Political & Economic Systems (copy)

Three Economic Questions that must be answered by all societies

What to Produce; How to Produce; Who gets to Consume what is produced?

Traditional Economic System

Three economic questions are answered by tradition and custom. This type of system is only suitable for small simple societies and typically involves trade and bartering.

Free Market Economic System

Individuals operating in the market place (consumers and producers) answer the 3 economic questions. Also called Capitalism. Government has no role.

Command Economic System

Also called a Centrally Planned System or Communism. The government decides the answers to all 3 economic questions

Mixed Economic System

Most countries today are mixed systems where individuals, producers, and the government all provide answers to the 3 economic questions

Adam Smith

Considered the father of Free Market Capitalism. Published "The Wealth of Nations" in 1776

Karl Marx

Considered the father of Communism. Wrote a book called Das Kapital. He believed that workers were exploited by Capitalists and that private property should be abolished

The Invisible Hand

The combination of Self Interest and Competition that should work together to regulate the market (not the government).

Laissez Faire

Government should not intervene in the marketplace. This is a key idea in capitalism.

Economic System

The way a society produces and distributes goods and services. How they choose to answer the 3 basic questions based on their values as a society.

Incentive

Reward or punishment that influences behavior.

Communism

Economic system created by Karl Marx where the government (on behalf of the people) would answer the 3 questions. Also called a command or centrally planned economy.

Capitalism

Economic System described by Adam Smith in which producers and consumers driven by self-interest and competition answer the 3 questions. Also called Free Market economic system.

Socialism

Government owns or regulates SOME of the means of production. Elements of socialism are found in most mixed economies today.

political system

how a government is organized, who has power to make decisions

government

a system that creates and enforces laws, makes decisions and maintains control

autocracy

A form of government in which a single individual rules

oligarchy

A government ruled by a few powerful people

theocracy

A system of government in which religious leaders rule a country in the name of God or a god

aristocracy

A form of government in which power is held by the best individuals or by a small privileged class usually determined by their wealth, education or heredity

direct democracy

All voters in a community meet in one place to make laws and decide what actions to take.

representative democracy

A system of government in which citizens elect representatives, or leaders, to make decisions about the laws for all the people.

dictatorship

A government controlled by one person, who usually takes power by force, rather then by inheriting it

totalitarian

A political system in which the government has complete control over the lives of individual citizens

constitutional monarchy

A form of government in which the king/queen's power is limited and the authority to tax and make new laws resides in an elected body.

monarchy

A form of government in which one person, usually a member of a royal family, exercises supreme authority.

anarchy

Absence of law or government; chaos, disorder

monopoly

when one company controls an entire industry without any competition.

supply and demand

the amount of something that is available and the desire of buyers for it. This is how price is determined in a market economy.

anti-trust

laws that prohibit monopolies and other activity that reduces competition

tariffs

taxes on goods from other countries

junta

a military group that rules a country after taking power by force

merger

multiple companies forming into a single business

feudalism

the dominant social system in medieval Europe, in which the nobility held lands from the Crown in exchange for military service, and vassals were in turn tenants of the nobles, while the peasants (villeins or serfs) were obliged to live on their lord's land and give him homage, labor, and a share of the produce, notionally in exchange for military protection.

republic

a government ruled by the people and the representatives whom they elect.

federalism

a system of government that splits the power between a central government and smaller, regional governments.