Economic Systems : 1/27/16 Flashcards
There are two basic types of economics in the world today : 1. M_____________. 2. M_______________.
Microeconomics, macroeconomics
M______________ is the study of individuals, families, and businesses in the economy.
Microeconomics
M_____________ is the study of the economy as a whole and is concerned with large-scale economic activity.
Macroeconomics
P______ e________ studies economic behavior as it is.
Positive economics
N________ e________ involves judgements of what economic behavior ought to be.
Normative economics
What are the three economic questions? The answers to these questions shape the e_______ s_____ a society has.
Economic system
An e________ s______ is the way a society uses its scarce resources to satisfy its people’s unlimited wants.
Economic system
There are three basic types of economic systems. : 1. T_________ economies. 2. C______ economies. 3. M______ economies.
Traditional, command, market
A t__________ economy is an economic system in which families, clans, or tribes make economic decisions based on customs and beliefs that have been handed down from generation to generation.
Traditional
The one goal of these societies is s_______.
Survival
A c________ economy, the government decides what goods and services will be produced, how they will be produced, and how they will be distributed.
Command
G__________ o_______ consider the resources and needs of the county and allocate those resources according to their judgement.
Government officials
A m______ economy, is based on individual choice, not government directives. In this system, c________ and p_______ drive the economy.
Market, consumers, producers
P_______ decide what goods or services they will offer.
Producers
Individuals act in their own s___-______ when they make economic choices.
Self-interest
As A____ S_____ noted in T___ W_____ of N_____, when you make economic decisions you act in your own self-interest, but you are “led by an i_______ h____” to promote the interests of others.
Adam Smith, The Wealth of Nations, invisible hand
No other economist has had as much influence as A_____ S____.
Adam Smith
Smith was born in S_______, in ____ and studied, and later taught literature, logic, and moral philosophy.
Scotland, 1723
In the Wealth of Nations, Smith challenged the ideas of m___________ being economically sound.
Mercantilism
M___________ is a system by which the government of the homeland controlled trade with its colonies.
Mercantilism
A nation would be wealthier if it engaged in f___ t____.
Free trade
He reasoned that people behave in ways that satisfy their economic s___-______.
Self-interest
An “i________ _____” guides the marketplace.
Invisible hand
Advantages of traditional economies. : 1. Traditional economies clearly answer the __ economic q_______. 2. They produce what best ensures its s______. 3. The methods of p____________ are the same as they have always been. 4. Systems of d_________ are determined by custom or tradition. 5. Little disagreement over economic g____ and r____.
3 questions, survival, production, distribution, goals, roles
Disadvantages of traditional economies. : 1. Because they are based on r____ and c______, they resist c_____. 2. They are less productive than they might be if they adopted new approaches. 3. They prevent people from doing the jobs they want to do or best suited to do. 4. Very l___ s_______ of living.
Rituals, customs, change, low standard
A system in which the society’s leaders, usually members of the central government, make all economic decisions is called a c_______ p_______ e_______.
Centrally planned economy
Modern societies that have adopted command economies have done so largely because of the influence of K___ M____. The struggle between owners of the great industrial factories and the workers who exchanged their labor for wages.
Karl Marx
M___ predicted that in time, the workers would o________ this system and transfer o_______ of the factories to p_____ hands.
Marx, overthrow, ownership, public
S________ is an economic system in which the government owns some or all of the factors of production.
Socialism
C_________ is an economic system in which the government owns all the factors of production and there is little or no political freedom.
Communism
Typically c__________ will become a__________
Communism, authoritarian
An a__________ system requires absolute obedience to those in power.
Authoritarian
D________ s_______ is established through the democratic political process rather than through the violent overthrow of the government.
Democratic socialism
In this form of s________, the government owns the basic industries, but other industries are privately owned.
Socialism
M___ was born in what is now G_______ in ____ and grew up in middle class comfort.
Marx, Germany, 1818
He would be exiled from his homeland for becoming involved in r_____ p_____.
Radical politics
During his travels, he met F______ E_____, the son of a factory worker.
Friedrich Engels
Marx concluded that the I_______ R________ had created a system of w___ s_______.
Industrial Revolution, wage slavery
The whole i_______ s______, Marx reasoned, was based on the e________ of workers.
Industrial system, exploitation
Marx, assisted by E_____, laid out ideas of worker overthrow in T__ C________ M_______ (?).
Engels, The Communist Manifesto (1848)
N_____ K______ still has an economy with mostly command elements.
