Economics Test 2 Flashcards
1
Q
What are the 2 types of economics in the world today?
A
- Microeconomics
- Macroeconomics
2
Q
What is the study of individuals, families, and businesses in the economy?
A
Microeconomics ***
3
Q
What is the study of the economy as a whole and is concerned with large-scale economic activity?
A
Macroeconomics ***
4
Q
What studies economic behavior as it is?
A
Positive economics (factual)
5
Q
What involves judgements of what economic behavior ought to be?
A
Normative economics (opinionated)
6
Q
What is the way a society uses its scarce resources to satisfy its people’s unlimited wants?
A
An economic system **-*
7
Q
What are the 3 basic types of economic systems?
A
- Traditional economies
- Command economies
- Market economies
8
Q
What 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?
A
Traditional economy ***
9
Q
What is the one goal of a traditional economy?
A
to survive
10
Q
the government decides what goods and services will be produced, how they will be produced, and how they will be distributed?
A
A command economy ***
11
Q
Government officials consider ______ and ______ of the country and allocate those resources according to their judgement.
A
resources and needs
12
Q
What is based on choice, not government directives in this system, consumers and producers drive the economy?
A
Market economy ***
13
Q
What do producers decide?
A
What goods/services they will offer
14
Q
Individuals act in their own __________ when they make economic choices.
A
self-interest
15
Q
U.S. Unemployment rate is 9%.
A
Positive economics
16
Q
Higher interest rates will reduce house prices.
A
Positive economics
17
Q
The U.S. unemployment rate should be lower.
A
Normative economics
18
Q
Pollution is the most serious economic problem.
A
Normative economics
19
Q
Who has had more influence than any other economist?
A
Adam Smith
20
Q
Where was Smith born? What year?
A
Scotland
1723
21
Q
What did Smith study, then later teach?
A
literature, logic and moral philosophy
22
Q
In ____________, Smith challenged the ideas of mercantilism being economically sound.
A
Wealth of Nations
23
Q
What is a system by which the government of the homeland controlled trade with its colonies?
A
Mercantilism
24
Q
How would a nation become wealthier?
A
If it engaged in free trade
25
Smith reasoned that people behave in ways that satisfy __________.
Their economic self-interest
26
What guides the market place?
"invisible Hand"
27
What became the foundation of modern economic theory?
The "invisible hand" as well as other principals outlined in the Wealth of Nations
28
Government should provide basic healthcare to all citizens.
Normative Economics
29
Government-provided health care increases public expenditures.
Positive Economics
30
A fall in incomes will lead to a rise in demand for own-label supermarket foods.
Positive
31
A reduction in income tax will improve the incentives of the unemployed to find work.
Positive
32
Unemployment is more harmful than inflation.
Normative
33
What are 5 examples of Traditional Economies?
- They clearly answer 3 economic questions
- They produce what best ensures its survival
- The methods of production are the same as they always been
- System of distribution are determined by custom or tradition
- Little disagreements over economic goods and roles
34
What are disadvantages of traditional economies?
- Because they are based on ritual and customs, they resist change
- they are less productive than they might be if they adopt new approaches
- They prevent people from doing jobs they want to do or best suited to do
- Very low standards of living
35
Modern societies that have adopted command economies have done so largely because of the influence of ________.
Karl Marx
36
Marx predicted that in time, the workers would overthrow this system and transfer ownership of the factories to _______ _____.
Public hand
37
What is an economic system in which the government owns some or all of the factors of production?
Socialism
38
What is an economic system in which the government owns all the factors of production and there is little or no political freedom?
Communism
39
Typically communism will become ________.
Authoritarian
40
What requires absolute obedience to those in power?
Authoritarian system
41
What is established through the democratic political process rather than through the violent overthrow of the government?
Democratic socialism
42
the government owns the basic industries, but other industries are privately owned?
Democratic socialism
43
Where was Marx born? What year? Class ranking?
Germany
1818
Middle Class family
44
Why was he exiled from his homeland?
He became involved in radical politics
45
During Marx travels, Who did he meet that was a son of a factory worker?
Friedrich Engels
46
What did Marx conclude that the Industrial Revolution created?
A system of wage slavery
47
According to Marx, The whole industrial system was based on ______.
The exploitation of workers
48
Marx, assisted by Engels, laid out ideas of worker overthrow in ___________.
