Econ2011_Chapter2_StudyGuide

Chapter 2: Economic Systems

and the Global Economy

Section 1: Economic Systems

Three Economic Questions

1.What are the three economic questions pertaining to the production and

distribution of goods? (p. 32)

Two Major Economic Systems

2.What is an economic system? (p. 32)

3.How does the economic system of free enterprise work? (p. 32)

4.What is socialism? (p. 32)

5.What are two other terms sometimes used to refer to a free enterprise? (pp. 32–33)

6.What is another term for socialism? (p. 33)

Major Differences Between Free Enterprise and Socialism

Resources

7.What differences are present with the use of resources in a free enterprise

economic system versus a socialist system? (p. 33)

Government's Role in the Economy

8.How does the government’s role i n the economy differ in free enterprise and

socialist systems? (p. 35)

Economic Plans

9.What is an economic plan and under which economic system might it be used? (p.

35)

Income Distribution

10.What is income distribution and which system pays more attention to it? (p. 35)

Controlling Prices

11.How are prices controlled in a free enterprise system? In a socialist system? (p. 36)

Private Property

12.What do the proponents of free enterprise believe about private property? How

does the socialist view differ in regard to private property? (p. 36)

Mixed Economies

13.What is a mixed economy? (p. 37)

14.How are the mixed economies of the United States and China different? (p. 37)

Economic Systems: Past, Present, and Future

15.What is a traditional economy? (p. 37)

16.Give an example of a traditional economy. (p. 37)

The Visions Behind Free Enterprise and Socialism

17.The ideas of which two economists became the vision for free enterprise and for

socialism? (p. 39)

Self-Interest

18.In what ways did Smith think that we benefit others through our self-interest? (pp.

39–40)

Labor Theory of Value

19.How did Marx view self-interest? (p. 40)

20.What is his labor theory of value? (p. 40)

21.What is a surplus value? (p. 40)

Section 2: Globalization

What is Globalization?

22.What is globalization? (p. 41)

A Smaller World

23.How has globalization made the world smaller? (p. 41–42)

A Free Enterprise World

24.What does the trend of globalization mean for the study of economic systems? (p.

42)

Movement Toward Globalization

Early History

25.In what way was the First Era of globalization freer than that of the world today?

(p. 43)

26.What did the Cold World do to the economy, in terms of globalization? (p. 43) Recent Causes

The End of the Cold War

27.Why was the end of the Cold War important economically? (p. 43) Advancing Technology

28.How does advancing technology affect economic trade? (p. 45)

Policy Changes

29.In what ways can a government control the process of globalization? (p. 45) The Costs and Benefits of Globalization

Benefits

Trade

30.From the view of trade, what is globalization all about? (p. 46)

Standard of Living

31.How do poverty levels change with increasing globalization? (p. 46)

32.How does globalization affect a country’s life expectancy? (p. 46)

Costs

Increased Income Inequality

33.How does globalization relate to income inequality? (p. 47)

Losing American Jobs

34.What is offshoring? (pp. 48–49)

More Power to Big Corporations

35.What is a major difference between a corporation and a government? (p. 49)

The Continuing Globalization Debate

36.Why is it more difficult to see the benefits of globalization than it is to see the

costs? (p. 50)

Globalization and the Financial Crisis

37.What did Adam Smith say about why the basic globalization force will not be

overcome? (p. 51)