Economic Systems Flashcards
What are the two basic types of economics in the world today?
Microeconomic
Macroeconomics
___ is the study of individuals, families, and businesses in the economy
Microeconomics
___ is the study of the economy as a whole and is concerned with large-scale economic activity
Macroeconomics
___ studies economic behavior as it is
Positive economics
___ involves judgements of what economic behavior ought to be
Normative economics
An ___ is the way a society uses its scarce resources to satisfy its peoples unlimited wants
economic system
What are the three economic systems?
Traditional
Command
Market
___ 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 economy
What is the one goal of these societies?
Survival
A ___ is where the government decides what goods and services will be produced, how they will be produced, and how they will be distributed
command economy
___ consider the resources and needs of the country and allocate those resources according to their judgment
government officials
___ is based on individual choice, not government directives
market economy
___ and ___ drive the economy
consumers and producers
___ decide what goods or services they will offer
producers
Individuals act in their own self-interest when they make ___ choices
economic
No other economist has had as much influence as ___
Adam Smith
Smith was born in ___, in ___
Scotland in 1723
What three things did Smith study and later taught
literature, logic, and moral philosophy
In the ___, Smith challenged the ideas of mercantilism being economically sound
The Wealth of Nations
___ is a system by which the goverment of the homeland being trade with its colonies
Mercantilism
A nation would be wealthier if it engaged in ___
free trade
He reasoned that people behave in ways that satisfy their economic ___
self-interest
An “___” guides the marketplace
invisible hand
The “invisible hand” as well as other principles outlined the Wealth of Nations became the foundation of modern ___
economic theory
A system in which the society’s leader, usually members of the central government, make all economic decisions is called a ___ economy
centrally planned
Modern societies that hae adopted command economics have done so largely because of the influence of ___
Karl Marx
Marx predicted that in time, the workers would overthrow this system and transfer ownership of the factories to ___
public hands
___ is an economic system in which the government owns some or all of the factors of production
Socialism
___ is an economic system in which the government owns all the factors of production and there is little or no political freedon
Communism
Typically communism will become ___
authoritarian
A ___ system require absolute obedience to those in power
authoritarian
___ is established through the democratic political process rather than through the violent overthrow of the government
Democratic socialism
In this form of socialism, the ___ owns the basic industries, but rather industries are privately owned
Government
Marx was born in what is now ___ in ___
Germany in 1818
Marx grew up in ___ comfort
middle-class
During Marx’s travels, he met ___, the son of a factory worker
Friedrich Engels
Marx concluded that the ___ had created a system of wage slavery
Industrial Revolution
The whole industrial system, Marx reasoned, was based on the ___ of workers
exploitation
Marx, assisted Engels, laid out ideas of worker overthrow in The ___
Communist Manifesto
Communist Manifesto was in what year?
1848
___ still has economy with mostly command elements
North Korea
Self interested behavior is behind two features of a market economy, what are they?
Private property rights and market
___ are the rights of individuals and group to own businesses and resources
Private Property rights
___ is any place where people buy and sell goods and services
market
___ is vital to any single sale or evantage
Clear ownership
___ are necessary to make markets properly
Private property rights
The principle that the government should not interfere in the economy is called ___
laissez faire
The concept of laissez faire if often paired with ___
capitalism
___ is an economic system that is based on private ownership of the factors of production
Capitalism
___ is a market economy in its pure form
Laissez faire capitalism
___ is a trade in which both traders believe that what they are getting is worth more than what they are giving up
voluntary exchange
___ guides voluntary exchanges
self- interested
___ is considered a financial gain from a business transaction
profit
___ is the effort of two or more people , acting independently, to get the business of others by offering the best deal
Competition
___ is the idea that because are free to purchase what they refuse products they do not, they have the ultimate control over what is produced
Consumer sovereignty
___ acts as a control on self-interested behavior, guiding the market toward a balance between higher ___ and lower ___
Competition
value
prices
___ is a situation in which people concentrated their efforts in the areas in which they have advantage
Specialization
___ removes the need for households to be self-sufficient, and ___ allow households to trade for what they need
Specialization
Markets
Specialization, then, leads to higher ___ yet lower ___ products
quality
priced
___ is a tool that economists use to understand how market economies operate
The circular flow model
The model represents the two key economic decisions markers in a market economy…what are they?
households
businesses
The market for goods and services is called the ___
product market
The supplies of the product market are ___
businesses
The ___ is the market for the factors of production
factor market
Individuals own all the ___
factors of production
In the factor market, businesses are the ___ and individuals are the ___
customers
producers
In a ___ the economic good of the individuals is the primary focus
pure market economy
___ is the most common type of economic system today
mixed economy
___ is an economy that has elements of traditional, command, and market systems
mixed economy
In the United States, the ___ economy dominates
market
France tried to fins a middle ground between ___ and ___
socialism and capitalism
Even though there are traditional and command elements, the driving forces of the US economy are such features as ___ and ___
private ownership and markets
___, while also a mixed economy, has much greater government involvement
Sweden
The Swedish government and government-related organizations own ___ of the Swedish companies
one-third
Swedish citizens receive “___” social benefits
cradle to grave
One way to help privative an industry is to open it up to ___
foreign investors
___ refers to all the economies interactions that cross international boundaries
global economy
