Chapter 5

Question 1

Economic System

Answer 1

the way the country distributes its services and goods to citizens. FINITE RESOURCES

Question 2

Political System

Answer 2

the type of government a country is run by

Question 3

Types of Economies

Answer 3

Market, Centrally planned, Mixed

Question 4

Centrally Planned

Answer 4

Communism
Profit: government
Private Company: government owns
Competition: limited, government determines prices

Question 5

Market

Answer 5

Capitalism
profit: owners
private property: by individuals
competition: critical, a greater selection of goods

Question 6

Mixed

Answer 6

Modified free enterprise
profit: private but taxed
private property: individual and government
competition: strong but the government may be compeitor

Question 7

Developed country

Answer 7

Strong GDP
High standard of living
Moved from primary to diverse manufacturing
G7 countries

Question 8

Developing

Answer 8

Predominantly agriculturally based
Lack social services
lower literacy
Limited access to technology

Question 9

Economies in Transition

Answer 9

Moving from central to mixed economies
Decreasing government roles
Widening income gaps

Question 10

Index of Economic freedom

Answer 10

Measures the economic freedoms of individuals in a country

Question 11

Economic Indicators

Answer 11

Leading: Predictions about where the economy is going
Lagging: After the economy has seen a change
Coincident: Current state of economy

Question 12

Monetary

Answer 12

Decisions by the central bank
Impacts money supply, inflation, interest
Goal - economic stability

Question 13

Fiscal

Answer 13

How government spends tax money

Establish budgets - balanced, deficit, surplus

Question 14

Role of Government

Answer 14

Government regulations
Trade offices
Consular services
Trade missions
Corporate influence - lobbying

Question 15

Communist countries

Answer 15

Vietnam, north korea, china, russia

Question 16

Cycle

Answer 16

Expansion peak reccesion trough

Question 17

circular flow model.

Answer 17

In its most basic form, this model considers economies simplistically as consisting solely of individuals (or households) and businesses

Question 18

market economy

Answer 18

known as capitalism or private enterprise.

Question 19

market economy

Answer 19

known as capitalism or private enterprise. Consumers make the decisons.

Question 20

People who grew wealth

Answer 20

-J.D. Rockefeller (oil) 
Andrew Carnegie (Steel)
Cornelius Vanderbilt (shipping/railroad)

Question 21

The Demand Curve

Answer 21

a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time.

Question 22

Depression

Answer 22

Mass unemployment
Economic growth slowed to a halt
Keynes book “General Theory” was published in 1936
Government began to take more control of the economy
Government spending helped to create jobs and eventually brought the country out of the great depression

Question 23

WWII

Answer 23

US entering the WWII helps to end the great depressions
Wars are horrible in general, but great for the economy
Gets governments to spend money on the War effort

Question 24

50’s

Answer 24

After the war, Keynes economic theories continue with governments spending money and controlling and managing the economy
Period of economic prosperity
People are confident with their jobs and begin buying (cars, TVs, houses)
The economy experiences a huge growth
Large middle class

Question 25

70s

Answer 25

Stagflation High unemployement combined with high inflation Keynes theory continues to persist Nixon introduces wage and price controls Does not help and inflation continues to rise and people continue to lose their jobs

Question 26

80s

Answer 26

Reagon and Thatcher (GB) cuts back on government controls Begins to bring in Von Hayek’s theories based on market economy US and Canada sees period of economic prosperity

Question 27

2010s and beyond

Answer 27

In US, we are seeing more and more government controls Obama-care Greece/Spain – Too much government spending (government’s going bankrupt) Can’t pay public sector employees, job cuts and cutbacks

Question 28

Invisible hand

Answer 28

Supple and demand, no one telling retkaor what to do.

Question 29

Hyperinflation

Answer 29

out-of-control inflation, in which the price of goods and services rises at an annual rate of 1,000% or more

Question 30

Minimum wage

Answer 30

- surplus | - long run companies begin to make more money, hire more people.

Question 31

Minimum wage

Answer 31

- surplus | - long-run companies begin to make more money, hire more people.

Question 32

price ceiling

Answer 32

A price ceiling is a government- or group-imposed price control, or limit, on how high a price is charged for a product, commodity, or service.

Question 33

price floor

Answer 33

is a government- or group-imposed price control or limit on how low a price can be charged for a product, good, commodity, or service.

Question 34

Market economy pro and cons

Answer 34

``` +Efficient use of resources New products Economic growth Good quality products Low prices -Gap between rich and poor expands Lack of consumer education Unhealthy products ```

Question 35

Mixed Economy pro cons

Answer 35

+Individual incentive Basic social services Consumer protection -Higher taxation Individuals have little input into how taxes are spent Government intervention may stifle growth Less motivation to work hard

Question 36

Centrally planned

Answer 36

``` +All citizens are assured a minimum standard of living Health, education, and other social programs are provided free to all citizens No unemployment Long-term stability -Little motivation to work hard Large military presence Lack of innovation Corruption ```