Questions and Answers
What is an economic system?
Term used to describe how a nation is organized for production.
What are the 3 kinds of economic systems?
What are models in economics?
Simplified pictures of reality.
No modern economic system completely fits the models.
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What is a traditional economic system?
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Can you give examples of countries that have traditional economic systems today?
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What characterizes a market economic system?
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What are market systems also known as?
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What is capitalism?
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What kind of economic system does the U.S. have?
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Who are considered competitors in an economic context?
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In market systems, how is success determined?
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What is a command economic system?
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What decisions does the government make in a command economic system?
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Can you give examples of Communist countries?
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What is the idea of a communist country?
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What happens if you are a famous person in a Communist country?
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What do all 4 economic systems have in common?
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What are the 4 questions that each economic system must answer?
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Although each economic system must answer the 4 questions, they answer the questions ____________.
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In a traditional system, who decides what is produced?
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In a market system, who decides what is produced?
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In a command economic system, who decides what is produced?
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In a traditional system, how is production determined?
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In a market system, how is production determined?
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In a command system, how is production determined?
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In a traditional system, who receives the goods?
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In a market system, who receives the goods?
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In a command system, who receives the goods?
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In a traditional system, who owns the means of production?
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In a market system, who owns the means of production?
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In a command system, who owns the means of production?
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What are mixed economies?
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What defines a market economy?
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What defines a mixed economy?
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What defines a command economy?
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What book did Karl Marx and Friedrich Engels write in 1848?
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What did Marx and Engels claim?
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Who made up the ruling classes during the Middle Ages?
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Who made up the lower classes in Europe?
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What did Marx say about the middle class?
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What does exploiting mean?
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What is the lower class also known as?
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What is proletariat?
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What did Marx believe?
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What is communism?
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Since there would be only one class, the working class, there would no longer be...
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What did Marx predict?
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What happened in 1917?
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What was the 2nd revolution?
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What did the Russian Communist party create?
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Who rose to power in the mid-1920s?
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What did Stalin attempt to do when he became leader?
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What kind of plans did Stalin institute?
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What are 5-year plans?
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What are quotas?
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Study Notes
Economic Systems Overview
- Economic systems dictate how nations organize production and resource allocation.
- Three main types of economic systems: traditional, market, and command economies.
Traditional Economic System
- Roles and economic practices are inherited from previous generations.
- Common in small agricultural communities in parts of South America, Asia, and Africa.
Market Economic System
- Decisions arise from individual choices by buyers and sellers.
- Also known as free enterprise systems, where capitalism prevails with private ownership of production.
- The U.S. economy is approximately 90% market and 10% command.
Command Economic System
- The government is the primary decision-maker, owning production means.
- Decisions include what goods and services to produce and how to utilize labor.
- Examples of command economies can be found in countries like Cuba, Vietnam, the former Soviet Union, and China.
Economic System Functions
- All four systems must address four fundamental questions:
- What goods & services should be produced?
- How should these goods and services be produced?
- Who will receive the goods and services produced?
- Who owns the means of production?
- Each system provides different answers based on their structure.
Economic Decisions in Systems
- Traditional systems rely on customs and traditions for production and ownership.
- Market systems depend on individual and corporate profit motives.
- Command systems centralize authority, with the government making all significant decisions.
Mixed Economies
- Feature a combination of private enterprise and government ownership.
- Decisions in mixed economies are influenced by both consumers/businesses and government.
Karl Marx and Friedrich Engels
- Co-authored the "Communist Manifesto" in 1848, arguing that class struggles are inherent.
- Ruling classes historically included the Roman Catholic Church and nobility, while lower classes comprised peasants and the burgeoning middle class.
Proletariat and Class Struggle
- The proletariat refers to the working class, whom Marx viewed as exploited by the middle class.
- Marx theorized that discontent among workers would lead to a communist revolution.
Marxist Predictions
- Marx anticipated a worldwide overthrow of capitalist regimes, leading to a classless society.
- He suggested that the initial communist state would require dictatorial authority to suppress capitalist opposition.
Historical Context in Russia
- The Russian Revolution of 1917 saw the Communist Party, under Lenin, seizing power to establish the Soviet Union.
- Joseph Stalin later rose to prominence, initiating rapid industrialization through five-year plans focused on production goals and resource management.
Five-Year Plans and Quotas
- Stalin’s plans set ambitious targets to modernize the Soviet economy, providing structured goals for resource allocation.
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Test your knowledge of key concepts from Economics Chapter 2 with these flashcards. Explore terms related to economic systems, models, and their definitions. Enhance your understanding of how nations organize production and the various economic models in play.