Chapter 2 Review

What economic system is used in the United States?

• Command Economy

• Mixed Economy

• Market Economy

• Traditional Economy

Answer explanation

Although the United States economic system is mostly a market economy, there is still government involvement. No nation uses purely market or purely command economic system today.

What type of economy is used in communist nations?

• Market Economy

• Mixed Economy

• Command Economy

• Traditional Economy

What economic values are the highest priority in a command economy?

• Stability and Freedom

• Equity and Security

• Freedom and Efficiency

• Growth and Stability

Answer explanation

Communism (command economy) prioritized both equality and meeting everyone's needs.

What are the highest economic values in a market economy?

• Efficiency and Freedom

• Equity and Security

• Security and Stability

• Stability and Equity

Answer explanation

America uses a primarily market economy. Keep in mind that our national values include freedom and (economically) maximizing our productivity, a.k.a. efficiency.

What economic value is most closely related to inflation?

• Freedom

• Efficiency

• Equity

• Stability

Answer explanation

Think stability of prices

Which of the following are the 3 Economic Questions that all societies must answer?

• Who should get the stuff we make?

• Who should produce stuff?

• How should we produce stuff?

• What should we produce?

Which of the following would advocate for a market economy?

• Adam Smith

• Karl Marx

• Vladimir Lenin

• Josef Stalin

Answer explanation

Adam Smith was all about capitalism. Marx and Engels came up with communism. Lenin and Stalin were Soviet leaders who followed Marx' ideas.

Who makes economic decisions in a market economy?

• The Government

• Amazon

• The Federal Reserve

• Buyers and Sellers

According to Adam Smith, how should the economy be run?

• The government should make all economic decisions.

• We should return to hunting and gathering.

• The government should stay out of the economy.

• Adam Smith was a chemist, not an economist.

Answer explanation

Adam Smith was the founding father of economics. He argued that the economy works best when it runs itself, with little government involvement.

Who makes economic decisions in a mixed economy?

• The Government

• Buyers and Sellers

• Amazon

• Both the Government & Buyers and Sellers