Chapter 2 Economics Test – Flashcards
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Economic Efficiency is best promoted by which economic system
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Free Market
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Economic Freedom is best promoted by which economic system
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Free Market
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Economic growth is best promoted by which economic system
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Free Market
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Economic Security is best promoted by which economic system
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Command
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Economic Equity is best promoted by which economic system
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Command
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In which economic system is economic and political power controlled by the government
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Command (centralized)
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What is the best way to describe the United States economic system
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Mixed - limited government, more economic freedom
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What does Economic growth increase?
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Standard of living
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Small, closed communities that are resistant to change and technology tend to have what type of economic system
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Traditional
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What does Adam Smith's invisible hand encourages people to do?
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Pursue their own self-interest
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Who is the Father of Capitalism
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Adam Smith
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Who is the Father of Socialsim
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Karl Marx
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How are the three economic questions answered in a market economy
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Individuals in the market
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How are the three economic questions answered in a command economy
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the government
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All economies today are...
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Mixed
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What is another name for a free market economy
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capitalism, free enterprise, private enterprise
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What are the 3 economic questions
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What to Produce? How to Produce? For Whom with they be produced?
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What are examples of safety nets provided by our government
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Unemployment Social Security Medicare
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The term that means the government should keep its "hands off" the economy
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laissez-faire
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Why is specialization important?
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People specialize in a job to earn an income they use to exchange for other items. Specialization leads to more efficient use of resources
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What type of economic system values private ownership of resources
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Free market economy
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Who are the two participants in the free market
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firms and households
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What type of exchanges are made in the product market
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individuals give money to businesses in exchange for goods and services
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What type of exchanges are made in the resource market
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businesses give individuals money in exchange for resources (wages for labor, interest for capital)
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What are two type of incentives
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monetary - a money incentive non-monetary - prestige and personal satisfaction
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What does socialism advocate?
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and equal distribution of wealth
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What type of government did socialism give rise to?
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Communism
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What was the first communist country?
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Soviet Union
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What was the major contributor to the Soviet Union's collapse?
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Economic weakness despite its military strength (guns vs. butter)
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What has caused China's economy to thrive since the 1970's
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more economic freedom
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What are three things that most people would agree the government should provide in a free market economy
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public goods protecting property rights consumer protection law
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What is the difference between a public good and a private good
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A public good is provided by the government because no private company has the incentive to provide it. Public school, roads, national defense. Private good are produced by private companies who make a profit selling those items.
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How does the government participate in the product market
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they buy goods and services from businesses
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How does the government participate in the resource market
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they hire people to work and pay them a salary
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What is a government transfer?
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Taking money from one group of people and giving to another. Taking from people who work and giving it to people over 65 through Social Security
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What is the larges government expenditure
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Social Security
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What country has one of the freest markets
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Hong Kong
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What country has one of the most government controlled economy
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North Korea
