Prentice Hall. Economics. Principles In Action. Chapter 2. Economic Systems. 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, such as land, labor or capital
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patriotism
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the love of one’s country ; the passion that inspires a person to serve his or her country
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safety net
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government programs that protect people experiencing 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 production and consumption of goods and services
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market economy
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economic system in which decisions 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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economic system in which the central government makes all decisions on the production and consumption of goods and services
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command economy
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economic system in which a central authority is in command of the economy; a centrally planned 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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the concentration of the productive efforts of individuals and firms on 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, 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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the 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 fro 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 powers of the consumers to decide what gets produced
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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 a society
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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 government
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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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industry that requires a large capital investment and that produces items used in other industries
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laissez faire
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the doctrine that states that government generally should not intervene in the marketplace
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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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an economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market
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continuum
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a range with no clear divisions
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transition
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period of change in which an economy moves away from a centrally planned economy toward a market-based system
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privatize
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to sell state-run firms to idividuals

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