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5 CAEconomic Systems

Economic Systems & European Economics

QuestionAnswer
Define economic systems How a society determines what to produce, how to produce, and how to distribute goods and services
Define economy A system for producing, distributing, and consuming goods and services
Define consumer A person who buys and uses goods and services
What are the four factors of production? Natural resources, Entrepreneurship, human capital, and capital goods
Define capital goods factories, machinery, and technology needed for a business
Define human capital the education and training of people
Define entrepreneur A person who takes the risk to start a business
Define traditional economy An undeveloped economy in which customs and habits from the past determine how decisions will be made; may be found in rural areas with high levels of subsistence farming and rely on barter rather than currency
Define market economy An economy in which most decisions of production and distribution are made by individuals and firms (law of supply and demand)
Define command economy An economy in which the government controls all factors of production; Government officials make most of the decisions regarding production and distribution of goods and services
Define Gross Domestic Product (GDP) The market value of all final goods and services produced in a country in a calendar year; a country with a successful economy will have a high GDP
What type of economy is capitalism? market economy
What type of economy is communism? command economy
What are the traits of a market economy? Also called “free enterprise” or “capitalism”: relative absence of gov’t control; freedom of competition; right to make a profit; factors of production are determined by wants and needs of consumers
What are the advantages to a market economy? Right to own property; right to live and work where you choose; encourages workers to work hard to enjoy a high standard of living
What are the disadvantages to a market economy? Uneven distribution of wealth; possibility of high unemployment
What are the traits of a command economy? Government owns means of production; state sets prices; government sets production goals
What are the advantages of a command economy? Unemployment is practically unknown; controlled planning guarantees that profits are reinvested; social welfare benefits
What are the disadvantages of a command economy? Almost no private property rights; cannot choose own career/place to live; no profit motive so workers are unproductive; limited consumer goods
What is the purpose of the EU (European Union)? European countries create greater economic unity with the EU
What kind of trade barrier would be used if there is a danger created from a toy that the US imported from another country? an embargo would be placed on the item
What kind of economic system does the UK, Germany, and Russia have? Mixed economy - a blend of command and market economies
What is the purpose of currency exchange? it creates FAIR trade between countries
If I decide to sell lemonade, and I decide the prices for my lemonade, which kind of economy do I have? market
What are 3 economic questions asked of each economic system? What to produce? How to produce? For whom to produce?
If the United Kingdom invests in technology and factories, this is an example of what? investing in capital goods
If I decide to open up an advertising agency, I would become an ______ because I am risking my money to start my own business. entrepreneur
Ireland is a small island country with few natural resources, how does this affect Ireland? Ireland will need to import more products
I opened up my own advertising agency, and I provide education and training for my employees, this is an example of____ ___ investing in human capital
I open up my advertising agency and upgrade to wireless and invest in new computers; I have invested in ___ ____ capital goods
I decided to use solar panels on top of my advertising agency so that I become less dependent on oil from foreign countries. This means I am investing in domestic __ ___ natural resources
How does the EU positively affect the European economies? It lowers or eliminates trade barriers that would otherwise slow down trade between the countries.
Natural trade barriers are different than economic trade barriers. What is the difference? A natural trade barrier is a mountain, ocean, river that would impede (slow down trade). An economic trade barrier is a tariff, quota, embargo).
What is the effect of a tariff? It raises the prices of a good, and decreases the quantity imported.
what is it called when the government makes the economic decisions: What to produce, how much to produce, and for whom to produce. command economy
a person who comes up with a product or service, and takes a business risk. entrepreneur
a trade barrier stops trade completely embargo
What are some examples of natural trade barriers? mountains, oceans, rivers
Let's say a country imposes a barrier, (such as a tariff) against an import, what is likely to happen to the price and amount of imported goods? When the quantity decreases, the price increases
If a country has fewer natural resources, how does it affect its trade? the country will need to import more products
building new factories and using newer technology are examples of______ _____ capital goods
What are 3 economic questions are asked when studying different economies? What to produce, how to produce, and for whom to produce?
If a country decides to sell a product because it is easy to build and is popular, so a high profit can be made, it is a ____ economy market
What is the main purpose of the European Union? to create greater economic unity between European countries
What do the economic systems of the UK, Germany and Russia have in common? they are all all mixed economies that are most market economies with some elements of command economies.
What is the purpose of exchanging currencies? it creates fairness for trade between countries
What is a mixed economy? it is a combination of privately-owned industry and government control
Investing in human capital will increase the country's _________ Gross domestic product
geographic feature that makes it more difficult for Italian merchants to trade with countries north of Italy The Alps
The Soviet Union did not invest in human capital, so Russian workers today are not as ________ as workers in other countries. productive
Created by: ssha13
 

 



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