Economics Study Guide: Chapter 2 Flashcards
Define economic system and name the 3 basic economic questions.
A system to determine how resources will be used for wants and needs of people.
1. What to produce
2. How to produce
3. Whom will get produced
What are the 4 types of economic systems?
- Traditional
- Market
- Command
- Mixed
Define traditional economy.
Economy where decisions are made based on customs and habits. Is found in rural, non-developed countries
What are the advantages of traditional economy? Hint: There is 6
- Family/tribe based
- Simple/things done same way
- Works with natural environment
- Tradition determines who gets what
- Sharing/Support
- Bartering (Trading)
What are the disadvantages of a traditional economy? Hint: There is 5
- Isolation
- Overwhelmed from large outside economies
- Unpredictability creates survival uncertainties
- Economic stagnation (no economic growth) from lack of progress
- Lower quality of life
Define a command economy.
Economy where all decisions are made by the gov. - centrally planned - decisions made for you NOT by you
What are examples of a command economy?
Cuba, North Korea, and China
What are the advantages of a command economy? Hint: There are 4
- Industrial power boosted
- Citizens get free healthcare, education, etc.
- Low unemployment
- Equal income; no extremely poor people
What are the disadvantages of a command economy? Hint: There are 9
- Corrupt leaders
- Freedom restricted
- Societal needs are ignored
- Limited to propaganda
- Cut off from world
- Production of low quality goods
- Takes a large government
- No competition offered
- Unbalanced amounts of goods
Define socialism.
A more lighter version of communism
Define Market economy.
Economy where buyers and sellers determine goods and services
Example of Market Economy.
United States
What are the advantages of a market economy? Hint: There are 6
- High degree of individual freedom
- Adjust change overtime
- Small degree of government interference
- Decentralized decision making
- Large variety of goods and services
- Private ownership of resources
What are the disadvantages of a market economy? Hint: There are 3
- Does NOT provide for everyone
- May NOT provide enough basic goods/services
- High degree of uncertainty
Define Mixed Economy.
Combines elements of all 3 economic systems
Define transition.
A change
List the CHARACTERISTICS of a TRANSITIONING COUNTRY.
- Privatization - move from gov. owned to private owned.
- Vouchers - buy gov. property
- Loss of power - ruling class lose power to “new” entrepreneurs and capitalists (Russia’s big problem)
- New incentives - BIG PROBLEM - fend for self
- Automatic stabilizers/social welfare nets - needed for instability of becoming capitalist
What type of economy/government does Russia have today?
ON PAPER, Russia is a federal democratic state.
When did communism begin in Russia? How long did it last? When did it fall?
1912 - 1991 Lasted 79 years
What was the Five-Year Plan?
Series of nationwide centralized economic plans designed to achieve rapid industrialization
How many Five-Year Plans did Russia have?
13 Five-Year plans
Who is Mikhali Gorbachev?
8th and final leader of USSR who introduced Perestroika (restructuring of Soviet Union) started transitioning away from communism
Who is leader of Russia TODAY?
Vladimir Putin
When did China become Communist? Under what leader?
1949 - Mao Zedong
What was the Great Leap Forward?
Economic plan designed to transform China’s agrarian culture towards an industrialized one
What type of economy/government does China have today?
Operates under a socialist market economy, but is regarded as a one-party communist dictatorship
Has Japan ever been communist?
NO - always has been a successful capitalistic market economy
What has contributed to Japan’s success?
- Technology advancement
- Industrial Robots
- Cars
What is Tokyo considered?
Tokyo is the largest metropolitan area in the world
Define population density.
Number of people per square mile
What is South Korea’s history?
In the aftermath of the Korean War, South Korea’s economy was destroyed and it was considered the poorest country in Asia.
What is South Korea’s economy like now?
South Korea’s economy is now the 12th largest economy in the world
What has contributed to South Korea’s success on the global economy? Hint: There are 3
- Leading Producer in automobiles (KIA and Hyundai)
- Skilled production and exports
- World trade in textiles
What example does South Korea’s economy give?
It is the perfect example of how a war torn economy can go through a successful transition
