1. Economic Systems Review

2. In a command economy, economic decisions are made by individuals.
False

3. The kind of system in which the individuals own and control the factors of production is a command economy.
False

4. In a system of pure competition, the role of the government is to regulate prices.
False

5. A free enterprise system is based on individual initiative.
True

6. Economic equity refers to fair play in the economy.
True

7. In a laissez-faire system, the government does not interfere in the economy.
True

8. Adam Smith’s “invisible hand” refers to the role of the ______.
Market

9. A laissez-faire system is one in which government inference in the economy is __________.
Minimal

10. A major characteristic of a pure market economy is _________.
Competition
Little or no government
Freedom of choice
Freedom of enterprise
Private Property
Profit Incentive

11. Another term for a capitalist system is a _______ economy.
Market

12. The word “equity” means _________.
Fairness

13. Name a country that is a prime example of a command economy.
North Korea
China
Nazi Germany

14. In a capitalist system, most property is ___________.
Private Property

15. It is easier to start a business in a ________ system.
Market
Free Enterprise
Capitalist

16. Which economies answer all three of the basic economic questions?

17. What type of economic system is described in this passage?
“So long as mankind lived by raising crops and herding animals, there was not much need for measuring small units of time. The seasons were all important—to know when to expect the rain, the snow, the sun, the cold. Why bother with hours and minutes? Daylight was the only important time, the only time when men could work.”
Source: Daniel J. Boorstin’s The Discoverers: A History of Man’s Search to Know His World and Himself, 1985.
Traditional

18. What is rivalry among producers?
Competition

19. What is the desire to make money?
Profit Incentive

20. What economic system depends on decisions made by the government?
Command

21. What system states that government should interfere minimally?
Laissez-faire

22. What is the expansion of the economy?
Economic Growth

23. In which economic system is it easiest to start your own business?
Market

24. What is another term for a capitalist system?
Market

25. Traditions, Customs, and beliefs
What answers the three basic economic questions in a traditional system?
Traditions, Customs, and beliefs

26. What is the material well-being of an individual, group, or nation?
Standard of Living

27. What is a freely chosen activity between buyers and sellers of goods and services?
Market