North Korea
Advantages of command economies. : 1. They seek to p_____ for e________. 2. Leader in a command economy can use the nation’s r________ to produce items that may not make money in a m______ economy.
Provide, everyone, resources, market
Disadvantages of command economies. : 1. Central planners often have little u____________ of local conditions. 2. Workers often have little m_____ to improve their productivity. 3. Often set prices well b_____ those that would be established in a market system. 4. Command economies face s________.
Understanding, motive, below, shortages
Self-interested behavior is behind two features of a market economy. : 1. P______ p______ r_____. 2. M_____.
Private property rights, market
P______ p______ r_____ are the rights of individuals and groups to own businesses and resources.
Private property rights
The m_____ is any place where people buy and sell goods and services.
Market
C____ o_______ is vital to any single s___ or e_______.
Clear ownership, sale, exchange
P_______ p_______ r______ are necessary to make m______ work properly.
Private property rights, markets
The principle that the government should not interfere in the economy is called l______ f____.
Laissez faire
The concept of l______ f___ is often paired with c_________.
Laissez faire, capitalism
C_________ is an economic system that is based on private ownership of the factors or production.
Capitalism
C________, the foundation of m______ economies, operates on the belief that, on their own, producers will create the goods and services that consumers demand.
Capitalism, market
L_______ f_____ c__________ is a market economy in its pure form.
Laissez faire capitalism
A v________ e_______ is a trade in which both traders believe that what they are getting is worth more than what they are giving up.
Voluntary exchange
S___-_______ guides voluntary exchanges.
Self-interest
P_____ is considered a financial gain from a business transaction.
Profit
C___________ is the effort of two or more people, acting independently, to get the business of others by offering the best deal.
Competition
C_________ s_____________ is the idea that because consumers are free to purchase what they want and refuse products they do not, they have the ultimate control over what is produced.
Consumer sovereignty
C___________ acts as a control on a s___-________ b________, guiding the market toward a balance between higher value and lower prices.
Competition, self-interested behavior
S______________ is a situation in which people concentrate their efforts in the areas in which they have an advantage.
Specialization
S____________ removes the need for households to be s___-________, and m______ allow households to trade for what they need.
Specialization, self-sufficient, markets
S_____________, then, leads to h_____-_____ yet l_____-_____ products.
Specialization, higher-quality, lower-priced
The c______ f___ m_____ is a tool that economists use to understand how market economies operate.
Circular flow model
The model represents the two key economic decision makers in a market economy. : 1. H__________. 2. B_________.
Households, businesses
The market for goods and services is called the p______ m______.
Product market
The p_____ m______ isn’t a good place as much as it is a set of activities.
Product market
The suppliers of the p_____ m______ are b________.
Product market, businesses
The f______ m______ is the market for the factors of production.
Factor market
I__________ own all the f______ of p_________.
Individuals, factors of production
In the f______ m_____, b__________ are the customers and i__________ are the producers.
Factor market, businesses, individuals
P____ : The p____ m____, a key feature of the m_____ economy, ensures that resources will be allocated efficiently, since inefficiencies would result in lower profits.
Profit, profit motive, market
I_________ to come up with good ideas is related to another advantage of a market economy. : C__________.
Incentives, competition
C__________ leads to higher-quality products at lower prices and helps create a diverse product market.
Competition
In a pure m______ economy, the economic good of the i____________ is the primary focus.
Market, individual
The m_____ e_________ is the most common type of economic system today.
Mixed economy
A m______ economy is an economy that has elements of traditional, command, and market systems.
Mixed
Although all m______ economies are m_____, they often emphasize one type of system over another.
Modern, mixed
In the United States, the ________ economy dominates.
Market
Even though there are traditional and command elements, the driving forces of the US economy are such features as p______ o__________ and m______.
Private ownerships, markets
F____, tried to find a middle ground between s________ and c_________.
France, socialism, capitalism
S_______, while also a m_____ economy, has much greater government involvement. The Swedish government and government-related organizations own ___-_____ of all Swedish companies. Swedish citizens receive “c_____ t_ g____” social benefits.
Sweden, mixed, one-third, cradle to grave
To n__________ means to change from private ownership to government or public ownership.
Nationalize
More recently, many economies have moved away from c________ systems to m______ systems.
Command, market
To p_______ means to change from government to public ownership to private ownership.
Privatize
One way to help p________ an industry is to open it up to f______ i______. This kind of economic tie between nations is only one example of the g____ economy.
Privatize, foreign investors, global
The g_____ economy refers to all the economic interactions that cross international boundaries.
Global
G____________ also has been enhanced by cross-border business partnerships.
Globalization
