Economic Systems Joiner Flashcards
(22 cards)
What is capitalism?
A decentralized economic system
Capitalism allows for a free-market system where anyone can buy or sell.
Who is considered the Father of modern capitalism?
Adam Smith
Adam Smith’s ideas laid the groundwork for capitalist theory.
What does the supply/demand model consist of?
P = price, a = quantity, S = supply, D = demand, E = equilibrium
This model helps to understand how prices are determined in a market.
What happens when supply (S) equals zero?
Human happiness is maximized
This suggests that when supply is at zero, it could lead to a perfect state of happiness.
What does the statement ‘the rich are no happier than their peers’ imply?
Our nature leads us to think we would be happier if we were wealthier
This challenges the assumption that wealth directly correlates with happiness.
What roles do an entrepreneur and a consumer play in capitalism?
Entrepreneur chooses profit, consumer chooses cost
This highlights the decision-making processes of both parties in a capitalist system.
What is the ‘invisible hand’ in economics?
A decentralized process that gets both parties to compromise
The concept suggests that individuals’ self-interested actions can lead to positive social outcomes.
Fill in the blank: Capitalism is a _______ economic system.
decentralized
True or False: The equilibrium price is determined by supply and demand.
True
What is Mercantilism?
A centralized economic system used by Western European nations from the 1600-1800s aimed at achieving economic unity and political control.
Mercantilism emphasized strong governmental control over the economy.
During which period was Mercantilism predominantly practiced?
1600-1800s
This period saw heightened competition among European nations for wealth and resources.
Which Western European nations practiced Mercantilism?
Spain, England, France, Netherlands, Germany
These nations sought to enhance their economic power through Mercantilist policies.
What is Bullionism?
The belief that the economic health of a nation could be measured by the amount of gold and silver (bullion) it possessed.
Bullionism was a key concept in Mercantilism.
What does Bullionism dictate regarding trade balance?
A favorable balance of trade where exports exceed imports.
This principle aimed to ensure that more wealth flowed into the nation than flowed out.
What was one of the goals of Mercantilism regarding self-sufficiency?
Each nation tried to achieve economic self-sufficiency.
This meant reducing reliance on foreign goods and resources.
What agricultural policy was encouraged under Mercantilism?
A thriving agriculture should be encouraged, with no food imports and taxes on farmers.
This was aimed at ensuring local food production.
How was commerce regulated in a Mercantilist system?
Commerce should be carefully regulated with the use of tariffs to encourage consumers to buy domestic products over foreign ones.
Tariffs served as a tool to protect local industries.
What role did sea power play in Mercantilism?
Sea power was necessary to control foreign markets and protect economic interests.
A powerful merchant fleet was essential for trade dominance.
What was the purpose of colonies in a Mercantilist economy?
Colonies provided raw materials for manufacturing and markets for finished goods.
This created a dependency that benefited the colonizing nation.
What demographic policy was supported by Mercantilism?
A large population was encouraged to maintain domestic labor forces and populate colonies.
This policy aimed to increase economic productivity.
What was discouraged in a Mercantilist society?
Luxury goods were discouraged.
The focus was on utilitarian products that supported economic self-sufficiency.
What was necessary for enforcing Mercantilist policies?
State action was needed to enforce these policies.
This involved government intervention in various economic activities.
