Economic Systems Flashcard

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What is an economic system?

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An organized way of providing for the wants and needs of their people.

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What are the three basic economic questions every society must answer?

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How to produce, for whom to produce, and what to produce.

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What is a traditional economy?

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An economy where traditional societies use ritual/habitat/custom to answer what, how, and for whom to produce.

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What is a command economy?

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An economy where the government makes most of the economic decisions.

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Who heads a command economy?

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A dictator.

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What does the central authority do in a command economy?

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Makes major decisions about what, how, and for whom to produce.

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What is a market economy?

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An economy where consumers and businesses jointly answer questions of what, how, and for whom to produce.

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Who answers the questions of what, how, and for whom to produce in a market economy?

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Consumers and businesses.

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What are the advantages of a market economy?

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It rewards individual initiative, encourages innovation, and provides a wide variety of goods and services.

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What is a mixed economy?

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An economy where consumers and businesses jointly answer questions of what, how, and for whom to produce.