Chapter 2 Assessment: Economic Systems and Decision Making

People benefit from an economy that moves away from a command economy and more toward a market economy in which of the following ways?

• They have more choices and personal freedoms in economic decisions.

• The government controls all aspects of production and distribution.

• There is less competition and innovation in the market.

• Prices are set by the government rather than supply and demand.

Cause and Effect: A traditional economy can lead to economic stagnation because:

• it resists change and innovation

• it encourages rapid industrialization

• it promotes technological advancement

• it supports a highly competitive market

A mixed economy is different from a capitalist economy because:

• A mixed economy combines government and private sector involvement, while a capitalist economy relies mainly on private ownership.

• A mixed economy has no government intervention, while a capitalist economy is fully controlled by the government.

• A mixed economy only allows private businesses, while a capitalist economy only allows government businesses.

• A mixed economy and a capitalist economy have no differences.

According to Karl Marx, the ultimate goal of a communist system is:

• the abolition of class distinctions

• the establishment of a monarchy

• the expansion of private property

• the promotion of free market competition

The Five-Year Plans of China and Russia had which of the following as an advantage and disadvantage?

• They promoted rapid industrialization but often led to shortages and hardships for workers.

• They encouraged free-market competition and increased consumer goods.

• They reduced government control over the economy and improved living standards for all.

• They focused on agricultural exports and decreased state intervention.

Identifying: People who do not benefit from a market economy are often those whose needs go unmet. Who are these people?

• Those without sufficient income or resources

• Successful entrepreneurs

• Government officials

• Large corporations

According to the table, what is one advantage of a traditional economic system?

• Sets forth certain economic roles for all members of the community; stable, predictable, and continuous life.

• Encourages rapid innovation and technological advancement.

• Allows for a high degree of consumer choice and variety.

• Promotes strong government regulation and intervention in the economy.

According to the table, what is one advantage of a command economic system?

• Capable of dramatic change in a short time; many basic services available at little or no cost.

• High levels of consumer choice and competition.

• Efficient allocation of resources through supply and demand.

• Minimal government intervention in the economy.

According to the table, what is one advantage of a market economic system?

• Individual freedom for everyone; able to adjust to change gradually; high degree of consumer satisfaction.

• Centralized decision-making by the government; limited consumer choice.

• Guaranteed employment for all citizens; fixed prices for goods and services.

• Production based on tradition and customs; little innovation.

According to the table, what is one disadvantage of a traditional economic system?

• Discourages new ideas and new ways of doing things; stagnation and lack of progress; lower standard of living.

• Encourages rapid technological advancement and innovation.

• Promotes high levels of industrialization and urbanization.

• Ensures equal distribution of wealth among all citizens.