Economic Systems

Which summarizes the main characteristics of a traditional economic system?

• central government control, central planning, price controls

• diplomacy, labor participates in managerial decisions

• private ownership, social control of division of labor

• direct trade, no competition, relies on customs

“Innovations are normally the creation of business people.” Joseph Schumpter, Economic Theorist, (1911)

With which economic theory would Joseph Schumpter likely have agreed?

• socialism

• traditionalism

• capitalism

• communism

Economic Characteristics:

• The means of production are privately owned and operated for a private profit.

• The emphasis is on individual profit rather than on workers or society as a whole.

Which economic system does the above summary describe?

• command economy

• mixed economy

• traditional economy

• market economy

Command Economy: The state owns collective farms and all types of industry. Government officials make all major economic decisions.

Market Economy: Farms and industry are privately owned and operated. Producers and consumers make most economic decisions.

Traditional Economy: Subsistence agriculture is practiced on small family farms. Economic decisions are based on custom and habit.

What can be concluded from the information?

• Global competition is important in all three economies.

• Central government is weakest in command economies.

• Making a profit is very important in traditional economies.

• Economic freedom is most practiced in market economies.

Which statement best describes a mixed economy?

• The government determines the production and distribution of goods and services.

• Some industries are owned by the state, and others are privately owned.

• The products that consumers demand determine what goods are produced.

• People produce the same goods, but in different amounts, every year.

In a traditional economic system, which type of goods is most often produced?

• agricultural products

• heavy industrial machinery

• military supplies

• electronics and computers

Which economic enterprise would Adam Smith most favor?

• government-run railroad in Africa

• medieval manor in Europe

• commune in Communist China

• privately owned factory in France

an economic system in which the government owns most basic industries such as transportation, communications, banking. Nonbasic industries are privately owned.

• capitalism

• communism

• socialism

An economic system in which people and privately owned companies own both basic and non-basic businesses and industries

• capitalism

• communism

• socialism

An economic system in which, in its pure form, all property such as farms, factories, homes are owned by the government for the benefit of all citizens. The central government essentially controls all aspects of citizens' lives.

• Capitalism

• Communism

• Socialism