3.15 Economic Systems

In the United States' economic system, individuals have the freedom to start their own businesses and decide what to produce. This characteristic is a major component of

• A command economy

• A socialist system

• Capitalism and the free market

• A communist system

Compared to economic systems where the government heavily controls production and distribution, a key advantage of capitalism in the United States is that it generally leads to

• equal distribution of wealth among all citizens.

• greater economic freedom and choice for consumers and producers.

• a guaranteed standard of living regardless of employment.

• the elimination of competition between businesses.

A major difference between the United States' free market economy and a government-controlled economy is that in the United States,

• The government sets prices for most goods and services.

• private individuals and businesses own and control most of the resources.

• economic decisions are primarily made by government agencies.

• there is no competition among producers.

In a free market system, who makes the decisions about what goods and services to produce?

• The government

• Businesses and consumers

• Labor unions

• International organizations

How does capitalism generally affect the standard of living?

• It tends to lower the standard of living for most citizens.

• It has no impact on the standard of living.

• It often leads to a higher standard of living due to competition and innovation.

• It creates an equal standard of living for all citizens.

What do economic systems under socialist and communist governments have in common?

• They usually result in brutal dictatorship and economic stagnation

• They lead to increased government ownership of the means of production

• They are based on the belief that the ideal society eliminates private property

• They result from violent social revolutions in which workers seize control of governments

People can own private property. Producers can make whatever they want. Consumers can buy whatever they want. Producers act to make a profit. What is an important consequence of this type of economic system?

• Many people enjoy economic freedom and high standards of living

• Living standards drop when the country falls behind in its use of technology

• People are helped by the government, which provides many free public services

• Government leaders take over all farms and industries to provide greater equality

The diagram below shows characteristics of an economic system: Businesses are privately owned. Businesses decide what and how many goods to produce. Businesses freely trade goods.

• Capitalism

• Communism

• Fascism

• Socialism

Which statement describes a mixed economy under a socialist government?

• Private businesses provide all goods and services

• Taxes are low, but government services are extremely limited

• The government owns several industries and provides some services at no cost

• Private property is abolished, and all goods and services are provided to citizens by the government

Which conclusion can be inferred from the chart?

• A. Capitalism promotes higher standards of living.

• B. People tend to be happier in traditional societies.

• C. A command economy brings greater social stability.

• D. Economic opportunity increases along with public ownership.