Economics: The Market System & Circular Flow (CH.2) – Flashcards
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What type of society needs to develop an economic system?
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A society with limited resources.
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What describes a command system?
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Government ownership of most or all resources. (Socialism/Communism)
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What is an economic system?
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A particular set of institutional arrangements and a coordinating mechanism that responds to the economizing problem.
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What are the three virtues of the market system?
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Efficiency, incentives, and freedom.
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What is an institution or mechanism that brings buyers and sellers into contact?
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A market.
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What are some economic problems faced by the former Soviet Union, Eastern Europe, and China prior to its market reforms.
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Coordination & Incentive Problem.
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Define sole proprietorship?
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A business owned and managed by a single person.
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Exchange and trade resulting from specialization can and sometimes does occur through...
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barter & a coincidence of wants.
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Modern advanced industrial economies usually have...
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active, but limited government.
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In a ____ owners bear no personal financial responsibility for the firm's debt and obligation.
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corporation.
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The "Invisible Hand" refers to firms and resource suppliers in seeking their own interest, promote...
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the public or social interest.
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Which of the following are components of the circular flow model?
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Households, product market, resource market, businesses.
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Which of the following does not occur in the resource market?
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Households produce goods.
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Human specialization or division of labor contributes to a societies output in which of the following ways?
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Specialization makes use of differences in ability, specialization fosters learning by doing, specialization saves time.
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The first function of money is...
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Medium of exchange.
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Adam Smith's book (1776)
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Wealth of nations.
