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25 Cards in this Set
- Front
- Back
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economy or economic system
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an organized way of providing for the wants and needs of their people
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traditional economy
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the allocation of scarce resources, and nearly all other economic activity, stems from ritual, habit, or custom
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ADVANTAGES of a traditional economy
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1) everyone knows which role to play
2) little uncertainty over WHAT and HOW questions 3) FOR WHOM question is determined by custims and traditions of society |
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DISADVANTAGES of a traditional economy
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1) tends to discourage new ideas and new ways of doing things
2) tends to punish people who act differently or break rules 3) lack of progress leaders to a lower standard of living |
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command economy
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one in which a centural authority makes most of the WHAT, HOW, and FOR WHOM decisions
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ADVANTAGES of a command economy
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1) can change direction drastically in a relatively short time
2) many helath and public services are available to everyone at little or no cost, regardless of income |
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DISADVANTAGES of a command economy
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1) not designed to meet the wants of consumers, even though many basic needs are provided
2) system does not give people the incentive to work hard 3) requires a large decision-making bureaucracy 4) does not have the flexibility to deal with minor, day-to-day problems (size of bureaucracy discourages the smallest adjustments; instead, skip problems) 4) people with new or unique ideas find it difficult to get ahead |
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market economy
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people and firms act in their own best interests to answer the WHAT, HOW, and FOR WHOM questions
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ADVANTAGES of a market economy
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1) over time, it can adjust to change
2) high degree of individual freedom 3) relatively small degree of government interference 4) decision making is decentralized 5) incredible variety of goods and services available to consumers 6) high degree of consumer satisfaction |
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DISADVANTAGES of a market economy
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1) does not provide for the basic needs of everyone in the society
2) does not provide enough of the services that people value highly 3) relatively high degree of uncertainty that works and businesses face as the result of change 4) can fail if three conditions are not met: + sufficient competition + freedom of resource movement + adequate information available |
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U.S. Economic and Social Goals
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1) Economic Freedom
2) Economic Efficiency 3) Economic Equity 4) Economic Security 5) Full Employment 6) Price Stability 7) Economic Growth |
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Social Security
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a federal program of disability and retirement benefits that covers most working people
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inflation
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a rise in the general level of prices
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fixed income
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an income that does not increase even though prices go up
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capitalism
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where private citizens (many of whom are entrepreneurs) own the factors of production
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free enterprise
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economy in which competition is allwed to flourish with minimum of government interference; term used to describe the American economy
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5 Characteristic of a Free Enterprise Economy
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1) economic freedom
2) voluntary exchange 3) private property rights 4) profit motive 5) competition |
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voluntary exchange
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the act of buyers and sellers freely and willingly engaging in market transactions
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private property rights
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the privilege that entitles people to own and control their possession as they wish
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profit
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the exten to which persons or organizations are better off at the end of a period than they were at the beginning
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profit motive
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the driving force that encourages people and organizations to improve theirm aterial well-being
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competition
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the struggle among sellers to attract consumers while lowering costs
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consumer sovereignty
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describes the role of the consumer as sovereign, or ruler, of the market
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The Role of the Government
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1) protector
2) provider and consumer 3) regulator 4) promoter of national goals |
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mixed economy or modified private enterprise economy
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free enterprise market economy where people carry on their economic affairs freely, but are subject to some government intervention and regulation
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