Economic Systems Friday Test

Question 1

two basic types of economics in the world today?

Answer 1

Microeconomics and Macroeconomics

Question 2

__ is the study of individuals, families, and businesses in the economy.

Answer 2

Micro

Question 3

__is the study of the economy as a whole and is concerned with large-scale economic activity

Answer 3

Macro

Question 4

__ studies economics behavior as it is (U.S. unemployment rate is 6%)
Ex. Higher interest rates will reduce house prices

Answer 4

Positive Economics

Question 5

__ involves judgements of what economic behavior ought to be. (U.S. unemployment should be lower)
Ex. Pollution is the most serious economic problem.

Answer 5

Normative Economics

Question 6

__ is the way a society uses its scarce resources to satisfy its peoples unlimited wants.

Answer 6

economic system

Question 7

__ three basic types of economics systems:

Answer 7

Traditional economies
Command economies
Market economies

Question 8

__ 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 societies 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

__ based on individuals choice, not government directives

Answer 11

market economy

Question 12

In a market economy, ___ drive the economy

Answer 12

consumers and producers

Question 13

___ decide what goods or services they will offer.

Answer 13

Producers

Question 14

___ act in their own self-interest when they make economic choices.

Answer 14

Individuals

Question 15

__ born in Scotland, in 1723 and studied, and later taught literature, logic, and moral philosophy.

Answer 15

Adam Smith

Question 16

In what does Smith challenged the ideas of mercantilism being economically sound?

Answer 16

His book, Wealth of Nations

Question 17

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

Answer 17

Mercantilism

Question 18

A nation would be wealthier if it is engaged with__?

Answer 18

free trade

Question 19

He reasoned that people behave in ways that satisfy their __?

Answer 19

economic self-interest.

Question 20

___ guides the marketplace

Answer 20

“invisible hand”

Question 21

Advantages of Traditional Economies

Answer 21

Traditional economies clearly answer the three economic questions
***They produce what best ensures its survival
The methods of productions are the same as they always have been
Systems of distribution are determined by custom or tradition
Little disagreement over economies

Question 22

Disadvantages of Traditional Economies

Answer 22

Bc they are based on ritual and customs, they resist change
They are less productive than they might be if they adopted new approaches
They prevent people from doing the jobs they want to do or best suited to do.
***Very low standard of living.

Question 23

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

Answer 23

centrally planned economy

Question 24

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

Answer 24

Karl Marx

Question 25

Marx predicted that in time, the workers would overthrow this system and transfer ownership of the factories to ___?

Answer 25

public hands

Question 26

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

Answer 26

Socialism

Question 27

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

Answer 27

Communism

Question 28

Typically communism will become__?

Answer 28

authoritarian

Question 29

___ requires absolute obedience to those in power

Answer 29

authoritarian system

Question 30

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

Answer 30

Democratic socialism

Question 31

In this form of socialism(democratic socialism), the ___ owns the basic industries, but other industries are privately owned

Answer 31

government

Question 32

__ was born in what is now Germany in 1818 and grew up in middle-class comfort

Answer 32

Marx

Question 33

Marx would be exiled from his homeland for becoming involved in __?

Answer 33

radical politics

Question 34

During Marx travels, he met___ , the son of a factory worker.

Answer 34

Friedrich Engels

Question 35

Marx concluded that the Industrial Revolution had created a system of __?

Answer 35

wage slavery

Question 36

The whole industrial system, Marx reasoned, was based on the__?

Answer 36

exploitation of workers

Question 37

Marx, assisted by Engels, laid out ideas of worker overthrow in __?

Answer 37

The Communist Manifesto (1848)

Question 38

__ still has an economy with mostly command elements.

Answer 38

North Korea

Question 39

Advantages of Command Economies

Answer 39

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

Question 40

Disadvantages of Command Economies

Answer 40

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

Question 41

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

Answer 41

private property rights and Market

Question 42

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

Answer 42

Private property rights

Question 43

__ is vital to any single sale or exchange

Answer 43

Clear ownership

Question 44

__ are necessary to make markets work properly

Answer 44

Private Property Rights

Question 45

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

Answer 45

laissez faire

Question 46

The concept of laissez faire is often paired with__?

