Ch.2 "Economic Spectrum"

Question 1

Economic System

Answer 1

organized way of providing for the wants and needs of their people

Question 2

Traditional economy

Answer 2

allocation of scarce resources, and nearly all other economic activity, stems from ritual, habit, or custom

Question 3

Command Economy

Answer 3

a central authority makes most of the WHAT, HOW, FOR WHOM decisions

Question 4

Market Economy

Answer 4

people and firms act in their own best interests to answer the WHAT, HOW, FOR WHOM questions

Question 5

Market

Answer 5

meeting place or mechanism that allows buyers and sellers of an economic product to come together

Question 6

Mixed economy

Answer 6

people carry on their economic affairs freely, but are subject to some government intervention

Question 7

Socialism

Answer 7

economic system in which government owns some factors of production and has a role in determining what and how goods are produced

Question 8

Communism

Answer 8

economic and political system in which factors of production are collectively owned and directed by the state or government, theoretically it is supposed to be a classless society in which everyone works for the greater good

Question 9

Minimum Wage

Answer 9

lowest legal that can be paid to most workers

Question 10

Social Security

Answer 10

federal program of disability and retirement benefits that covers most working people

Question 11

Inflation

Answer 11

rise in general level of prices

Question 12

Fixed income

Answer 12

income that does not go up even though prices go up

Question 13

Free Enterprise

Answer 13

economy in which competition is allowed to flourish with a minimum of government interference; this term describes America’s economy

Question 14

Voluntary Exchange

Answer 14

act of buyers and sellers freely and willingly engaging in market transactions; characteristic of free enterprise and capitalism

Question 15

Private Property Rights

Answer 15

fundamental feature of capitalism, which allows individuals to own and control their possessions as they wish, includes both tangible and intangible property

Question 16

Profit

Answer 16

extent to which persons or organizations are better off at the end of a period than they were in the beginning; usually measured in dollar amount

Question 17

Profit Motive

Answer 17

driving force that encourages people and organizations to improve their material well being; characteristic of capitalism and free enterprise

Question 18

Competition

Answer 18

the struggle among sellers to attract consumers while lowering costs

Question 19

Consumer Sovereignty

Answer 19

role of a consumer as ruler of the market when determining the types of goods and services produced

Question 20

Modified Free Enterprise Economy

Answer 20

free enterprise system with some government involvement, same as modified private enterprise economy