Economic systems

Question 1

What is an economic system

Answer 1

structure and process that a country uses to allocate its resources and conduct its commercial activities

Question 2

What is a centrally planned economy

Answer 2

an economic system in which the government owns a nation’s land, factories, and other economic resources and plans nearly all economic activity

Question 3

What are the 4 things that lead to a decline of central planning

Answer 3

1. failure to create economic values
2. failure to provide incentives
3. failure to satisfy consumer need
4. failure to achieve rapid growth

Question 4

What is state capitalism

Answer 4

an economic system in which the state plays the role of leading economic actor and uses markets primarily for political gain

Question 5

What is a mixed economy

Answer 5

an economic system in which land, factories, and other economic resources are rather equally split between private and government ownership

Question 6

What are the origins of a centrally planned economy

Answer 6

1. rooted in collectivism
2. popularized by Karl Marx in the 19th century
3. implemented in the 20th by means of violent upheaval

Question 7

What is the origin of the mixed economy

Answer 7

advocates contend that a successful economic system should be efficient and innovative yet protect society from the excesses of individualism and organizational greed

Question 8

How did mixed economies progressed

Answer 8

proponents of mixed economies point out that European and US rates of productivity and growth were almost identical for decades after the Second World War
-> US created more jobs but widened social inequality & modernized social welfare institutions (MOVED TOWARDS PRIVATIZATION)

Question 9

What is a market economy (capitalism)

Answer 9

the nation’s land, factories, and other economic resources are privately owned, by either individuals or businesses

Question 10

What is the origins of the market economy

Answer 10

1. emphasis on individualism
2. laissez-faire economics
3. economic freedom

Question 11

What are the 3 features of a market economy

Answer 11

1. free choice (alternative purchase options)
2. free enterprise (firms choose products and markets)
3. price flexibility (prices follow supply and demand)

Question 12

What does the government do in a market economy

Answer 12

1. enforces antitrust (antimonopoly) laws (preventing companies from fixing prices, sharing markets, and gaining unfair monopoly advantages)
2. preserve property rights (legal rights to resources and any income they generate)
3. provide fiscal and monetary stability
4. preserve political stability

Question 13

What is economic freedom

Answer 13

having high standard of living (doesn’t not mean a high per capita income)