Free Market
What is the phrase that describes a government keeping its "hands off" the economy?
Laissez-faire
Who owns all land, factories, and equipment in a pure command economy?
The government (or state)
A mixed economy combines elements of which two economic systems?
Free Market and Centrally Planned (Command) Economies
Which nation represents an extreme centrally planned economy located on the far left of the economic continuum?
North Korea
What term describes property owned by individuals or companies, not by the government?
Private Property
In a pure free market, who or what determines prices and what goods are produced?
Buyers and sellers / Supply and demand (the market)
Who was the 19th-century philosopher whose ideas laid the foundation for modern socialism and communism?
Karl Marx
In a mixed circular flow model, what is the government's role in relation to households and businesses regarding taxes?
The government collects taxes from both households and firms.
Which modern Asian territory historically represents one of the world's freest markets on the right side of the continuum?
Hong Kong
What three basic questions must every economic system answer?
1) What to produce? 2) How to produce? 3) Who gets what is produced?
Who is considered the historic philosopher/thinker behind free market theory?
Adam Smith
What specific economic term refers to government planners creating multi-year economic target plans for industries?
Five-Year Plans
Name two ways the United States government intervenes in its free enterprise system.
Promoting general welfare, keeping order/laws, enforcing safety regulations, or providing public services (education, defense)
Why is China located closer to the center of the economic continuum than Cuba?
China is undergoing an economic transition toward privatization and market reforms.
What economic term describes an economic system based on private decision-making, competition, and voluntary exchange in the U.S.?
Free Enterprise System
What term describes the individual incentive that drives businesses to innovate and cut costs in a market economy?
Profit motive (or competition)
What is one major flaw or weakness commonly seen in command economies?
Shortages of goods, lack of worker incentive/innovation, inefficiency, or limited consumer choice
In the circular flow model, where does the government buy labor to staff public programs?
In the factor market
What term refers to a period of change in which a nation moves from one economic system to another?
Economic Transition
In the circular flow model, where does the government purchase finished goods and services from businesses?
In the product market
Name two essential functions that even Adam Smith acknowledged the government must provide in a market system.
National defense, public education, protecting private property, or infrastructure
What process involves merging private farms into large state-owned agricultural enterprises, as seen in the Soviet Union?
Collectivization
What is the process called when a government sells off state-owned businesses to private investors?
Privatization
Where on the economic continuum do the vast majority of modern world nations fall?
In the middle (as mixed economies)
What term describes a country that provides extensive public services (like free healthcare and higher education) paid for through high taxation?
A welfare state (or democratic socialist state)