Economics Study Guide: Chapter 2 Flashcards
(34 cards)
Define economic system and name the 3 basic economic questions.
A system to determine how resources will be used for wants and needs of people.
1. What to produce
2. How to produce
3. Whom will get produced
What are the 4 types of economic systems?
- Traditional
- Market
- Command
- Mixed
Define traditional economy.
Economy where decisions are made based on customs and habits. Is found in rural, non-developed countries
What are the advantages of traditional economy? Hint: There is 6
- Family/tribe based
- Simple/things done same way
- Works with natural environment
- Tradition determines who gets what
- Sharing/Support
- Bartering (Trading)
What are the disadvantages of a traditional economy? Hint: There is 5
- Isolation
- Overwhelmed from large outside economies
- Unpredictability creates survival uncertainties
- Economic stagnation (no economic growth) from lack of progress
- Lower quality of life
Define a command economy.
Economy where all decisions are made by the gov. - centrally planned - decisions made for you NOT by you
What are examples of a command economy?
Cuba, North Korea, and China
What are the advantages of a command economy? Hint: There are 4
- Industrial power boosted
- Citizens get free healthcare, education, etc.
- Low unemployment
- Equal income; no extremely poor people
What are the disadvantages of a command economy? Hint: There are 9
- Corrupt leaders
- Freedom restricted
- Societal needs are ignored
- Limited to propaganda
- Cut off from world
- Production of low quality goods
- Takes a large government
- No competition offered
- Unbalanced amounts of goods
Define socialism.
A more lighter version of communism
Define Market economy.
Economy where buyers and sellers determine goods and services
Example of Market Economy.
United States
What are the advantages of a market economy? Hint: There are 6
- High degree of individual freedom
- Adjust change overtime
- Small degree of government interference
- Decentralized decision making
- Large variety of goods and services
- Private ownership of resources
What are the disadvantages of a market economy? Hint: There are 3
- Does NOT provide for everyone
- May NOT provide enough basic goods/services
- High degree of uncertainty
Define Mixed Economy.
Combines elements of all 3 economic systems
Define transition.
A change
List the CHARACTERISTICS of a TRANSITIONING COUNTRY.
- Privatization - move from gov. owned to private owned.
- Vouchers - buy gov. property
- Loss of power - ruling class lose power to “new” entrepreneurs and capitalists (Russia’s big problem)
- New incentives - BIG PROBLEM - fend for self
- Automatic stabilizers/social welfare nets - needed for instability of becoming capitalist
What type of economy/government does Russia have today?
ON PAPER, Russia is a federal democratic state.
When did communism begin in Russia? How long did it last? When did it fall?
1912 - 1991 Lasted 79 years
What was the Five-Year Plan?
Series of nationwide centralized economic plans designed to achieve rapid industrialization
How many Five-Year Plans did Russia have?
13 Five-Year plans
Who is Mikhali Gorbachev?
8th and final leader of USSR who introduced Perestroika (restructuring of Soviet Union) started transitioning away from communism
Who is leader of Russia TODAY?
Vladimir Putin
When did China become Communist? Under what leader?
1949 - Mao Zedong
