Econ Chapter 3 – Flashcards
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Continuum
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A range with no clear Divisions
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Based on the principles of the free market, but allowing some government interventions
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The united states is a mixed economy..
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Governments are more able to meet some needs and wants of modern society in a way that ensures that all member of society can participate
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Government intervention in a modern economy is useful because
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Own all property and confiscate all economic output
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In most mixed economies the government does NOT..
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provide many health care and other advantages but involve a very high tax burden for people
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Sweden's social benefit programs
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keep order, provide vital services, and promote the general welfare
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The United States government intervenes to
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Safety Net
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A system to protect people experiencing unfavorable economic conditions
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Market Economy
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An economy in which economic decisions are based on exchange or trade
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Factor Payments
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The income people receive for supplying factors of production
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Traditional Economy
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An economy that relies on habit, custom, or ritual to answer economic questions
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Economic System
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The method used by a society to produce and distribute goods and services
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Its unique combination of social values and gaols
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Each society determines who will consume what is produced based on
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Grow through innovation
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The improve its standard of living a nation's economy must
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Small, close communities that avoid change and new Technology
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Traditional economies usually
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Centrally Planned Economy
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An economy in which only the government makes economic decisions is a
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Based economic decisions on exchange or trade
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Pure market economies always
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Market
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where goods and services are sold and used to make money
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Incentive
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The things that motivates one to produce a good or what one likes
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Consumer Sovereignty
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having control over what is produced
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No one is self sufficient
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Why do people need to buy and sell products and services
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Households
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Who owns the factors of production
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The negative incentive will cause consumers to purchase less of the good or sercies if its of lower quality
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How will consumers react to the incentive of a higher price on a good or service
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Competition and self-interest
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What is the invisible hand regulates the free market economy
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Competition encourages innovation which causes growth
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Why are free market economies able to attain economic growth
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Economic equity
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Which of the following is not an advantage of a free market economy
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Authoritarian
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Requiring strict obedience to an authority such as a dictator
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Communism
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A political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central governement
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Collective
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A large soviet farm leased by the state to groups of peasant farmers
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Socialism
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A social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout society
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Heavy Industry
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Requires a large capital investment and produces items used by others
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In a socialist society, the centers of economic power are under private control
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Why might a socialist society have a less rigid command economy than a communist society?
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The government
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Who decided what the farmers would produce on Soviet collectives?
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There were no incentives for competition because the government determined prices wages and products
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How did collectives in the Soviet Union avoid the competition that drives a free market economy
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The products of heavy industry provide material for many other industries
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Why might Soviet economic planners have favored heavy industry over the makers of consumer goods
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It tries to meet explicitly stated goals
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Which of the following is not a disadvantage of a centrally planned economy ?
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