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Economics Chapter 2 Vocabulary Test 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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Factor payments
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The income people receive for supplying factors of production: land, labor, or capital
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Patriotism
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Love of one’s country
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safety net
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A set of government programs that protect people who face unfavorable economic conditions.
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Standard of living
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Level of economic prosperity
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Traditional Economy
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economic system that relies on habit, custom, or ritual to decide questions of productions and consumption of goods and services
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market economy
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economic system in which decision on production and consumption of goods and services are based on voluntary exchange in markets
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centrally planned economy
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A system in which central government officials make all economic decisions
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Command Economy
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An economic system in which the government controls a country’s economy.
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Mixed Economy
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market-based economic system with limited government involvement
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market
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an arrangement that allows buyers and sellers to exchange things
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specialization
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concentration of the productive efforts of individuals and firms in a limited number of activities
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Household
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a person or group of people living in the same residence
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firm
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an organization that uses resources to produce a product or service, which it then sells
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factor market
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market in which firms purchase the factors of production from households
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profit
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financial gain made in a transaction
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product market
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the market in which households purchase the goods and services that firms produce
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self-interest
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one’s own personal gain
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Incentive
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an expectation that encourages people to behave in a certain way
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competition
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the struggle among producers for the dollars of consumers
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invisible hand
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term economists use to describe the self-regulating nature of the marketplace
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consumer sovereignty
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the power of consumers to decide what gets produced
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Socialism
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social and political philosophy based on a belief that Democratic means should be used to evenly distribute wealth throughout a society
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communism
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the idea that society should be based on public ownership and communal control of property
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Authoritarian
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requiring strict obedience to an authority, such as a dictator
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collective
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Large farm leased from the state to groups of peasant farmers
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heavy industry
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requires a large capital investment and that produces idem used in other industries
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Laissez-faire
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doctrine stating that government generally should not interfere in private buisness
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private property
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property owned by individuals or companies, not by the government or the people as a whole
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Free enterprise
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a type of economy in which people are free to buy, sell, and produce whatever they want
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transition
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period of change in which an economy moves away from a centrally planned economy to a market based system
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continuum
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a range with no clear divisions
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privatize
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to sell state-run firms to individuals