Comparison of Economic Systems

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NSL Government – Unit 5 Name_____________________________________

Comparison of Economic Systems

1. Define Economics:

2. What are the three questions all economic systems answer?

Word Bank:

Laissez Faire government (2) private property entrepreneurs companies inequality programs

exploitation (suffering) monopolies command communism unproductive middle

Efficiently consumers exchange money (2) illegal competition mixed

Supply Market (3) Trade Capitalism war industries businesses tax (2)

3. A traditional economy is characterized by the ____________________________________ of goods in which two people trade their possessions with each other.

4. Traditional economies do not use _______________________________ as a medium for trade.

5. Money allows ____________________________ and producers to connect with each other much more _______________________ than bartering.

6. _________________________ economies are driven by ___________________________ and demand.

7. Freedom and _______________________ make market economies possible.

8. Another word used to describe market economies is _______________________________.

9. Those who believe in market economies think that the more you trade with another nation the less likely you are to go to ________________ with that nation.

10. ______________________________________ is the term used to describe a hands-off approach by the government towards the economy. This term is also some time referred to as the “invisible hand of the market.”

11. Market economies are characterized by a hands-off approach to the economy by the ____________________, the protection of ______________________________ by the government, the rewarding of risk taking by ___________________________ and private _______________________________.

12. Critics of market economies claim that they result in _______________________________ between the few that are wealthy and the many that are poor. Critics also claim that market economies can lead the __________________________ of the poor in less well off countries and large ______________________________ that stifle (stop) all other competitors.

13. In ______________________________________ economic system the _____________________ has total control over the economy.

14. Command economies are characteristic of nations that embrace the political ideology of ______________________________.

15. Critics of command economies claim that _______________________________ workers are rewarded because everyone is treated the same. Critics also claim that command economies result in ______________________________ markets that operate outside the view of the government. Further, command economies can not compete with nations with ________________________________ economies because they do not promote entrepreneurship and ___________.

16. ____________________________ have some of the characteristics of both command and market economic systems. Often the government owns major _________________________, but private ________________________________ also exists.

17. In mixed economies the government often heavily _________________________ its citizens in order to pay for social _______________________ such as welfare, free health insurance, unemployment compensation and education.

18. Supporters of mixed economies claim that their policies result in a large _______________________ class that is well educated and can benefit the economy in the future.

19. Critics of mixed economies claim that they often _______________________ too heavily and as a result are less competitive than nations with _________________________ economies.

✓ BCR:

✓ Compare the government’s role in market, command and mixed economic systems.

✓ Describe the benefits and disadvantages of a mixed economic system.

✓ Use examples and details to support your ideas.

| |Market |Command |Mixed |

|Production and distribution of goods |Businesses and ____________________ entrepreneurs produce |Individuals produce goods and services for the |Businesses , __________________entrepreneurs and|

|and services – Who produces what, who|goods and services. Individuals, other businesses, and the|government. The ________________________then |the ____________________ produce goods and |

|gets what, how do they get it? |government purchase the goods and services with money. The|distributes those goods and services to the |services. Individuals, other businesses, and |

| |price of the goods and services is determined by the demand|population. |the government purchase the goods and services |

| |for the good versus its supply. | |with money. The government helps insure |

| |Example: the black market, stock market |Example: the Soviet Union, Cuba, North Korea, |distribution of goods and services is fair, by |

| | |Iraq |regulating prices providing health care, etc |

| | | |Example: Great Britain |

|Consumer Choice – How many choices |Consumer usually has _____________options when purchasing a|There is ______________choice. The government |Consumer usually has multiple options when |

|does a consumer have if they want a |good or service. There are usually several businesses |distributes only one type of product for a given |purchasing a good or service. However, the |

|good or service? To what degree does|offering the same product. This ensures competition and |good or service |government may own basic utilities like water, |

|competition exist? |fair prices, as businesses compete for the consumer’s | |and electricity. |

| |money. | |Example: Washington Suburban Sanitary |

| |Example: Many types of soda | |Commission, Public Education (you can not shoose|

| | |Example: There is only gov’t-issued soda. No |the school you attend) |

| | |other brands. | |

|Profit – What is the role of profit |The main incentive of businesses. Forces them to set fair |Not a factor. The government collects all profit |The main factor of business. However, the |

|in the economic system? |prices. |and distributes it amongst the population. |government takes a large percentage of profit |

| |Example: Taco Bell would not be profitable if no one could|Example: Cuban government takes all the labor of |and distributes it among the people. |

| |afford it’s food. |the farmers, and distributes their work (crops) to|Example: A successful business in France pays |

| | |the rest of the people. |high taxes, which the French gov’t spends on |

| | | |improved health care. |

| | | | |

| | | | |

|Productivity – How productive are the|__________________productive workers. If workers are not |______________________productivity. Workers see |___________________productive. Profit is still |

|workers in the economic system? Is |productive, then profit goes down. |little additional benefit in being more |an incentive, but goods are still distributed by|

|there an incentive to be productive? |Example: If farmers don’t harvest food quickly, they will |productive. |the government. Gov’t acts like a safety net. |

| |have less food to sell. |Example: A Soviet farmer may harvest food |Example: A farmer harvests slow, may not |

| | |quicker, but he/she will not eat much more because|profit much, but the gov’t will make sure he |

| | |of it. |eats |

|Property Rights – Who owns the |____________________own natural and human capital. They |_______________________owns all capital. |____________________, businesses, and |

|natural, physical, and human capital |sell the use of these to businesses, who own physical | |_____________________own capital. |

|in the economic system? |capital. |Example: Cuban farmer gives away his labor (human| |

| |Example: A Giant employee sells his/her labor (human |capital). Gov’t owns the farm he/she works on |Example: Tour guide sells labor (human capital)|

| |capital) to the store. The farmer sells the produce |(natural capital). Gov’t owns the tractor |to Grand Canyon Expeditions company. Company |

| |(natural capital) to Giant. Giant uses its refrigerators |(physical capital) used to harvest the goods. |owns the jeeps (physical capital) used on the |

| |(physical capital ) to sell the goods. | |tours. Federal Gov’t owns the land (natural |

| | | |resource) the tour takes place on. |

|Standard of Living – What is life |Very high for some. Very low for more. Pretty good for |Low for most. Lack of incentive to produce good |Good for most. Balanced. Less disparity. |

|like in the economic system? Are |most. Characterized by wide disparity: very rich and very|products. | |

|there differences in education, |poor. | | |

|health care, material possession, | | | |

|crime, etc | | | |

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