Understanding Economic Systems: Definitions and Examples

📚 Quick Study Guide

• 🤝 Traditional Economy: Relies on customs, history, and time-honored beliefs. Often rural and farm-based.
• 🏛️ Command Economy: The government controls the means of production and makes all economic decisions. (e.g., Cuba, North Korea)
• 💹 Market Economy: Driven by supply and demand; private individuals and firms make economic decisions. (e.g., USA, Japan)
• 🌠 Mixed Economy: A blend of market and command elements. Most modern economies fall into this category.
• 🏭 Key Differences: Consider factors like property rights, resource allocation, and the role of government.
• ⚖️ GDP (Gross Domestic Product): The total value of goods and services produced in a country in a year. $GDP = Consumption + Investment + Government\ Spending + (Exports - Imports)$
• 📈 Inflation: The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

🧪 Practice Quiz

1. Which economic system is primarily based on customs and traditions?
   1. Market Economy
   2. Command Economy
   3. Traditional Economy
   4. Mixed Economy
2. In a command economy, who makes the primary economic decisions?
   1. Consumers
   2. Private Businesses
   3. The Government
   4. Foreign Investors
3. Which of the following is a characteristic of a market economy?
   1. Government control of prices
   2. Private ownership of resources
   3. Centralized planning
   4. Equal distribution of wealth
4. Most modern economies are considered what type of economic system?
   1. Pure Market Economy
   2. Pure Command Economy
   3. Traditional Economy
   4. Mixed Economy
5. Which factor is NOT typically considered when comparing economic systems?
   1. Property Rights
   2. Resource Allocation
   3. Role of Government
   4. Astrological Signs
6. What does GDP stand for?
   1. Gross Domestic Product
   2. General Development Program
   3. Global Distribution Process
   4. Governmental Development Plan
7. Which of the following describes inflation?
   1. A decrease in the general price level.
   2. A rapid increase in economic growth.
   3. An increase in the general price level.
   4. A stable economic environment.