Economic Systems Test Flashcards Preview

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Flashcards in Economic Systems Test Deck (21):
1

Define the Circular Flow Model.

-visualizes how all interactive occur in a market economy
-2 decision makers
-households and markets
shows the 2 markets where households and businesses meet

2

Define competition

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3

Define Economic System

the way a society uses its scarce resources to satisfy its peoples unlimited wants

4

Define Factor Market

-market for the factors of production
-businesses purchase the factors they need from the factor market

5

Define Global Economy

-all economic interactions that cross international boundaries

6

Define Laissez Faire

-principle that the government should not interfere in the market place
-"Hands off" or "Leave things alone"

7

Define nationalize

-means to change from private ownership to government or public ownership

8

Define Privatize

-means to change from government or public ownership to private ownership

9

Define Product Market

-market for goods and services
-set of activities in which people buy goods and services

10

Define Specialization

-a situation in which people concentrate their efforts in the activities they do best
-allows people to trade what they can most efficiently produce.
-removes the need for households to be self sufficent

11

Define Voluntary Exchange

-a trade in which both traders believe what they are getting is worth more than what they are giving up
-based on self interest

12

what is another name for a command economy?

communism

13

Where is the real power in the market found in a market economy?

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14

In which type of economy do producers and consumers drive the economy?

Market

15

Who was Karl Marx and what was his theory?

-a german philosopher that was the "Father of Communism: he cowrote the communist manifesto
-he believed that communism was the way to go

16

How many pure market economies exist today?

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17

What is a mixed Economy?

-an economic system that has elements of traditional, command, and market economies
-most common type of economy today

18

Define Command Economy.

the central govt makes all decisions on the production and consumption of goods and services

19

list positive and negative aspects of a Command Economy

Positve:
-govt is able to equally distribute resources
-govt works in best interest of everyone
Negative:
-inefficent based on the:
-unfair and flawed govt decisions
-lack of motivation for people to work
-lack of individual freedom

20

Define Market Economy

decisions on production and consumption of goods and services are based on voluntary exchanges in markets

21

List positive and negative aspects of a Market Economy

Positive:
-individual freedom to act in one's own self-interest
-most efficent use of resources- individuals act in their own self-interest and in the self interest of others
Negative:
-uneven distribution of resources
-some needs are met, if they don't coincide with the needs of the majority