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Questions and Answers
What is a safety net?
What is a safety net?
- A government subsidy for families.
- A system to protect people experiencing unfavorable economic conditions. (correct)
- A system to protect people experiencing favorable economic conditions.
- A type of insurance for businesses.
What does standard of living refer to?
What does standard of living refer to?
the level of economic prosperity
What are factor payments?
What are factor payments?
the income people receive for supplying factors of production
What is a traditional economy?
What is a traditional economy?
What are economic systems?
What are economic systems?
What is innovation?
What is innovation?
How does each society answer the three basic economic questions?
How does each society answer the three basic economic questions?
To improve its standard of living, a nation's economy must...
To improve its standard of living, a nation's economy must...
Traditional economies are usually large, technologically advanced communities.
Traditional economies are usually large, technologically advanced communities.
What determines how goods are produced?
What determines how goods are produced?
What is self-interest?
What is self-interest?
What is a market?
What is a market?
What is the factor market?
What is the factor market?
What is an incentive?
What is an incentive?
What is consumer sovereignty?
What is consumer sovereignty?
What is specialization?
What is specialization?
Markets exist primarily because...
Markets exist primarily because...
In a free market economy, who owns the factors of production?
In a free market economy, who owns the factors of production?
According to Adam Smith, what 'invisible hand' regulates the free market economy?
According to Adam Smith, what 'invisible hand' regulates the free market economy?
Why are free market economies able to attain economic growth?
Why are free market economies able to attain economic growth?
What does authoritarian mean?
What does authoritarian mean?
What is communism?
What is communism?
What is another name for a centrally planned economy?
What is another name for a centrally planned economy?
What is socialism?
What is socialism?
What is a centrally planned economy?
What is a centrally planned economy?
What is economic equity?
What is economic equity?
Why does a socialist society have a more flexible command economy than a communist society?
Why does a socialist society have a more flexible command economy than a communist society?
How did heavy industry in the Soviet Union avoid competition?
How did heavy industry in the Soviet Union avoid competition?
Why might the Soviet planners have favored heavy industry over the makers of consumer goods?
Why might the Soviet planners have favored heavy industry over the makers of consumer goods?
How is the economic system in China today different from the one in Soviet Russia?
How is the economic system in China today different from the one in Soviet Russia?
What is economic transition?
What is economic transition?
What is a free enterprise system?
What is a free enterprise system?
What is privatization?
What is privatization?
What is laissez-faire?
What is laissez-faire?
What is a mixed economy?
What is a mixed economy?
What is private property?
What is private property?
The United States economy is a mixed economy based on...
The United States economy is a mixed economy based on...
Why is government intervention in a modern economy useful?
Why is government intervention in a modern economy useful?
What is a difference between the economies of China and North Korea?
What is a difference between the economies of China and North Korea?
Why does the United States government intervene in the economy?
Why does the United States government intervene in the economy?
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Study Notes
Economic Concepts and Systems
- Safety Net: Protects individuals facing unfavorable economic conditions, ensuring basic support.
- Standard of Living: Reflects the economic prosperity level of a population, influencing quality of life.
- Factor Payments: Income individuals earn from providing factors of production like land, labor, and capital.
- Traditional Economy: Defined by reliance on customs and rituals for economic decision-making; often prevalent in small, close-knit communities.
- Economic Systems: Frameworks societies use to produce and distribute goods and services; varies widely across cultures.
Market Structures and Mechanisms
- Innovation: Introduces new methods, products, or ideas, key for economic progress and competitiveness.
- Self-Interest: Motivates individuals to act for their personal gain, driving market behavior.
- Market: A platform enabling buyers and sellers to freely exchange goods and services.
- Consumer Sovereignty: Indicates consumer power in determining production based on preferences and demands.
Production Factors and Growth
- Factor Market: Arena where businesses acquire factors of production from households, crucial for economic activity.
- Incentive: Motivational factors encouraging behaviors linked to economic activities, often tied to rewards.
- Specialization: Focuses productive efforts on specific activities to enhance efficiency and expertise.
- Economic Growth: Achieved through innovation and increased efficiency in utilizing resources.
Economic Models and Types
- Free Market Economy: Characterized by household ownership of production factors and minimal government intervention.
- Centrally Planned Economy: Government controls economic decisions, resulting in limited market freedom; exemplified by communism.
- Socialism: Advocates for equitable wealth distribution, incorporating both market elements and state direction.
- Mixed Economy: Combines free market principles with government regulation, balancing individual and public sector interests.
Historical and International Context
- Soviet Union's Heavy Industry: Government management eliminated competition; focus on producing foundational goods for other industries.
- China vs. North Korea: China promotes economic freedom and privatization, diverging from North Korea's rigid economic controls.
- Economic Transition: Marks the shift from one economic system to another, such as moving from a command to a market-driven economy.
Government's Role in Economy
- Government Intervention: Aimed at promoting general welfare, addressing market failures, and meeting societal needs and wants.
- Privatization: Involves transferring state-run firms to private ownership, facilitating competition in the marketplace.
- Laissez Faire: Economic philosophy advocating minimal government interference in market operations.
Key Takeaways on Economic Regulation
- Competition: Acts as an "invisible hand" regulating free markets, fostering innovation while ensuring consumer choices.
- Economic Equity: A fundamental goal of socialist economies, aiming for fair resource distribution among the population.
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