Types Of Economic Systems Flashcards
1
Q
Command Economy
A
- Government controls all economic activity
- Example: North Korea, China, Cuba
- Problems: (1) Consumers have little or no freedom, (2) Central planning can be inefficient (not giving individuals power to run business), (3) Resources owned by the government can be wasted
- Don’t want to encourage competition within the economy
- Can become corrupt
2
Q
Who created the Command Economy?
A
Karl Marx
• Communism
• USSR
• Bolshevik Party
3
Q
Market Economy
A
- Individual choice determines progress of the market
- Driven by competition
- Problems: (1) Some people have fewer resources, (2) Monopolies (eliminates competition), (3) Externalities
4
Q
Who created the Market Economy?
A
Adam Smith
• “Invisible Hand”
5
Q
Socialism
A
- Group Living
- Government owns means of production
- Stage following capitalism; Transition to Communism
6
Q
Transitional Economy
A
- In the purpose of shifting from central planning to private enterprises (privatization)
- Examples: China (opened market to private businesses), Soviet Union
7
Q
Traditional Economy
A
- Customs and Traditions
- Production is done the way it has always been done
- Example: Rural areas in South America; Inuit
8
Q
Efficiency
A
Making the most of resources
9
Q
Growth
A
Innovation leads to economic growth and economic growth leads to a higher standard of living
10
Q
Stability
A
Assurance that goods and services will be available, payments will be made on time and a safety net will protect individuals in times of economic disaster
11
Q
Freedom
A
Government intervention in the production and distribution of goods and services are limited
12
Q
Equity
A
Fair distribution of wealth
