Chapter 2 Economic System And The American Economy

Question 1

Three basic questions asked in economics.

Answer 1

What should be produced?
How should it be produced?
For whom should it be produced?

Question 2

Four types of economic systems.

Answer 2

Traditional
Command
Market
Mixed

Question 3

American Economy - Important Characteristics

Answer 3

Limited Governmental Control 
Free Enterprise 
Freedom of Choice 
Profit Incentive 
Competition

Question 4

Limited governmental economy

Answer 4

Capitalism

Let it be / hands off government

Question 5

Free Enterprise

Answer 5

Individuals control the factor of production

• land
• labor
• capitol
• entrepreneurship

Question 6

Freedom of choice

Answer 6

Buyers have money choices and freedom to make that choice

Question 7

Profit Incentive

Answer 7

Desire to make money

-motivates entrepreneurs to establish new businesses and produce new goods and services

Question 8

Private Property

Answer 8

Individuals free to buy and own whatever you can afford

Question 9

Competition

Answer 9

Rivalry among producers of similar products to win more business

• lower prices
• better quality
• leads to efficient use of resources

Question 10

Goals of the U.S. Economy

Answer 10

Economic

• freedom
• efficiency
• equity
• security
• stability
• growth

Individual Responsibility

Question 11

What is economics?

Answer 11

The way in which we decide hot to utilize our resources.