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Economics > Macroeconomics Long Questions > Flashcards

Macroeconomics Long Questions Flashcards

1
Q

What happens in a market economy?

A

The basic economic problems of what, how and for whom to produce are decided by the market system

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2
Q

What are the characteristics of a market economy?

A 
COMPETITION
DECENTRALIZED DECISION MAKING
FREE ENTERPRISE AND CHOICE
MOTIVATION
PRIVATE OWNERSHIP
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3
Q

Why is competition a characteristic of a market economy?

A

Competition exists if economic units are free to use their resources as they wish

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4
Q

Why is decentralized decision making a characteristic of a market economy?

A

Individual economic agents are free to choose how they wish to allocate resources

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5
Q

Why is free enterprise and choice a characteristic of a market economy?

A

Owners of the factors of production as well as producers of goods and services have the right to buy and sell what they own through the market

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6
Q

Why is motivation a characteristic of a market economy?

A

In a pure market economy, consumers and producers are motivated by pure self-interest or private gain

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7
Q

Why is private ownership a characteristic of a market economy?

A

Private individuals own nearly all factors of production

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8
Q

What are the advantages of a market economy?

A 
It works automatically
Choice
Innovation
Economic growth
Distribution of income and wealth
Risk
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9
Q

Why does a market economy work automatically?

A

It registers peoples preferences, it transmits those preferences to enterprises which move resources to produce the good and decide who will get the final product

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10
Q

Why is choice an advantage of a market economy?

A

Consumers are faced with a wide variety of choices

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11
Q

Why is innovation an advantage of a market economy?

A

Market economies have strong incentives in terms of material gain and profits

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12
Q

Why is Economic growth an advantage of a market economy?

A

A free market economy is very dynamic because of the driving forces of profits and the checking forces of competition

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13
Q

Why is the distribution of income and wealth an advantage of a market economy?

A

Fear of economic failure is a major incentive for people to take jobs however poorly paid

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14
Q

Why is risk an advantage of a market economy?

A

Individuals take great care to reduce economic risk

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15
Q

How is choice a disadvantage in a market economy?

A

Consumers’ choice may be distorted by extensive persuasive advertising

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16
Q

How is competition a disadvantage in a market economy?

A

Markets tend to be dominated by competition, they can manipulate and exploit uninformed and naive consumers

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17
Q

How is Income and Wealth a disadvantage in a market economy?

A

There is no link between needs and the allocation of resources, income is allocated to those with capital

18
Q

How is risk a disadvantage in a market economy?

A

Only a small percentage of population has enough income to insure themselves against mishaps

19
Q

How are externalites a disadvantage in a market economy?

A

Selfish attitude and exploitation prevails toward others and the environment

20
Q

What is a centrally planned economy?

A

In a centrally planned economy resources are allocated by the government through a planning process

21
Q

What are the characteristics of a centrally planned economy?

A

Motivation
Ownership
Planning

22
Q

Why is motivation a characteristic of a centrally planned economy?

A

Consumers, enterprises and government are assumed to be selfless, co operating to work for the community

23
Q

Why is ownership a characteristic of a centrally planned economy?

A

All factors of production except labour are owned by the state

24
Q

Why is planning a characteristic of a centrally planned economy?

A

Resources are allocated through a planning process, the state directs labour into jobs and consumers on what to consume

25
Q

What are the advantages of a centrally planned economy?

A 
It works intentionally
Needs are catered for
Wastage is limited
Mass production
Advertising
Externalities
Full employment
26
Q

How is a centrally planned economy working intentionally an advantage?

A

Allocation of resources is not left to unpredictable thrills of a market

27
Q

How does needs being catered for result in an advantage of a centrally planned economy?

A

Ensures that adequate resources are devoted to community, public and merit goods

28
Q

How is limited wastage an advantage of a centrally planned economy?

A

Competition has the effect of duplication, resources used for production of unused goods are usually wasted

29
Q

How is mass production an advantage of a centrally planned economy?

A

advantages are secured because of the use of monopoly enterprises

30
Q

How is advertising an advantage of a centrally planned economy?

A

Advertising is used to inform rather than brainwash

31
Q

How are externalities an advantage of a centrally planned economy?

A

planning may allow for cost and benefits

32
Q

How is full employment an advantage of a centrally planned economy?

A

All workers are employed

33
Q

What are the disadvantages of a centrally planned economy?

A 
Choice
Motivation
Economic growth
Distribution of income
Risk 
The environment
Human rights
34
Q

How is choice a disadvantage of a centrally planned economy?

A

Consumers have relatively little choice

35
Q

How is motivation a disadvantage of a centrally planned economy?

A

It is difficult to provide incentives for enterprises and individual workers to produce good quality products

36
Q

How is economic growth a disadvantage of a centrally planned economy?

A

As economies grow, it becomes more complex, therefore it is difficult to to plan allocation of resources

37
Q

How is distribution of income a disadvantage of a centrally planned economy?

A

Governments may choose any distribution of income, those in power have used the planning system to their own advantage

38
Q

How is risk a disadvantage of a centrally planned economy?

A

Removing risk removes the incentives to work and create wealth

39
Q

How is the environment a disadvantage of a centrally planned economy?

A

Individual producers base their production decisions on private rather than social costs, thus creating negative externalities such as pollution

40
Q

How is human rights a disadvantage to a centrally planned economy?

A

Centrally planned economies leave little room for individual freedom

Economics (7 decks)

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