Economic Systems & Philosophies

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Questions and Answers

In a purely communist economic system, what is the primary characteristic regarding property ownership?

  • Individual ownership of all means of production.
  • Private ownership with government regulation.
  • Collective ownership of property with no private ownership. (correct)
  • Ownership distributed based on individual contribution.

Which economist is best known for advocating free markets and the concept of the 'invisible hand'?

  • Adam Smith (correct)
  • John Maynard Keynes
  • Karl Marx
  • Max Weber

What fundamental principle underlies the concept of a free market economy?

  • Minimal government intervention with prices determined by supply and demand. (correct)
  • Centralized planning by a council of economic experts.
  • Extensive government control over prices and production.
  • Equal distribution of wealth regardless of contribution.

What is the primary effect of competition among sellers in a free market?

<p>Drives innovation and lowers prices. (A)</p>
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Which term describes the transfer of a business or service from public (government) ownership to private ownership?

<p>Privatization (C)</p>
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What is a notable characteristic of Marxist economic theory?

<p>Advocacy for class struggle and the abolition of capitalism. (D)</p>
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How do cartels negatively impact a free market economy?

<p>By controlling prices and limiting production, reducing competition. (C)</p>
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What distinguishes fascism as an economic system?

<p>Authoritarian system combining dictatorial power with controlled capitalism. (A)</p>
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Which of the following best describes 'economic freedom'?

<p>The ability of individuals to control their economic actions. (C)</p>
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What is the result of free trade among nations?

<p>International trade without tariffs, quotas, or restrictions. (D)</p>
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Why is productivity considered a key factor for overall economic growth?

<p>It measures output per unit of input, like labor. (D)</p>
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What is the primary characteristic of hyperinflation?

<p>Extremely rapid inflation that drastically erodes the value of currency. (D)</p>
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What does 'Efficiency' mean in the context of economics?

<p>Optimal use of resources to maximize output and minimize waste. (C)</p>
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What is the purpose of 'corporate governance'?

<p>Systems and rules for how companies are directed and controlled. (C)</p>
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What is 'crony capitalism'?

<p>A corrupted form of capitalism where businesses thrive due to close relationships with government officials. (B)</p>
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According to Max Weber, what was a key factor in the emergence of capitalism?

<p>The protestant ethics and bureaucracy . (A)</p>
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What is the long-term impact of hyperinflation on an economy?

<p>Erosion of savings and investment, disruption of trade, and economic instability. (B)</p>
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How does strong enforcement of property rights contribute to economic growth?

<p>By incentivizing individuals and businesses to invest and develop property. (C)</p>
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How do you describe the role of government intervention in a socialist Economic system?

<p>Extensive, with government or community ownership of the means of production. (B)</p>
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Which scenario exemplifies the concept of 'crony capitalism'?

<p>A failing company receives a government bailout due to the owner's close ties with politicians. (A)</p>
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Flashcards

Property Rights

Legal rights to use, control, and transfer property.

Adam Smith

Father of modern economics; promoted free markets and the “invisible hand” theory.

Karl Marx

Critic of capitalism; developed theories that inspired communism and socialism.

Max Weber

Sociologist who linked capitalism to Protestant ethics and bureaucracy.

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Communism

An economic system with collective ownership of property and no private ownership.

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Fascism

An authoritarian system with dictatorial power, suppression of opposition, and controlled capitalism.

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Marxism

Political and economic theory advocating for class struggle and the abolition of capitalism.

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Socialism

A system where the government or community owns the means of production.

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Privatization

Transferring ownership of a business or service from public to private hands.

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Free Market

An economic system with minimal government intervention where prices are determined by supply and demand.

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Competition

Rivalry among sellers to attract customers, driving innovation, and lowering prices.

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Cartels

Groups of producers that agree to control prices and limit production, reducing competition.

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Capitalism

An economic system based on private ownership, profit motive, and free markets.

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Economic Freedom

The ability of individuals to control their economic actions (buying, selling, working, investing).

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Free Trade

International trade without tariffs, quotas, or restrictions.

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Productivity

Measure of output per unit of input; key to economic growth.

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Hyperinflation

Extremely rapid inflation that drastically erodes the value of currency.

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Economic Growth

An increase in a nation’s output of goods and services over time.

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Efficiency

Optimal use of resources to maximize output and minimize waste.

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Crony Capitalism

A corrupted form of capitalism where businesses thrive due to close relationships with government officials.

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Study Notes

  • Property rights: Legal rights govern the use, control, and transfer of property.
  • Adam Smith: Known as the father of modern economics, he championed free markets and the "invisible hand" theory.
  • Karl Marx: A critic of capitalism, he developed theories that inspired communism and socialism.
  • Max Weber: Sociologist who connected capitalism to Protestant ethics and bureaucracy.
  • Communism: Economic system characterized by collective ownership of property and the absence of private ownership.
  • Fascism: Authoritarian system that combines dictatorial power, suppression of opposition, and controlled capitalism.
  • Marxism: Political and economic theory advocating for class struggle and the abolition of capitalism.
  • Socialism: A system where the government or community owns the means of production.
  • Privatization: Transferring ownership of a business or service from public to private entities.
  • Free market: Economic system with minimal government intervention, where prices are determined by supply and demand.
  • Competition: Rivalry among sellers to attract customers, fostering innovation and lowering prices.
  • Cartels: Groups of producers collude to control prices and limit production, thereby reducing competition.
  • Capitalism: Economic system grounded in private ownership, the profit motive, and free markets.
  • Economic freedom: The capacity of individuals to control their economic activities, like buying, selling, working, and investing.
  • Free trade: International trade conducted without tariffs, quotas, or other restrictions.
  • Productivity: Measure of output per unit of input, such as labor, and a key factor in economic growth.
  • Hyperinflation: Extremely rapid inflation that severely diminishes the value of currency.
  • Economic growth: Increase in a nation’s output of goods and services over a period.
  • Efficiency: The optimal utilization of resources to maximize output and minimize waste.
  • Corporate governance: Systems and rules that dictate how companies are directed and controlled.
  • Crony capitalism: Corrupt form of capitalism where businesses flourish due to close ties with government officials.

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