Understanding Economic Systems

What are the three fundamental questions that define an economic system?

• Who to produce for, when to produce, where to produce

• When to produce, where to produce, how to produce

• What to produce, how to produce it, who gets it

• Why to produce, how much to produce, for whom to produce

Who classified the major inputs required to produce goods as land, labor, and capital?

• John Maynard Keynes

• Milton Friedman

• Karl Marx

• Adam Smith

What is a key characteristic of a command economy?

• Government control over production

• Individual ownership of resources

• Consumer choice dictates production

• Market-based decision making

What distinguishes a planned economy from a free market economy?

• The absence of government

• Consumer choice in production

• Unlimited resources

• Government control over production

What is the primary motive for businesses in a free market economy?

• To maximize profit

• To serve the public interest

• To follow government directives

• To ensure employment for all

What does the 'invisible hand' refer to in a free market economy?

• The role of technology in production

• Central planning

• Consumer preferences guiding production

• Government regulation

Why do free markets require government intervention?

• To guarantee employment for all citizens

• To ensure profits for all businesses

• To control prices of all goods and services

• To maintain order and provide public goods

What is a key role of government in a free market economy?

• To provide public goods and services

• To compete with private businesses

• To take over failing businesses

• To set prices for all goods and services

What is a mixed economy?

• An economy with no government intervention

• An economy based solely on agriculture

• An economy where production is equally divided among sectors

• An economy with elements of both free markets and government control

How do mixed economies address the limitations of free market and planned economies?

• By eliminating government

• Through international trade only

• By focusing solely on profit

• By combining elements of both systems