2.1 and 2.2 Study Guide

In a traditional economy, how are economic decisions primarily made?

• By government authorities and central planners

• Based on consumer demand and supply

• Through the interaction of buyers and sellers in markets

• According to customs, traditions, and rituals 

What is the main role of individuals in a traditional economy?

• To carry out roles and tasks as dictated by their culture and heritage

• To adapt to changing market conditions

• To innovate and create new products

• To maximize profits and economic growth

The "invisible hand" suggests that:

• Government should control economic decisions

• Society’s goals will be met as individuals seek their own self-interest

• Prices should be set by a central authority

• Markets require constant supervision to function properly

What is a free market economy?

• An economy where the government controls all production and distribution

• An economy where individuals and businesses make most economic decisions

• An economy where trade is restricted to only local markets

• An economy where prices are set by a central authority

Does Laissez Faire mean let it be?

• True

• False

What are economic systems?

• The structure of methods and principles a society uses to produce and distribute goods and services

• Level of economic prosperity

• Relies on habit, custom, or ritual to answer the three basic economic questions

• The process of bringing new methods, products, or ideas into use

Which of the following is NOT an advantage of free market?

• Growth and innovation

• Freedom of choice for governments

• Variety of goods and services

• Efficient response to changing marketplace conditions

What of the following is NOT an economic question?

• What goods and services should be produced

• What services should be produced

• How should these goods and services be produced

• Who consumes these goods and services

What is another name that the Free Market System goes by

• Socialism

• Capitalism

• Communism

• Communion

What type of occupation is typically passed down from generation to generation in a traditional economy?

• Jobs that offer the highest salaries

• Jobs that are consistent with cultural traditions and norms

• Jobs that are in high demand in the global markets

• Jobs that require formal education and training