Economic Systems
what is a Traditional Economie
The allocation of scarce resources, and nearly all other economic
activity, stems from ritual, habit, or custom
what is Economic Freedom
Chose occupations, employers, and use of money
what is Capitalism
Where private citizens, many of whom are entrepreneurs,own the factors of production
Tries to make sure everyone follows the “rules of the game” to ensure an efficient and fair economy
what is Protector
what is Price Stability
Stable prices
what is a Command Economy
Central authority makes most of the what, how, and for whom decisions
what is Economic Efficiency
Making economic decisions so that benefits gained are greater than costs incurred
what is Free Enterprise
Competition is allowed to flourish with a minimum
amount of government interference
Provider and consumer
Provides goods and services i.e. defense services
what is Inflation
Rise in the general level of prices
what is a Market Economy
People and firms act in their own best interests to answer the what,how, and for whom questions
what is Economic Equity
Equal pay for work
what is Voluntary Exchange
Act of buyers and sellers willingly engaging in market transactions
Preserves competition in the marketplace, oversees interstate commerce, communications, banking
what is Regulator
what is Fixed Income
Income that doesn’t increase even though prices go up
what is a mixed economy
it integrates elements of both free market and planned economic systems
what is Economic Security
Protection from adverse economic events
what is Private Property Rights
The privilege that entitles people to own and control
their possessions as they wish
what is Promoter of National Goals
Reflects the will of the majority of people
what is Consumer Sovereignty
Ruler of the market
list the pros and cons of Traditional, Command, and Market Economy
Traditional Economies
Adv – Roles are clearly established
Dis – Discourages new ideas and ways of doing things
Command Economy
Adv – Capable of dramatic change in a short period of time
Dis – Does not meet the wants and needs of consumers
Market Economy
Adv – Able to adjust to change gradually
Dis – Rewards only productive resources; does not provide for people
too young, too old, or too sick to work
what is Full employment
An economic system should provide as many jobs as
possible
what is a Profit Motive
If a venture goes well for them, they earn rewards for their efforts
Example of "Justified whenever its benefits outweigh its costs"
FDR’s New Deal to end the Great Depression
what is Economic Growth
Better “things” in the future