Laissez-Faire Economy Quiz & Flashcards

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Questions and Answers

In a traditional command economy, who decides how much of a product is needed?

The consumer

The government (correct)

The corporations

The suppliers

What is a key feature of a laissez-faire capitalist system?

State-run economy

Strong government regulations

Limited government involvement (correct)

Central planning committee

Which economic system is based on the principles of supply and demand?

Traditional economy

Command economy

Capitalist economy (correct)

Mixed economy

What is a disadvantage of a traditional economy?

It discourages innovation Signup and view all the answers

What is a characteristic of a mixed economy?

Some government involvement Signup and view all the answers

What is a drawback of a command economy?

It leads to economic stagnation Signup and view all the answers

What is a disadvantage of a command economy?

No room for individuality Signup and view all the answers

What is a benefit of a mixed economy?

Provides public goods while allowing private competition Signup and view all the answers

What is a characteristic of a socialist system?

People's basic needs are taken care of Signup and view all the answers

What is a drawback of a capitalist system?

No public goods Signup and view all the answers

What is a benefit of a capitalist system?

High degree of customer satisfaction Signup and view all the answers

What is a disadvantage of a mixed economy?

Always winners and losers Signup and view all the answers

What is the main criticism of capitalism by Karl Marx?

It leads to exploitation of the lower class by the upper class Signup and view all the answers

In a mixed economy, the government's role is to:

Provide public goods and services, and intervene when necessary Signup and view all the answers

What is the main principle of the laissez-faire approach?

The government should provide public goods and services, but not interfere with the economy Signup and view all the answers

What is the main goal of a socialist economy?

Meet people's needs and achieve greater equity Signup and view all the answers

What is the concept that describes individuals acting in their own self-interest, leading to the greater good?

The invisible hand Signup and view all the answers

In a command economy, who plans the entire economy?

The government Signup and view all the answers

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.