Answer 46

Capitalism

Question 47

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

Answer 47

Capitalism

Question 48

Capitalism,___,operates on the belief that, on their own, producers will create the good and serviced that consumers demand

Answer 48

the foundation of market economies

Question 49

__is a market economy in its pure form

Answer 49

Laissez faire capitalism

Question 50

__is a trade in which both traders believe that what they are getting is worth more than what they are giving up.

Answer 50

A voluntary exchange

Question 51

___guides voluntary exchanges?

Answer 51

Self-interest

Question 52

___is considered a financial gain from a business transaction

Answer 52

Profit

Question 53

___is the effort of two or more people, acting independently, to get the business of others by offering the best deal.

Answer 53

Competition

Question 54

__is the idea that because consumers are free to purchase what they want and refuse products they do not, they have the ultimate control over what is produced.

Answer 54

Consumer Sovereignty

Question 55

___acts as a control on self-interest behavior, guiding the market forward a balance between higher value and lower prices.

Answer 55

Competition

Question 56

___is a situation in which people concentrate their efforts in the areas in which they have an advantage.

Answer 56

Specialization

Question 57

Specialization removes the need for____, and markets allow households to trade for what they need.

Answer 57

households to be self-sufficient

Question 58

__ is a tool that economist use to understand how market economies operate.

Answer 58

circular flow model

Question 59

The model represents the two key economic decisions makers in a market economy.. ?

Answer 59

Households | Businesses

Question 60

The market for goods and services is called the__?

Answer 60

product market

Question 61

The product market isnt a place as much as it is a___?

Answer 61

set of activities

Question 62

The suppliers of the product market are __?

Answer 62

businesses

Question 63

__ is the market for the factors of production.

Answer 63

Factor Market

Question 64

__own all the factors of production?

Answer 64

Individuals

Question 65

In the factor market,___ are the customers and ___ are the producers.

Answer 65

Businesses, Individuals

Question 66

Advantages of Economic and Political Freedom..

Answer 66

* Freedom is one of the chief advantages of a market economy * Fewer areas of government involvement unlike the command economy * A market economy also can be responsive to changes in conditions and accommodate those changes quickly * Individuals in local communities are free to make their own economic choices without the interference of the government

Question 67

___ ,a key feature of the market economy, ensures that resources will be allocated efficiently, since inefficiencies would result in lower profits

Answer 67

Profit motive

Question 68

Incentives to come up with good ideas is related to another advantage of a market economy:

Answer 68

Competition

Question 69

Competition leads to higher-quality products at lower prices and helps create a ___?

Answer 69

diverse product market

Question 70

___, the economic good of the individual is the primary focus

Answer 70

pure market economy

Question 71

Disadvantages of pure market economy..

Answer 71

A pure market economy has no mechanism for providing public goods and service i.e. National Defense Pure market economies cannot provide security to those who, because of sickness or age cannot be economically productive. Nor can it prevent the unequal distribution of wealth, even though the gap may be the result of unequal opportunities

Question 72

___ is the most common type of economies system today.

Answer 72

mixed economy

Question 73

A mixed economy is an economy that has elements of..?

Answer 73

traditional, command, and market systems.

Question 74

__, tried to find a middle ground between socialism and capitalism

Answer 74

France

Question 75

Even though there are traditional and command elements, the driving forces of the US economy are such features as ___?

Answer 75

private ownership markets

Question 76

___, while also a mixed economy, has much greater government involvement

Answer 76

Sweden

Question 77

The Swedish government and government-related organizations own ___ of all Swedish companies

Answer 77

one-third

Question 78

Swedish citizens receive___ social benefits.

Answer 78

“cradle to grave” (whole life)

Question 79

__ means to change from provide ownership to government or public ownership.

Answer 79

To nationalize

Question 80

__ means to change from government or public ownership to private ownership.

Answer 80

To privatize

Question 81

One way to help privatize an industry is to open it up to ___?

Answer 81

foreign investors

Question 82

This kind of economic tie between nations is only one example of the__?

Answer 82

global economy

Question 83

___refers to all the economic interactions that cross international boundaries.

Answer 83

Global economy

Question 84

___also have been enhanced by cross-border business partnerships.

Answer 84

Globalization