Economic Systems

Question 1

2 basic types of economic systems:

Answer 1

1. macroeconomics

2. microeceonomics

Question 2

_____ is the study of individuals, families, and businesses in the economy

Answer 2

microeconomics

Question 3

______ is the study of the economy as a whole and is concerned with large-scale economic activities

Answer 3

macroeconomics

Question 4

______studies economic behavior as it is

Answer 4

Positive Economics

Question 5

______ involves judgements of what economic behavior ought to be

Answer 5

Normative Economics

Question 6

An _____ is the way a society uses its scarce resources to satisfy its people’s unlimited wants

Answer 6

economic system

Question 7

There are 3 basic economic systems:

Answer 7

1. Traditional Economies
2. Command Economies
3. Market Economies

Question 8

A ________ 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

Answer 8

traditional economy

Question 9

The one goal of traditional economies is _____

Answer 9

survival

Question 10

In a ______, the government decides what goods and services will be produced, how they will be produced, and how they will be distributed

Answer 10

command economy

Question 11

A _____ is based on an individual choice, not government directives in this system, consumers and producers drive the economy

Answer 11

market economy

Question 12

Adam Smith wrote the _____

Answer 12

Wealth of Nations

Question 13

Smith was born in ____ in 1723

Answer 13

Scotland

Question 14

______ is a system by which the government of the homeland controlled trade with its colonies

Answer 14

Mercantilism

Question 15

A nation would be wealthier if it engaged in _____

Answer 15

free trade

Question 16

The _____ became the foundation of modern economic theory

Answer 16

invisible hand

Question 17

An ____ guides the marketplace

Answer 17

invisible hand

Question 18

Advantages of a traditional economy

Answer 18

1. They clearly answer the 3 economic questions
2. They produce what best ensure survival
3. Little disagreement over economic goals and roles
4. System of distribution is determined by customs or tradition

Question 19

Disadvantages of a traditional economy:

Answer 19

1. They resist change
2. They are less productive
3. They prevent people from doing jobs they want tod o
4. Very low standard of living

Question 20

A system in which the society’s leaders, usually members of the central government, make all economic decisions is called a _______

Answer 20

centrally planned economy

Question 21

Modern societies that have adopted command economies have done so largely because of the influence of _____

Answer 21

Karl Marx

Question 22

______ is an economic system in which the government owns some or all of the factors of production

Answer 22

socialism

Question 23

______ is an economic system in which the government owns all the factors of production and there is little or no political freedom

Answer 23

communism

Question 24

______ is established through the democratic political process rather than through the violent overthrow of the government

Answer 24

Democratic Socialism

Question 25

Karl Marx was born in _____ in 1818 and grew up in middle class comfort

Answer 25

Germany

Question 26

He met _____ during his travels

Answer 26

Friedrich Engles

Question 27

Marx concluded that the _______ had created a system of wage slavery

Answer 27

Industrial Revolution

Question 28

Marx and Engles laid out their ideas of worker overthrow in the _____

Answer 28

Communist Manifesto

Question 29

Advantages of Command Economy

Answer 29

1. They seek to provide for everyone
2. Leaders in a command economy can use the nation’s resources to produce items that may not make money in a market society

Question 30

Disadvantages of a Command Economy

Answer 30

1. Central planners often have little understanding of local conditions
2. Workers often have little motive to improve their productivity
3. Often set prices will be below those that would be established in a market system
4. Face shortages

Question 31

Self-interest behavior is behind 2 features of a market economy:

Answer 31

1. Private Property Rights

2. Market

Question 32

_____ are the rights of individuals and groups to own businesses and resources

Answer 32

Private Property Rights

Question 33

The ____ is any place where people buy and sell goods and services

Answer 33

Market

Question 34

______ is vital to any single sale or exchange

Answer 34

Clear Ownership

Question 35

______ are necessary to make markets work properly

Answer 35

private property rights

Question 36

The principle that the government should not interfere in the economy is called _____

Answer 36

laissez faire

Question 37

______ is an economic system that is based on private ownership of the factors of production

Answer 37

capitalism

Question 38

_______ is a market economy in its pure form

Answer 38

Laissez Faire Capitalism

Question 39

A _____ is a trade in which both traders believe that what they are getting is worth more than what they are getting

Answer 39

voluntary exchange

Question 40

_____ guides voluntary exchange

Answer 40

Self-interest

Question 41

_____ is considered a financial gain from a business transaction

Answer 41

Profit

Question 42

_______ is the effort of 2 or more people, acting independently, to get the business of others by offering the best deal

Answer 42

Competition