Econ Ch. 6-7 Test

Question 1

5 main points of Mercantalism

Answer 1

1) Explore (3 G’s: God, gold, and glory)
2) Positive Trade
3) High domestic manufacturing
4) Colonize
5) Alliances/Treaty

Question 2

Main beliefs of mercantalism

Answer 2

An early economic system that focused on wealth being found in gold/silver

Question 3

Who was Adam Smith?

Answer 3

pro-laissez faire/ anti-mercantalist believer
Wrote Wealth of Nations in 1776
Said silver and gold did not equal wealth
Said true prosperity is when a nation’s people are prosperous
“Father of Laissez-Faire economy”
Said money does not equal wealth because money is means to an end and not the end itself

Question 4

What is the invisible hand

Answer 4

Smith believed that an invisible hand guided the market to healthy balance of supply and demand

Question 5

Which economic system has individuals own and answer

Answer 5

Radical Capitalism

Question 6

Which economic system has individuals with minimum government ownership (own) and individuals with some government decisions (answer)

Answer 6

Classic Liberalism

Question 7

Which economic system has individual and government moderate ownership (own) and both individuals and government making decisions (answer)

Answer 7

State Capitalism

Question 8

Which economic system has government owning key industries and individuals own the rest (own) and government making major decisions and individuals making small decisions (answer)

Answer 8

Social Democracy

Question 9

Which economic system has government owning and answering

Answer 9

Centralized Socialism

Question 10

Which economic system has all citizens owning and answering equally

Answer 10

Utopian Communism

Question 11

Order of chart (prob not how it will be on test but)

Answer 11

Radical Capitalism
Classical Liberalism
State Capitalism
Social Democracy
Centralized Socialism
Utopian Communism

Question 12

Pros/Cons of Sole Proprietorship (one owner)

Answer 12

Pros: Freedom in the market, less outside control, less info sharing, lower taxes, own boss

Cons: hold all liability, limited management skills, limited employee skills, limited life, limited funds

Question 13

Pros/Cons of General Partnership (2+ owners)

Answer 13

Pros: more management skills, longer lasting employees, more financing sources, relatively easy to form/manage

Cons: both liable, short business life due to conflict,

Question 14

Pros/Cons of Limited Partnership

Answer 14

One partner has unlimited personal financial liability

one partner invests and has the right to inspect books and profit, but no decision making or management responsibilites

Question 15

Pros/Cons of Corporation

Answer 15

Pros: limited liability, experienced management, specialized employees, continuous life, easy to raise $

Cons: pay more in taxes, greater government regulation, lack of secrecy, impersonal, rigid/less flexible,

People can buy stock and own
Can be public or private

Question 16

Private Corporation

Answer 16

Individuals own (ex. Disney, Apple)

Question 17

Public Corporation

Answer 17

General public owns, managed by government (ex. TVA)

Question 18

What is an LLC?

Answer 18

It combines the benefits of a corporation with those of a partnership.
Like corp: owners not liable for for acts and debts
Like part: lower taxes, less burdensome reporting requirements

Question 19

Pros/Cons of LLC

Answer 19

Pros: Can be created by one person, any number of shareholders, members dont have to meet on regular schedule, governed by operating agreement

Cons: difficult to raise money, special tax in some states, operating agreement must be flawless or else legal trouble

Question 20

When a nation has more coming in than going out

Answer 20

Favorable balance of trade

Question 21

“let alone”, government stays out of the individual and allows them to seek own profit

Answer 21

Laissez-faire

Question 22

Goods and services that benefit all or nearly all of a nations people and that private firms or individuals would not choose to produce because they could not do so profitably

Answer 22

Public Good

Question 23

Nation’s government assumes ownership of companies on a large scale

Answer 23

Nationalization (often found in socialism)

Question 24

Where Karl Marx argued that any arrangement of the tools of production short of total state ownership would be counterproductive

Answer 24

Communist Manifesto

Question 25

Nation under extreme state capitalism; taxes high and funds are redistributed so that the government claims to care for all citizens

Answer 25

Welfare State

Question 26

Action wherein the governments sell nationalized businesses back to private stockholders

Answer 26

Privatization