chapter 3 study guide Test Questions – Flashcards
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Mirco
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small
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why is the free enterprise system subject to business cycles?
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become economic decisions about factors such as prices, production, and consumption are made by individuals and firms acting in their own self- interest
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what three outcomes does the government pursue in promoting economic strength?
answer
high employment, steady growth, stable prices
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what are three indicators of economic stability?
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price levels, health of nations, financial institution and how well they hold up to economic downturn
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how does the u.s government encourage innovation in the marketplace?
answer
funds research and development at universities, produces own research NASA issues copyrights and parents
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What is a public good?
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A shared good or service for society
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What must the government determine when deciding to produce a public good?
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benefits must outweigh the costs
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private sector
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individual and firm transactions
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public sector
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government transactions
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what is the free rider problem?
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consume what they do not pay for
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positive externality
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benefits people to many people not just those who pay for the goods
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negative externatity
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generate unintended costs
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what is the government's role in combating the poverty problem?
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providing safety net programs
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what are the two major concerns critics have about the welfare system?
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people become dependent upon welfare, and discourages productivity
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what are cash transfer
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social security, and unemployment
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in kind benefits?
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food stamps, food giveaways, subsidized housing
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