Chapter 2 Economic Systems

A social and political philosophy based on the belief that democratic means should be used to distribute wealth throughout society is called

• communism
• collectivism
• socialism
• authoritarianism

The self-regulating nature of the marketplace is called

• self-interest
• the invisible hand
• equity
• competition

The former Soviet Union was an example of a communist country where

• individual freedom was allowed
• free enterprise was encouraged
• consumers had many choices
• most economic and political power was controlled by the government

The circular flow model of a mixed economy shows

• only how firms and households interact
• the physical flow and monetary flow between households and firms in both the product and factor markets
• how government interacts with households and firms in the product and factor markets
• how taxes and profits are related

The government decides which goods and services will be produced in a

• market economy
• mixed economy
• fluctuating economy
• command economy

In return for supplying the factors of production-land, labor, or capital-people recieve

• salaries
• factor payments
• workers' compensation
• social security

Which is a key economic question faced by all countries?

• How big should the army be?
• How much money should be raised in taxes?
• How may schools should be built?
• How should goods and services be produced.

Competition and self-interest are two important forces in 

• free market economies
• traditional economies
• centrally-planned economies
• communist economies

In a traditional economy, economic decisions are based largely on

• science
• custom
• socialism
• technology

Which of the following countries is the most extreme example of a centrally-planned economy?

• Hong Kong
• China
• Great Britain
• North Korea