The Communist Manifesto (1848)
49
_________ still has an economy with mostly command elements.
North Korea
50
Advantages of Command Economies:
- they seek to provide for everyone
- Leaders in a command economy can use the nation's resources to produce items that may not make money in a market economy
51
Disadvantages of Command Economies
- Central planners often have little understanding of local conditions
- workers often have little motive to improve their productivity
- often set prices well below those that would be established in a market system
- Command economies face shortages
52
Self-interested behavior is behind 2 features of a market economy:
- Private property rights
| - Market
53
What are the rights of individuals and groups to own businesses and resources?
private property rights
54
What is any place where people buy and sell goods and services?
Market place
55
What is vital to any single sale or exchange?
Clear ownership
56
What is necessary to make markets work properly?
Private property rights
57
What is the principle that the government should not interfere in the economy called?
Laissez faire
58
The concept of ________ is often paired with capitalism.
Laissez faire
59
What is an economic system that is based on private ownership of the factors of production?
Capitalism
60
What is the foundation of market economies?
Capitalism
61
What operates on the belief that, on their own, producers will create the goods and services that consumers demand?
Capitalism
62
What is a market economy in its pure form?
Laissez faire capitalism
63
Is pure form good?
NO, nothing gets done
64
What is a trade in which both traders believe that what they are getting is worth more than they are giving up?
Voluntary Exchange
65
What guides voluntary exchanges?
Self-Interest ***
66
Profit is considered a ______ ______ from a business transaction.
Financial gain
67
What is the effort of two or more people, acting independently, to get the business of others by offering the best deal?
Competition ***
68
What 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?
Consumer sovereignty ***
69
What acts as a control on self-interested behavior, guiding market toward a balance between higher value and lower prices?
Competition
70
What is a situation in which people concentrate their efforts in the areas in which they have an advantage?
Specialization
71
Specialization removes the need for households to be _______, and markets allow households to trade for what they need.
self-sufficient ***
72
Specialization, then, leads to higher quality yet lower _________.
priced products
73
What is a tool that economists use to understand how market economies operate?
The circular flow model ***
74
The model represents two key economic decisions makers in a market economy:
- households
| - businesses
75
The market for goods and services is called the _______ _________.
Product market
76
The product market isn't a place as much as it is a ______.
set of activities
77
What are the suppliers of the product market?
businesses
78
What is the market for the factors of production?
the factor market
79
who owns all of the factors of production?
individuals
80
In the factor market, who are the customers, and who are the producers?
- businesses are the customer
| - individuals are the producer
81
Advantages of Market Economies:
- Economic and Political Freedom
- Profit
- Incentives
82
How are Economic and Political Freedoms an advantage of market economies?
- Freedom is one of the chief advantages of a market economy
- Fewer areas of govt 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
83
How is profit an advantage of market economies?
It is a key feature of the market economy, ensures that resources will be allocated efficiently, since inefficiencies would result in lower profits
84
Incentives to come up with good ideas is related to another disadvantage of a market economy:
Competition
85
What leads to higher quality products at lower prices and helps create a diverse product market?
Competition
86
In a pure market economy, What is the primary focus?
The economic good of the individual
87
What are disadvantages of a market economy?
- pure market economies have no mechanism for providing public goods and services ie. National Defense
- Pure market economies cannot provide security to those who, bc 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
88
What is the most common type of economic system today?
mixed economy ***
89
A mixed economy is an economy that has elements of _______, ________, and ________ systems.
- traditional
- command
- market
90
Although all modern societies are mixed, they often emphasize _______ over ______.
one type of system over another
91
In the United states, the _______ dominates.
the market economy
92
Even though there are a traditional and command elements, the driving forces of the US economy are such features as ________ _________ and __________.
private ownerships
| markets
93
France tried to find a middle ground between ______ and ________.
Socialism and capitalism
94
________, while also a mixed economy, has much greater govt involvement.
Sweden
95
The _______ govt and govt related organizations own 1/3 of all Swedish companies.
Swedish
96
Swedish citizens receive _______________ social benefits.
"cradle to grave" ***
97
More recently, many economies have moved away from _____ systems to _______ systems.
Command
| market
98
to _____ means to change from private ownership to govt or public ownership.
nationalize ***
99
To ___________ means to change from govt or public ownership to private ownership.
privatize ***
100
What is one way to help privatize an industry?
to open it up to foreign investors
101
This kind of economic tie between nations is only one example of the _______ _______.
global economy
102
What refers to all the economic interactions that cross international boundaries?
The global economy ***
103
What has been enhanced by cross-border business partnerships?
Globalization
