Economic Terms Flashcards
What is laissez-faire capitalism?
An economic system with no government intervention, where businesses and individuals operate freely without regulation, taxation, or government control.
What is the economic spectrum?
The range from no government involvement in the economy (laissez-faire capitalism) to total government control (communism).
Why does pure laissez-faire capitalism not exist in reality?
Because some government regulation is always necessary to enforce contracts, protect property rights, and prevent fraud or abuse.
What is communism?
An economic system where the government controls all businesses, industries, and resources, eliminating private property and distributing wealth based on need.
What are four common problems associated with communist economies?
Inefficiency, lack of innovation, economic stagnation, and restrictions on individual freedoms.
What is regulated capitalism?
A system where markets operate freely but with some government oversight to regulate monopolies, enforce labor laws, and provide public services.
How does regulated capitalism balance economic growth and fairness?
It allows markets to drive growth while using government intervention to prevent exploitation and market failures.
What is social democracy?
A system that maintains capitalism but includes extensive government involvement to ensure social welfare and reduce economic inequality.
How do social democracies fund public services?
Through higher taxes, particularly on the wealthy, to provide healthcare, education, and unemployment benefits.
What is the main debate in economic policy?
The balance between market efficiency and social fairness—how much government involvement is necessary in the economy.
