Major Economic Systems SOL 11b

SOL 11b Major Economic Systems

Major Economic Systems

Unlimited wants and limited resources present real issues for countries.  Every country must make choices about how to deal with scarcity.  Each of the four major economic systems, traditional economy, free market economy, command economy, and mixed economy, will make those choices differently. Therefore, there are three basic economic questions all societies must answer.   These questions are: (1) What will be produced?  (2) How will it be produced?  (3) For whom will it be produced? 

Multiple Choice

Unlimited wants and limited resources present real _____ for countries.

• solutions

• answers

• issues

• decisions

Multiple Choice

Each of the four major economic systems, traditional economy, free market economy, command economy, and mixed economy, will make those choices ______.

• the same

• differently

• equally

• forever

Multiple Choice

There are _____ basic economic questions all societies must answer.

• one

• two

• three

• four

Multiple Choice

These questions are: (1) What will be produced? (2) How will it be produced? (3)

• For whom will it be produced?

• Why will it be produced?

• Where will it be produced?

• For what purpose will it be produced?

Major economic systems

Every country must develop an economic system in order to use its limited productive resources.  The key factor in deciding the type of economic system to use is determined by the amount of government involvement. 

Multiple Choice

Every country must develop an economic system to determine how to use its limited productive ________

• Resources

• Products

• Produce

• Property

Multiple Choice

The key factor in determining the type of economy a country has is the extent of _____ involvement.

• Public

• Private

• Government

• People

Traditional Economic System

A traditional economy is characterized by economic decisions that are based on established customs or practice.  In this type of economy, it is not uncommon for people to do the same kind of work as their parents and grandparents did, regardless of their ability or their potential. This economy provides less of a demand on resources than any other economic system.

Multiple Choice

A traditional economy is characterized by economic decisions that are based on established _____ or practice.

• customs

• religion

• knowledge

• practice

Multiple Choice

In this type of economy, it is not uncommon for people to do the same kind of work as their ______ and grandparents did, regardless of their ability or their potential.

• uncles

• aunts

• parents

• grandparents

Free market Economic System

A free market economy is characterized by minimal government involvement in the economy.  That means that if most of the decision making is left to the individual, the closer a system is to a free market system. 

Multiple Choice

A free market economy is characterized by ______ government involvement in the economy.

• a lot

• minimal

• equal

• unequal

Free market characteristics

• private ownership of property and resources – property and resources are owned by individuals or businesses, not the government;

• profit motive – profit is the earnings that remain after all expenses have been paid;

• competition –competition is the rivalry between the producers of similar products or services.  It can also be the rivalry between people selling similar products and services.  Competition often results in better quality products and services as well as lower prices.

Multiple Choice

_______ is the rivalry between the producers of similar products or services.

• rivalry

• competition

• entrepreneurship

• scarcity

Free market characteristics

• consumer sovereignty (control) – it is the consumers rather than the producers which determine what is produced;

• individual choice – choices rewarded by a free market economic system are entrepreneurial boldness, the willingness to speculate and take a chance, and the ability to seize or make new opportunities.

Multiple Choice

It is the _____ rather than the producers which determine what is produced;

• supply

• production

• producers

• Consumers

Command economy

A command economy means that property and/or resources are centrally owned, usually by government.  That means when the greater amount of decision making is left to a centralized authority, the closer the system is to a command economy. This centralized authority, or government, controls, plans, and makes almost all economic decisions.  That means that government planners decide which goods and services are produced and how they are distributed.  As a result, there is a lack of consumer choice in a command economy.  A command economic system is also called a centrally-planned economy.

Multiple Choice

A command economy means that property and/or resources are centrally owned, usually by ________.

• people

• government

• military

• stock holders

Multiple Choice

As a result, there is a lack of consumer _____ in a command economy.

• choice

• decision

• help

• resaons

Mixed economy

In a mixed economy, the role of government is greater than in a free market economy and less than in a command economic system.  A mixed economy is an economic system that includes the private sector and government control.  Whereas individuals and businesses operate as owners and decision-makers for the private sector, the government operates as owner and decision-maker for the public sector.  The United States, as with most economies in the world today, is a mixed economy. 

Multiple Choice

In a _______, the role of government is greater than in a free market economy and less than in a command economic system.

• free market

• command

• traditional

• mixed

Multiple Choice

The ______, as with most economies in the world today, is a mixed economy.

• Canada

• Mexico

• Cuba

• The United States