Quiz 2 Flashcards
no other economist has had as much influence as
Adam Smith
In the _____________, smith challenged the idea of mercantilism being economically sound
Wealth of Nations
______________ is a system by which the government of the homeland controlled trade with its colonies
Mercantilism
A nation would be wealthier if it engaged in__________
free trade
He reasoned that people behave in ways satisfy their ______________ also helpes with voluntarry exchange
economic self-interest
An _______________ guides the marketplace
“invisible hand”
A system in which the society’s leaders usually members of the central government make all economic decision is called a _________________
centrally planned economy
Modern societies that have adopted command economies have done so largely because of the influence of _______
Karl Marx
Marx predicted that in time the workers would overthrow this system and transfer ownership of the factories to _______________
public hands
________ is an economic system in which the government owns some or all of the factors of production
Socialism
_______ is an economic system in which the government owns all the factors of production and there is little or no political freedom
Communism
an ____________ require absolute obedience to those in power this is what communism will usually become
authoritarian system
______________ is established through the democratic political process rather than through the violent overthrow of the government
Democratic socialism
In democratic socialism the government owns the ____________________
basic industries but other industries are privately owned
Marx would be exiled from his homeland for becoming involved in
radical politics
During his travels he met ___________ the son of a factory worker
Friedrich Engels
Marx concluded that the Industrial Revolution had created a system of ______
wage slavery
Marx assisted by Engels laid out ideas of worker overthrow in the ____________
Communist Manifesto (1848)
still has an economy with mostly command elements
north korea
Self interest behavior is behind two features of a market economy:
private property rights
market
________________ are the rights of individuals and groups to own businesses and resources
Private property rights
The ___________ is any place where people buy and sell goods and services
market
_________________ are necessary to make markets work property
Private property rights
The principle that the government should not interfere in the economy is called_____________
laissez faire
the concept of laissez faire is often paired with __________
capitalism
_____________ is an economic system that is based on private ownership of the factors of production
Capitalism
_____________ is a market economy in its pure form
Laissez faire capitalism
a _____________ is a trade in which both traders believe that what they are getting is worth more than what they are giving up
voluntary exchange
__________ is considered a financial gain from a business transaction
profit
_________ is the effort of two or more people acting independently to get the business of others by offering the best deal
Competition
_____________ is the idea that because consumers are free to purchase what they want and refuse products they do not have the ultimate control over what is produced
Consumer sovereignty
______________ is a situation in which people concentrate their efforts in the areas which they have an advantage
Specialization
Specialization _______________________ and markets allow households to trade for what they need
removes the need for household to be self-sufficient
The ______________ is a tool that economists use to understand how market economies operate
circular flow model
The model represents the two key economic decisions makers in a market economy
households
businesses
The market for goods and services is called the ____________
product market
The _____________ is the market for the factors of production
factor market
Individuals own all the _____________
factors of production
_______________ a key feature of the market economy ensures that resources will be allocated efficiently since inefficiencies would result in lower profits
profit motive
___________ to come up with good ideas is related to another advantage of a market economy: Competition
Incentives
Competition leads to higher-quality products at lower prices and helps create a __________________
diverse product market
In a ____________________ the economic good of the individual is the primary focus
pure market economy
The _____________ is the most common type of economic system today
mixed economy
A mixed economy is an economy that has elements of _____________________
traditional, command, and market systems
Even though there are traditional and command elements the driving forces of the US economy are such features as __________________
private ownerships and markets
Swedish citizens receive ___________ social benefits
“cradle to grave”
To __________ means to change from private ownership to government or public ownership
nationalize
To __________ means to change from government or public ownership to private ownership
privatize
One way to help privatize an industry is to open it up to _____________
foreign investors
the _____________ refers to all the economic interactions that cross international boundaries
global economy
Globalization also have been enhanced by _____________________
cross-border business partnerships
