Test Flashcards
In classifying types of economic systems, discuss the three fundamental dimensions used by our textbook in differentiating one type of system from another.
Property ownership (individual rights), extent of government ownership, and freedom of mobility.
Four major ways in which economic systems may differ in their “preconditions” to determine outcomes.
Rules, economic institutions, economic resources, how wealth varies among nations,
goals of the system.
Name and briefly discuss six or seven different economic outcomes for an economic system.
Per-head income, the distribution of income, employment, inflation, life expectancy (demographic factors), the structure of output, unemployment rates, environmental sustainability
Economic freedom
recent economic performance
Extent of corruption
levels of income
the structure of output
6 or 7 outcomes
Economies can be distinguished by how or in what ways value is added in the economy.
High agriculture, manufacturing, and service sectors can all add value to an economy
the distribution of income
6 or 7 outcomes
In highly developed and rich market economies an even distribution of income can be seen.
Even distribution can result in low unemployment rates.
environmental sustainability
6 or 7 outcomes
How an economy is coping with environmental issues.
Acid rain, population density, number of cars in a country, and level of energy use per head.
Economic freedom
6 or 7 outcomes
Restrictive monetary policies are considered to be favorable for economic freedom.
This is because money growth may produce inflation, allowing the government to get back resources.
The extent of corruption
6 or 7 outcomes
Corruption can deter growth by…
1) acting as a tax and increasing the costs of doing business and transferring income.
2) increases the level of uncertainty for investors
- puts firms in situations where major consequences might result
- opens the door for “rent seeking behavior”
Property ownership
3 fundamental dimensions
The extent of rights and freedoms of individuals
Right to own property
Socialism and capitalism
Whether or not people are allowed to own the “means of production”
-enterprises, organizations, tools, and inventories used to make goods and services.
Freedom of mobility
3 fundamental dimensions
Freedom to work at the individuals choice of occupation and location
Denial can shape the nature of enterprise and economic activity
Ability to enter a profession or establish business is an important right
Extent of government ownership
3 fundamental dimensions
The extent of government ownership of industry, services, and infrastructure
Measure of economic freedom
Less developed countries have higher levels of government control to promote industry, attempting to accelerate development
Measure of degree of government interference in the economy
Rules
Can determine outcomes
Rules control production and distribution techniques
Economic institutions
Different histories, cultures, ideologies, and priorities can lead to unique institutional forms & how they interact
Economic resources
Geographical location can impact the actions of the people, businesses, and government
How wealth varies among nations
-goals of institutions
Human resources, natural resources, human capital, cultural factors, etc.
