New Economic Theories

Adam Smith believed the government’s role in laissez-faire capitalism was

• to distribute wealth equally.

• to set prices and wages.

• to control the economy.

• to leave the economy alone.

Supporters of a communist revolution hoped it would lead to a government in which workers were

• equal owners of property and goods.

• expected to follow a dictator.

• equal economically and socially.

• expected to create businesses.

What two principles form the basis for capitalism?

• private ownership and equal wealth

• free markets and shared property

• private ownership and free markets

• free markets and government oversight

Adam Smith believed that fair prices for goods are determined in a capitalist system

• through competition between businesses.

• by government regulation of businesses.

• by setting limits on imports and exports.

• through competition between consumers.

In a free market, supply and demand determines

• the type and number of goods produced.

• the number and distribution of goods produced.

• the raw materials and tools used to produce goods.

• the factories and machines used to produce goods.

In terms of production, what best describes the difference between capitalism and socialism?

• Capitalism is a system in which goods are made by private businesses, but socialism stresses government control over production.

• Capitalism is a system in which the government controls production, but socialism stresses production by private businesses.

• Capitalism is a system in which people pursue their own self-interests, but socialism stresses an equal distribution of wealth.

• Capitalism is a system in which government should “plan” the economy, but socialism stresses that free market dictates production.

Karl Marx developed the economic theory of

• socialism.

• capitalism.

• utopianism.

• communism.

During industrialization, which led to an exploration of new economic theories?

• a war between socialists and capitalists

• a gap between rich and poor

• the seizure of property by the government

• the fight to control businesses by individuals

Which best explains how a mixed economy addressed problems that arose from capitalism?

• Laissez-faire principles remained, but government passed laws promoting worker safety.

• Government interference continued, and new laws allowed workers to own companies.

• Supply and demand remained, and government took control of the means of production.

• Government regulation was minimal, but new laws protected workers and their standard of living.

In general, which best explains why communist revolutions did not happen?

• Workers were too tired and poor to revolt.

• Moderate socialists were less radical.

• Capitalist governments enacted reforms.

• Workers were not convinced they would work.