3.1.1.2 The nature and purpose of economic activity NOTES

What is the central purpose of economic activity?

• To reduce the efficiency of resource allocation

• To maximize government control over production

• To produce goods and services to fulfill people's needs and wants

• To limit the choices available to consumers

Which of the following is considered a need?

• Smartphones

• Vacations

• Water

• Sports cars

What drives the decisions in a free-market economy?

• Fixed production quotas

• Equitable distribution of resources

• Market forces and consumer preferences

• Government planning

Which economy uses government intervention to decide what to produce?

• Traditional economy

• Free-market economy

• Command economy

• Barter system

What is a key advantage of a free-market economy?

• Centralized control of production

• Reducing income inequality

• Efficiency and innovation

• Addressing market failures

Which of the following is a characteristic of a mixed economy?

• Combination of market forces and government intervention

• Complete government control over all economic activities

• Absence of consumer choice

• Pure market-driven decisions without government intervention

What role does government play in a command economy?

• Focusing solely on foreign trade

• Making key economic decisions and directing production

• Regulating only the financial sector

• Minimal to no involvement

Which of the following is an advantage of government intervention in an economy?

• Decreasing public infrastructure

• Maximizing profits for private firms

• Ensuring all citizens have access to essential goods and services

• Promoting fierce competition among businesses

What is primarily determined by income and preferences in a capitalist economy?

• Central planning objectives

• Production methods

• Distribution of goods and services

• Government policies

Which policy is used by governments in mixed economies to influence the economy?

• Prohibiting imports and exports

• Elimination of all regulations

• Fiscal policy

• Disallowing private enterprises