Understanding Free-Market Capitalism and State Capitalism

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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?

The equilibrium point is reached Signup and view all the answers

What is a limitation of free markets?

People may let greed drive them Signup and view all the answers

What is the main difference between free markets and socialism?

Private ownership of businesses Signup and view all the answers

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

The right to own private property Signup and view all the answers

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

Consumer signals and prices Signup and view all the answers

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

Supply Signup and view all the answers

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

To signal to producers how much to produce 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?

Circular Flow Model Signup and view all the answers

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

It decreases Signup and view all the answers

What is a situation in which prices are declining?

Deflation Signup and view all the answers

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

Producer Price Index (PPI) Signup and view all the answers

What is a severe recession, usually accompanied by deflation?

Depression 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?

Fiscal Policy 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?

National Deficit Signup and view all the answers

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

Business Cycles Signup and view all the answers