Economics Chapter 2: Understanding Economics and Business

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What is a negative consequence of socialism?

More social programs and higher taxes
Increased innovation and inventions
Greater incentives for businesspeople to take risks
A brain drain, or loss of the best and brightest people to other countries (correct)

What is a characteristic of command economies?

Social programs are increased and taxes are lowered
The government decides what goods and services are produced (correct)
The market determines what goods and services are produced
Incentives for businesspeople to take risks are increased

What is happening in socialist governments today?

They are maintaining the status quo and not making any changes
They are increasing social programs and moving more towards communism
They are switching to command economies
They are cutting back on social programs, lowering taxes, and moving towards capitalism (correct)

What is a characteristic of communist systems?

Prices don't reflect demand, which may lead to shortages (C) Signup and view all the answers

What is a trend in capitalist countries today?

They are moving more towards socialism (C) Signup and view all the answers

What is a consequence of communism?

Severe economic depression (B) Signup and view all the answers

What is the primary goal of economics?

To allocate scarce resources efficiently (B) Signup and view all the answers

Which economic system is characterized by private ownership of the means of production and creation of goods for profit?

Capitalism (B) Signup and view all the answers

What is a key difference between socialism and communism?

Socialism allows for private ownership, while communism does not (A) Signup and view all the answers

What is the trend in many modern economies, where elements of both capitalism and socialism are combined?

Mixed Economy (C) Signup and view all the answers

What is the term for the total value of goods and services produced within a country's borders over a specific time period?

Gross Domestic Product (GDP) (B) Signup and view all the answers

What are the two main tools used by governments to influence economic activity?

Monetary policy and fiscal policy (B) Signup and view all the answers

What is the market price determined by?

Supply and demand (D) Signup and view all the answers

What is a characteristic of perfect competition in a free market?

Many companies compete with each other (C) Signup and view all the answers

What is a limitation of free markets?

It allows people to let greed drive them (A) Signup and view all the answers

What is a key characteristic of socialism?

Some basic businesses are owned by the government (D) Signup and view all the answers

What is a benefit of socialism?

It provides free education and health care (B) Signup and view all the answers

What is the main difference between socialism and capitalism?

Socialism involves government ownership of businesses, while capitalism involves private ownership (C) Signup and view all the answers