disasters, unemployment

Question 36

making the most of resources

Answer 36

economic efficiency

Question 37

freedom from government intervention in the production and distribution of goods and services

Answer 37

economic freedom

Question 38

the comfort in knowing we can get what we need and want

Answer 38

economic security and predictability

Question 39

fair distribution and wealt

Answer 39

economic equality

Question 40

What can lead to a higher standard of living?

Answer 40

economic growth and innovation

Question 41

What is an example of a traditional economy?

Answer 41

the Amish

Question 42

What is an example of a command or centrally planned economy?

Answer 42

The Soviet Union

Question 43

What kind of economy do we have in the United States?

Answer 43

a mixed economy

Question 44

Why are economies and markets necessary?

Answer 44

because we are not self-sufficient; we cannot make the things we need or want on our own

Question 45

What are the two types of incentives?

Answer 45

monetary and nonmonetary

Question 46

Who owns all the land and capital in a centrally planned economy?

Answer 46

the government

Question 47

What is the less extreme form of communism?

Answer 47

socialism