Unit 2; Economic Systems Flashcards
Traditional Economy
A system that relies on customs, history, and time-honored beliefs.
Command Economy
A system in which a central government makes all economic decisions.
Market Economy
A system in which individuals, rather than the state, own most of the resources.
Mixed Economy
A system that combines characteristics of market, command, and traditional economies.
Socialism
An economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.
Communism
A theory derived from KArl Marx, advocating class war and leading to a socirty in which all property is publicly owned and each person woks and is paid according to their abilities and needs.
Capitalism
An economic system in which a country’s trade and industry are controlled by private owners for profit.
Free Enterprise
An economic system in which private business operates in competition and largely free of state control.
Circular Flow Model
A model that demonstrates how money moves through society.
Households -(investment)-> factor markets -(investment)-> firms -(payment)-> factor markets -(payment) -> households -repeat
How is scarcity resolved in traditional economies?
Scarcity is resolved in traditional economies by using barter systems
How is scarcity resolved in command economies?
Scarcity is resolved in command economies by using the government to plan what good and services are produced.
How is scarcity resolved in market economies?
Scarcity is resolved in market economies by reducing demand through quotas, rationing, and price caps.
What are examples of command economies?
Some examples of command economies are Cuba, North Korea and the former Soviet Union
What is the economic system of the United States?
The economic system of the United States is a mixed economy.
What is the role of the government within the free enterprise system?
The role of the government within the free enterprise system is to ensure fair competition, and protect property rights.
