The Three Basic Economic Questions and Purchasing Power Parity

What is the first basic economic question?

"What to produce?"

What is the second basic economic question?

“How should goods and services be produced?"

What is the third basic economic question?

“For whom to produce?" This refers to the allocation of goods and services among different individuals and groups in society based on their needs and wants.

What is an economic system?

The way a society organizes and manages its resources, production, distribution, and consumption of goods and services.

What is a traditional/subsistence economy?

There is no money, and people only produce enough to meet their own needs.

What is a market socialist economy?

Firms are told what to produce by the government who owns most of the productive resources.

What is a planned capitalist economy?

Workers produce what they need to survive and money is not used.

What is a planned socialist economy?

This is a market economy in which productive resources are owned by the state.

What is a market capitalist economy?

This is a market economy in which productive resources are largely owned by firms and individuals.

What is purchasing power parity?

A theoretical exchange rate that allows you to buy the same amount of goods and services in every country.