Economic Systems Flashcards
What are the three major economic systems?
PLANNED economy, MARKET economy, MIXED economy
Examples: Cuba (Planned), America (Market), South Africa (Mixed)
What is an advantage of planned economies regarding stability?
They can be very stable because they are closed systems.
How can planned economies stimulate growth in industry?
The government doesn’t have to wait for capital to accumulate before it makes investments in heavy industry.
What is a key advantage of planned economies in directing resources?
The government can direct economic resources to specific areas where they are most needed.
What is a disadvantage of planned economies related to innovation?
They can limit economic growth and innovation as there is no entrepreneurship.
What consumer choice limitation exists in planned economies?
There is no freedom of choice for consumers; the government makes a limited range of products available.
How do planned economies respond to changes in demand?
They are inflexible systems that cannot adapt to change quickly.
Fill in the blank: Planned economies are driven by _______.
Equality
What are some advantages of mixed economies?
They encourage private businesses to make contributions to citizens welfare.
What is a disadvantage of planned economies regarding product availability?
Consumers have few choices about which products to buy.
True or False: Planned economies encourage entrepreneurship.
False
What is the primary economic focus of a market economy?
Driven by demand and supply
What is one potential benefit of a mixed economy?
It can incorporate welfare benefits and economic growth.
How is competition regulated in the private sector?
Competition is regulated by the government to ensure fairness and prevent monopolies.
What drives producers in the private sector?
Producers in the private sector are driven by self-interest and profit motives.
What is the focus of the public sector?
The public sector is focused on the welfare of all citizens rather than profit and growth.
What are the advantages of market economies?
Market economies are flexible, allow individuals to choose production, provide a wide range of products, and promote economic growth.
What is a disadvantage of market economies?
Market economies can lead to large differences in wealth among citizens.
What are the advantages of mixed economies?
Mixed economies combine government and private businesses, promote competition, and encourage contributions to citizens’ welfare.
What is a disadvantage of mixed economies?
Economic growth can be limited due to heavy government involvement and resource allocation to welfare.
What is a disadvantage of market economies regarding consumer products?
Market economies may produce goods and services that can harm consumers.
How does government involvement affect mixed economies?
Heavy government involvement can make mixed economies bureaucratic and open to corruption.
What is the objective of government in a planned economy?
The government directs resources to meet the economic needs and eliminate monopolies.
What is a planned economy?
An economic system where the government controls production and distribution of resources.
