Econimc Systems

Question 1

Name 3 types of economic systems

Answer 1

Free enterprise, centrally planned and mixed

Question 2

What is a free enterprise economy?

Answer 2

A free enterprise economy is where private businesspeople make decisions on the goods and services to be produced

Question 3

What are the characteristics free enterprise economy?

Answer 3

Market mechanism, ownership of factors of production, limited government interference, decentralised decision making and motivated by self-interest

Question 4

What are the disadvantages of a free enterprise economy?

Answer 4

Distribution of income/wealth inequalities, lack of essential public services, vital service should not be in private hands, growth of monopolies and unemployment/inflation

Question 5

What is a centrally planned economy?

Answer 5

A centrally planned economy is where the government make decisions on the goods and services to be produced

Question 6

What are the characteristics of a centrally planned economy?

Answer 6

Planning mechanism, ownership of factors of production, maxium government intervention, centralised decision making and motivated by common good

Question 7

What are the advantages of a centrally planned economy?

Answer 7

More even distribution of wealth, provision of essential services, economies of scale and full employment

Question 8

What are the disadvantages of a centrally planned economy?

Answer 8

Shortage of goods and services, restricted choice for individuals, inefficency, low economic growth and bureaucracy/corruption/high taxes

Question 9

What is a mixed economy?

Answer 9

A mixed economy is one the incorporates elements of both centrally planned and free enterprise in its economic system

Question 10

What are the characteristics of a mixed economy?

Answer 10

Existence of semi state and private enterprises side by side, government departments/various legislators, legisation, use of taxation/government expenditure and existence of social partnership