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ECONOMICS - Chapter 2 Study Guide – Economic Systems and Decision MakingUse the book to answer the following questions.What is the purpose of government in a command economy? List the examples of a market economy. List the major economic and social goals of a country. Which group of people ultimately determines the products that a free enterprise economy produces? What type of system best describes the United States? Command Economy; Pure Free Enterprise System; Traditional Economy or Modified Private Enterprise System What are the key characteristics of a command economy? Does a market economy provide for everyone’s basic needs? YES OR NO What economic and social goal is the minimum wage an example? What is the concept of voluntary exchange? What is the government’s main role in a mixed economy? DBQ SECTION“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.”From Daniel J. Boorstin’s The Discoverers: A History of Man’s Search to Know His World and Himself, 1985 What type of economic system does this passage describe? “[E]very individual, therefore, endeavours as much as he can [to direct his resources toward his own business] so that its produce may be of greatest value; every individual...neither intends to promote the public interest, nor knows how much he is promoting it...He intends only his own gain, and he is in this...led by an invisible hand to promote an end which was no part of his intention...By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”From Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nation, 1776.According to Adam Smith, what directs the choices business people make about how to use their resources? Diaguita Indians have lived in this region for generations...We grow beans, corn and potatoes on the mountain slopes. To irrigate these crops, we still use the channels built centuries ago by our ancestors. We also breed llamas...In our community, the more llamas you own, the richer you are.In the economic system described in this passage, answers to the basic economic questions would be determined by? What would this cartoonist would like government to do? Where would the U.S. economy be located in the diagram, in W, X, Y, or Z? A government program helps pay the medical expenses for a worker who is injured on the job. On the diagram, should this program be located in p, Q, R or S? The Americans with Disabilities Act bans discrimination in employment against people with disabilities. On this diagram, would you locate this law in P, Q, R or S? SHORT ANSWER QUESTIONSDiscuss inflation as it affects one of the following: labor, consumers, or government spending. Why is the entrepreneur so important in the free enterprise economy? During which two-year period did inflation increase the most? During which year was inflation at the highest? What was the approximate percentage change in inflation from 1990 to 1992? Did it increase or decrease? During which two-year period did inflation decrease the most? During which year was inflation at the lowest? What was the approximate percentage change in inflation from 1982 to 1984? Did it increase or decrease? AdvantagesDisadvantagesAble to adjust to change graduallyRewards only productive resources; does not provide for people too young, too old, or too sick to workLack of government interferenceWorkers and businesses face uncertainty as a result of competition and changeLarge variety of goods and servicesDoes not produce enough public goods such as defense, universal education, or health careWhat economic system does the information in this table describe? ................
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