Understanding Free-Market Capitalism and State Capitalism
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Questions and Answers

What is the market price determined by?

  • Supply only
  • Government intervention
  • Both supply and demand (correct)
  • Demand only
  • What is a characteristic of perfect competition in a free market?

  • Many companies compete with each other (correct)
  • The government owns all businesses
  • There is no competition
  • A single company dominates the market
  • What is a benefit of free markets?

  • Opportunities for poor people to work their way out of poverty (correct)
  • Government ownership of businesses
  • Limited job opportunities
  • High taxes on citizens
  • What happens when the supply and demand curves intersect?

    <p>The equilibrium point is reached</p> Signup and view all the answers

    What is a limitation of free markets?

    <p>People may let greed drive them</p> Signup and view all the answers

    What is the main difference between free markets and socialism?

    <p>Private ownership of businesses</p> Signup and view all the answers

    What is one of the basic rights in a free-market capitalist system?

    <p>The right to own private property</p> Signup and view all the answers

    In a free market, what determines how much of a product to produce?

    <p>Consumer signals and prices</p> Signup and view all the answers

    What is the term for the quantity of products that manufacturers are willing to sell at different prices?

    <p>Supply</p> Signup and view all the answers

    What is the main function of prices in a free market?

    <p>To signal to producers how much to produce</p> Signup and view all the answers

    What is the name of the model that illustrates the flow of resources and goods in a free market?

    <p>Circular Flow Model</p> Signup and view all the answers

    What happens to the quantity demanded when the price of a product increases?

    <p>It decreases</p> Signup and view all the answers

    What is a situation in which prices are declining?

    <p>Deflation</p> Signup and view all the answers

    What is an index that measures the change in prices at the wholesale level?

    <p>Producer Price Index (PPI)</p> Signup and view all the answers

    What is a severe recession, usually accompanied by deflation?

    <p>Depression</p> Signup and view all the answers

    What is the federal government’s effort to keep the economy stable by increasing or decreasing taxes or government spending?

    <p>Fiscal Policy</p> Signup and view all the answers

    What is the amount of money the federal government spends beyond what it collects in taxes for a given fiscal year?

    <p>National Deficit</p> Signup and view all the answers

    What are the periodic rises and falls that occur in economies over time?

    <p>Business Cycles</p> Signup and view all the answers

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