Questions and Answers
In a traditional command economy, who decides how much of a product is needed?
The government
What is a key feature of a laissez-faire capitalist system?
Limited government involvement
Which economic system is based on the principles of supply and demand?
Capitalist economy
What is a disadvantage of a traditional economy?
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What is a characteristic of a mixed economy?
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What is a drawback of a command economy?
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What is a disadvantage of a command economy?
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What is a benefit of a mixed economy?
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What is a characteristic of a socialist system?
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What is a drawback of a capitalist system?
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What is a benefit of a capitalist system?
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What is a disadvantage of a mixed economy?
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What is the main criticism of capitalism by Karl Marx?
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In a mixed economy, the government's role is to:
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What is the main principle of the laissez-faire approach?
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What is the main goal of a socialist economy?
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What is the concept that describes individuals acting in their own self-interest, leading to the greater good?
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In a command economy, who plans the entire economy?
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Study Notes
Economic Systems
- Traditional Economy: Based on customs, traditions, and rituals; decisions made on what, how, and for whom to produce are based on these factors.
- Examples: Amish, some African countries, Australian Aborigines.
Command Economy
- Government decides what, how, and for whom to produce; everything is predetermined.
- Examples: North Korea, Cuba, China (formerly).
- Based on government plans and projections.
Market Economy
- Based on supply and demand; laissez-faire approach.
- Examples: US before 1949, Canada, South Korea, Singapore, Great Britain, Germany.
- Focuses on individual freedom and lack of government interference.
Mixed Economy
- Combines elements of market and command economies; government involvement in some aspects.
- Examples: US after 1949, most countries today.
- Regulates economy to prevent market failure and provides public goods.
Three Main Questions of Economic Systems
- What will be produced?
- How will it be produced?
- For whom will it be produced?
Philosophy of Economic Systems
- Traditional Economy: Focuses on customs and traditions.
- Command Economy: Government decides people's needs.
- Market Economy: Based on individual freedom and lack of government interference.
- Mixed Economy: Combines elements of market and command economies.
Key Figures
- Karl Marx: Criticized capitalism, advocated for socialism.
- Adam Smith: Advocated for laissez-faire approach, believed in the "invisible hand" of the market.
Economic Functions of Government
- Maintain the legal and social framework.
- Provide public goods and services.
- Regulate economy to prevent market failure.
- Maintain tradition.
- Provide for education and public health.
- Decide how much is needed and produced.
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Description
Quiz about the advantages and disadvantages of command economies and laissez-faire systems, including their impact on individual freedom, government control, and economic production. Learn about the trade-offs between government-controlled and market-driven economies.
