Quiz 2

Question 1

Who is Adam Smith?

Answer 1

Scottish Economist. Author of the “Wealth of Nations”. Promoted Laissez Faire

Question 2

What is Laissez Faire?

Answer 2

The doctrines of “leave it alone”, of nonintervention by government in the market mechanism

Question 3

What is the Role of Price in a Market Economy?

Answer 3

1. Information: a. what goods and services are in demand b. what resources are scarce. 2. Incentives: a. what to produce b. what to conserve.

Question 4

What are 2 important ways in which Economic Systems differ?

Answer 4

1. who owns the factors of production 2. the method used to coordinate economic activity

Question 5

What are the 5 questions that need to be answered regardless of the economic system used?

Answer 5

1. What goods and services will be produced? 2. How will the goods and services be produced? 3. Who will get the goods and services? 4. How will the system accommodate change? 5. How a market economy achieves growth?

Question 6

What is the Invisible Hand?

Answer 6

There is no direct communication needed between the consumer and the producer, market sales and prices convey the message and direct the market. Market participants are guided by an “invisible hand” to act in ways that promoted the public interest