Chapter 3- The American Free Enterprise System Flashcards
What is capitalism?
An economic system in which private citizens own and use the factors of production to produce and generate profits
What is capitalism based on?
Free markets (w/out government regulation and interference)
What is free enterprise?
An economic system which privately owned businesses have the freedom to operate w limited gov intervention
What are the 5 characteristics if a free enterprise/capitalist economic system?
- Economic Freedom (have choices)
- Voluntary exchange (buyers and sellers freely exchange goods)
- Private property rights (own and control your own possessions)
- Profit motive (the incentive to improve one’s goods)
- Competition (the struggle among sellers to attract customers)
What are the 5 benefits of Free Enterprise?
- Individual Freedom x choices
- A variety of goods- inexhaustible variety of goods
- Adapting to change-prices
- Promoting progress- cell phone evolution
- Creation of wealth- gdp (gross domestic product)
2 major disadvantages of a free enterprise?
- Uneven economic growth (recessions and depressions)
2. Growing gaps between rich and poor (gilded age 56% poor and today 12% poverty)
What is the GDP?
The dollar value of all final goods, services, and structures produced in one year in a country.
What is an entrepreneur?
A person who organizes and manages the factors of production
What is the role of the entrepreneur?
The spark plug and the catalyst of the free enterprise economy
Being an entrepreneur is very safe and secure? T/F
False-super risky w a high rate of failure
What is the role of the consumer?
Determine what is produced. Role is sovereign (always right)
What are the 4 major roles of the government?
Play a limited role
- protect the people
- provide services for the people
- regulate business
- consumer of goods
What is minimum wage?
Lowest legal wage that can be paid to most workers
What is social security?
Federal program of disability and retirement benefits that covers mist working people.
What is medicare?
Federal health insurance program for senior citizens, regardless of income
What is medicaid?
Federal health insurance program for lower income families
What is inflation?
A rise in the general level of prices.
What is fixed income?
Income that does not increase over time.
