Chapter 6 Test

Question 1

According to Adam Smith, what are the three principal functions of government

Answer 1

• Government is to protect its citizens from foreign aggression
• to protect the rights of its citizens from infringements by others.
• to provide public goods

Question 2

Give an example of a public good

Answer 2

Postal office

Question 3

Why is radical capitalism unscriptural?

Answer 3

It’s denied legitimacy of government

Question 4

In the eighteenth century, what did liberal mean?

Answer 4

People who believed in liberty

Question 5

Measure of quality of life in a country

Answer 5

Standard of living

Question 6

What a persons income could buy

Answer 6

Real income

Question 7

Weakness of capitalism

Answer 7

Greed and materialism

Question 8

Transitional economic system between free markets and governmental ownership

Answer 8

Social democracy

Question 9

The government sells businesses back to private individuals

Answer 9

Privatization

Question 10

Economics system characterized by private ownership and decision making

Answer 10

Capitalism

Question 11

Adam Smith’s ideal economic system

Answer 11

Classic liberal capitalism

Question 12

Government is no longer necessary since everyone is acting in the best interest of others

Answer 12

Communism

Question 13

Economic system that leans towards capitalism and has extremely high taxes

Answer 13

Welfare state

Question 14

Gold and silver in the government’s treasury are what is important

Answer 14

Mercantilism

Question 15

The government takes possession of key industries

Answer 15

Nationalization

Question 16

A central authority controls resources and makes economic decisions

Answer 16

Socialism

Question 17

Private ownership of businesses but with frequent governmental intervention

Answer 17

State capitalism

Question 18

In what year did mercantilism end in America

Answer 18

1776

Question 19

What is not one of the strategies of mercantilism?

Answer 19

Refuse to sell goods and services to foreign nations

Question 20

What does laissez faire mean

Answer 20

Let alone

Question 21

5 points of mercantilism

Answer 21

1. Exploration
2. Trade
3. Domestic manufacturing
4. Colonization
5. Alliances

Question 22

Which of the following is not one of the distinguishing characteristics of a capitalistic economy
A. Workers decide all questions of policy for their particular business.
B. Individuals own a majority of the factors of production.
C. The government does not own the businesses that are cornerstones of the economy
D. Most economic decisions are made by individuals

Answer 22

A.

Question 23

According to Adam Smith, why do the butcher and barker provide our dinner?

Answer 23

Because it is in their own best interest to do so

Question 24

What system do the government not exist

Answer 24

Pure communism

Question 25

When would a social democracy be least likely to assume control?

Answer 25

A shoe factory

Question 26

A _____________ balance of trade is said to exist when a nation sells more goods and services than it purchases

Answer 26

Favorable

Question 27

In his book_____________, Adam Smith refuted the economic policies of mercantilism

Answer 27

Wealth of Nations

Question 28

Why did mercantilism promote colonization

Answer 28

To aquifer new supplies of the factor of production

Question 29

What was the root problem with mercantilism

Answer 29

The misconception that money is wealth