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5 CAEconomic Systems
Economic Systems & European Economics
Question | Answer |
---|---|
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 |