Economics: Today and Tomorrow © 2012

Chapter 2: Economic Systems and the American Economy

Economic Systems and the American Economy

1
Almost all economic systems today are _____.
A)traditional economies
B)mixed economies
C)command economies
D)market economies
2
In the circular flow model, what is the relationship between businesses and individuals?
A)Businesses are composed of groups of individuals on the payroll.
B)Businesses have higher tax rates than individuals.
C)Businesses and individuals receive the same benefits from government, so they share the same place on the circular flow model.
D)Businesses sell goods and services to individuals. Individuals earn income by selling resources to businesses.
3
Which of the following is defined as the way in which a nation uses its resources to satisfy its people's needs and wants?
A)Command economy
B)Market economy
C)Mixed economy
D)Economic system
4
Which of the following describes a free enterprise system?
A)Individuals are free to own and control the factors of production.
B)Government owns and controls the factors of production.
C)Businesses cannot make a profit.
D)There are no legal restrictions on freedom of enterprise.
5
What motivates people to establish new businesses or expand existing ones?
A)Private property
B)Government regulations
C)Freedom of choice
D)Profit incentive
6
The money left over after all the costs of production have been paid is called ____.
A)capitalism
B)laissez-faire
C)private property
D)profit
7
Adam Smith described a system in which the "invisible hand" guided individuals to use resources efficiently. The term for this type of economic system is ____.
A)competition
B)profit
C)laissez-faire
D)private property
8
The goal of economic efficiency is to _____.
A)limit the economic benefits of an action
B)produce an economic system that is fair and just
C)regulate changes in the standard of living
D)use limited resources wisely
9
The goal of economic stability is to reduce extreme ups and downs in the _____.
A)minimum wage
B)standard of living
C)factors of production
D)average work week
10
A system in which the government controls only some areas of the economy is called _____.
A)communism
B)proletariat
C)democratic socialism
D)authoritarian socialism
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