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Ch 2 Economics
for sections 1 - 4
| Question | Answer |
|---|---|
| economic system | method used by a society to produce and distribute goods/services; depends on values |
| factor payments | income people receive for supplying factors of production (land, labor, capital, entrepreneurship) |
| safety net | set of gov. programs that protect people experiencing bad economic conditions |
| traditional economy | relies on habit, custom, ritual to answer 3 econ. Qs; little room for innovation; familial |
| market economy | economic decisions made by individuals and based on exchange; free markets, capitalism. |
| centrally planned economy | command economy; central gov. alone makes economic decisions |
| mixed economies | most modern; market-based sys. in which gov. has limited role |
| What are the three economic questions? | 1. What goods/services to produce? 2. How should these goods/services be produced? 3. Who consumes the goods/services? |
| What is the "invisible hand"? | Adam Smith's idea that the market will self-regulate through competition, leading to the doctrine of laissez faire |
| U.S. Economic Goals | Economic: efficiency, freedom, security & predictability, equity, growth/innovation. |
| market | arrangement that allows buyers and sellers to exchange things |
| specialization | concentration of productive efforts of indiv. and firms on a limited # of activities |
| factor market | exchange in which firms purchase factors of prod. from households |
| product market | exchange in which households purchase services/goods from firms |
| self-interest/incentive | hope of reward or fear of punishment that encourages person to behave in certain way |
| competition | struggle among producers for the dollars of consumers |
| consumer sovereignty | power of consumers to decide what gets produced |
| Why do markets exist? | Markets exist because no one produces all the goods/services we require to satisfy needs/wants |
| Advantages of Free Market Economy | Efficiency, freedom, growth, wider variety of goods/services than other systems |
| Examples of: 1. Market econ. 2. Mixed econ. 3. Command econ. | 1. U.S., Japan 2. All EU, Canada 3. (communism) N. Korea, S. Korea, China |
| socialism | formal econ. system in which society exerts considerable control over nation's wealth & property in pursuit of social justice |
| communism | polit. system characterized by command econ. w/ all econ/polit. power in gov. control |
| authoritarian | requiring strict obedience to an authority, ex. dictator |
| collective | large farm leased from state to groups of peasant farmers |
| heavy industry | requires large capital investment to produce items used in other industries ex. chemical, steel, heavy machinery manufacture |
| Define former Soviet Union in terms of Agriculture, Industry, Consumers, and Problems. | Agr- collectives for most agri. production Ind- planners favor heavy industry Cons- goods scarce and poor quality Prob- poor quality goods, shortages, diminishing production |
| private property | property owned by indiv. or companies, not gov. or people as a whole |
| free enterprise | economic sys. characterized by private/corporate ownership of capital goods |
| privatized | sold to individuals |
| transition | period of change when econ. moves from command sys. toward a market-based sys. |
| laissez faire | doctrine that states gov. should generally not intervene in marketplace |
| What is the government's role in a mized economy? What things can the gov. do? | -gov. participates in both factor and product market -creates public works, spend $$$ to get econ. moving |
| Name 3 countries in the command, middle, and free market sections on the Continuum of Mixed Economies. | -command: China, N. Korea, Cuba -middle: France, Greece, S. Africa -free market: U.K., U.S. esp. HongKong, Singapore |
Created by:
HurstonLove
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