Economics Chapter 2 Flashcard
Unlock all answers in this set
Unlock answersquestion
Social Security
answer
a federal program of disability and retirement benefits
question
Economic System
answer
an organized way of providing for the wants and needs of their people
question
Profit Motive
answer
the driving force that encourages people and organizations to improve their material well-being
question
Fixed income
answer
an income that does not increase even though prices go up
question
Capitalism
answer
where citizens own the factors of production
question
Command Economy
answer
one in which a central authority makes most of the what, how, and for whom decisions
question
Mixed Economy
answer
people carry out their economic affairs freely
question
Profit
answer
the extent to which persons or organizations are better off at the end
question
Voluntary Exchange
answer
the act of buyers and sellers freely and willingly engaging in market transactions
question
Private Property Rights
answer
the privilege that entitles people to own and control their possessions
question
Advantages & Disadvantages of a Command Economy
answer
ADV- Capable of dramatic change in a short time Many basic education, public health, and other public services available at little or no cost DIS- Does not meet wants and needs of consumers Lacks effective incentives to get people to work Requires large bureaucracy, which consumes resources Has little flexibility to deal with small, day-to-day changes No individuality
question
Advantages & Disadvantages of a Traditional Economy
answer
ADV- Sets forth certain economic roles for all members of the community Stable, predictable, and continuous life DIS- Discourages new ideas and new ways of doing things Stagnation and lack of progress Lower standard of living
question
Advantages & Disadvantages of a Market Economy
answer
ADV- Able to adjust to change gradually Individual freedom for everyone Lack of government interference Decentralized decision making Incredible variety of goods and services High degree of consumer satisfaction DIS- Rewards only productive resources does not provide for people too young, too old, or too sick to work Workers and businesses face uncertainty as a result of competition and change Does not produce enough public goods such as defense, universal education, or health care
question
Competition
answer
the struggle among sellers to attract consumers while lowering costs
question
Traditional Economy
answer
stems from ritual, habit, or custom
question
Inflation
answer
a rise in the general level of prices
question
Market Economy
answer
people and firms act in their own best interests to answer the what, how, for whom questions
question
Examples of a traditional economy
answer
African Mbuti, Australian Aborgines, Inuits of Northern Canada
question
Why are economic goals important?
answer
They serve as benchmarks that help us determine if the system meets most of our needs
question
Why is economic equity important?
answer
equal pay for equal work regardless of age, sex, religion, race, or disability
question
Characteristics of Capitalism
answer
Economic Freedom, Private Property Rights, Voluntary Exchange, Profit Motive
question
The role of the consumer in the American economy
answer
have a say in what is and what is not produced when they express their wants in the form of purchases in the marketplace
question
Purpose of government in command economy
answer
people have little influence over the basic economic questions
question
The role of the entrepreneur in a free enterprise economy
answer
start up new businesses
question
Examples of economic freedom for individuals
answer
can choose their own occupation and employer, where and when to work
question
What protection does Social Security offer?
answer
Medicare provides health insurance
question
What impact does it have on the economy when people have no jobs?
answer
people cannot support themselves nor can produce output for others
question
Free Enterprise Economy
answer
competition is allowed to flourish with a minimum of government interference
question
Entrepreneurs
answer
organizes and manages land, capital, and labor in order to seek the reward called profit
question
The role of the government in the United States
answer
protector, provider of goods and services, consumer, regulator, and promoter of national goals
question
Consumer sovereignty
answer
the role of the consumer as sovereign of the market
question
modified free enterprise economy
answer
people carry on their economic affairs freely, but are subject to some government intervention
question
Economic Efficiency
answer
factors of production should be used wisely
question
Economic Freedom
answer
people able to choose their own occupations and uses for their money
question
Full Employment
answer
provide as many jobs as possible
question
Economic Stability
answer
have stable prices
question
Economic Equity
answer
equal pay for equal work
question
Economic Growth
answer
necessary to meet everyone's needs
question
What happens when resources are wasted?
answer
Fewer goods and services can be produced and fewer wants and needs can be satisfied
question
How do laws against false advertising promote the goals of economic equity?
answer
The laws protect those who don't have the education or access to information that proves that an advertisement is false.
question
How may an increase in minimum wage involve a conflict of goals?
answer
On one hand, the supporters of the increase might argue that increasing the minimum wage is the right thing to do. opponents might argue that it would do more harm than good.
question
Explain the characteristics of a Free Enterprise economy? Use specific examples.
answer
pg. 47
