Economic systems Flashcards
The study of individuals, families, and businesses in the economy
Microeconomics
The study of the economy as a whole; concerned with large-scale economic activity
Macroeconomics
Studies economic behavior as it is
Positive economics
Judgements of what economic behavior ought to be
Normative economics
What are the three basic economic questions?
What are we producing?
How are we going to produce it?
Who are we producing it for?
The way a society uses its scarce resources to satisfy its people’s unlimited wants
Economic system
Basic 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
Economic system in which the govt decides what goods and services will be produced, how they will be produced, and how they will be distributed
Command economy
Economic system based on individual choice, not govt directives
Market Economy
System by which the govt of the homeland controlled trade with its colonies
Mercantilism
Wrote Wealth of Nations, and is considered the father of Economics
Adam Smith
A system in which the society’s leaders make all economic decisions
Centrally planned economy
Economic system in which the govt owns some or all of the factors of production
Socialism
Economic system in which the govt owns all the factors of production and there is little or no political freedom
Communism
System which requires absolute obedience to those in power
Authoritarian System
Economic system in which the govt owns the basic industries, but other industries are privately owned; Established through the democratic political process rather than through the violent overthrow of the govt
Democratic Socialism
Who published The Communist Manifesto, which laid out the ideas of worker overthrow?
Karl Marx
The publisher of The Communist Manifesto stated that the Industrial Revolution had created a system of _______________
Wage Slavery
The rights of individuals and groups to own businesses and resources; necessary to make markets work properly
Private property rights
Any place where people buy and sell goods and services
Market
___________ is vital to any sale or exchange
Clear ownership
The principle that the govt should not interfere in the economy
Laissez faire
An economic system that is based on private ownership of the factors of production
Capitalism
A market economy in its pure form
Laissez faire capitalism
A trade in which both traders believe that what they are getting is worth more than what they give up
Voluntary exchange
____________ is considered a financial gain from a business transaction
Profit
The effort of two or more people, acting independently, to get the business of others by offering the best deal
Competition
________ guides voluntary exchanges
Self-interest
The idea that because consumers are free to purchase what they want and refuse products they do not
Consumer sovereignty
A situation in which people concentrate their efforts in the areas in which they have an advantage
Specialization
A tool that economists use to understand how market economies operate
Circular flow model
The market for goods and services is called the _________
Product market
The market for the factors of production
Factor market
Insures that resources will be allocated efficiently, since inefficiencies would result in lower profits
Profit motive
An economy that has elements of traditional, command, and market systems
Mixed economy
Which economic system dominates the US?
Market economy
To change from private ownership to govt or public ownership
Nationalize
To change from govt or public ownership to private ownership
Privatize
All the economic interactions that cross international boundaries
Global economy
