Types of Government & Economic Systems Study Guide

List the three core economic questions.

1.) What goods will a society produce?

2.) For whom will these goods be produced?

3.) How will these goods be produced?

Define a traditional economy.

A type of economy in which people accept the rules as good and correct.

Define a command economy.

A type of economy in which the government answers the core economic questions (government decides what to produce, how, and for whom).

Define a market economy.

A type of economy in which individual citizens answer the core economic questions without government interference.

What Enlightenment thinker do we associate with the idea of a market economy?

Adam Smith

What french term, meaning "Let do" or "let it be" means a government should keep its "hands off" the economy?

laissez-faire

What is the difference between private and public ownership of property?

private= individual citizens own properties/businesses

public = the government owns properties/buisnesses

What determines prices in a market economy?

the law of supply and demand

If the supply of a good goes down, but the demand goes up what should happen to the price?

it should go up

If the supply of good goes up or stays the same, but demand goes down?

it should go down

Define a mixed economy.

a type of economy in which most decisions are made by private citizens, but there is some government regulation

What are the six economic functions of government in a mixed economy?

1.) Maintain legal and social framework

2.) Stabilizing the Economy

3.) Providing goods and services

4.) Maintaining Competition

5.) Correcting Spillovers (Externalities)

6.) Redistributing Income

Identify the economic function of government shown in the scenario described below:

The government prevents the merger of two large cell-phone companies fearing it will harm consumers.

Maintaining Competition

Identify the economic function of government shown in the scenario described below:

The government increases funding to low-interest rates loans to attend college, hoping that more people will attend college and someday obtain higher paying jobs.

Correcting spillovers

Identify the economic function of government shown in the scenario described below:

A company has a patent on its unique product, and sues another company for copying it.

Maintaining legal and social framework.

Identify the economic function of government shown in the scenario described below:

Fearing an economic slowdown, the Federal Reserve Bank lowers interest rates.

Stabilizing the Economy

Identify the economic function of government shown in the scenario described below:

The government- using tax dollars- provides a public library and public trash collection to a city.

Providing goods and services

Identify the economic function of government shown in the scenario described below:

The government closes a tax loophole that had been allowing wealthy Americans to avoid paying taxes on certain types of investment income. It plans to use the money to increase spending on welfare programs.

Redistributing Income

What are two functions of government?

1.) Maintain order 2.) Provide goods/services

Define monarchy.

a type of government in which the ruler (a king or queen) inherits (is born into) power

What is an absolute monarchy?

A monarchy where the ruler has no limits on his/her power (absolute power).

What is a constitutional monarchy?

A type of monarchy in which the monarch exists as a symbol, but the real power is in the hands of an elected legislature (a parliament)

What is a dictatorship?

A type of government in which one person/party seizes power illegally; there are no limits on the dictator's power

What is a totalitarian dictatorship?

a dictatorship in which the dictator controls all aspects of citizens' lives

What are four characteristics of totalitarianism?

1.) Use of Secret Police 2.) Use of Work camps/death caps 3.) Control of Media/use of propaganda 4) No protections of individual rights (i.e. no right to privacy or free speech)

What is authoritarianism?

a dictatorship in which the dictator exerts a lesser degree of control over citizens' lives

What are two characteristics of an authoritarian dictatorship?

1.) Perhaps freedom of speech can be exercised privately (but not publicly) 2.) There may be elections, but the outcome is "fixed"

What is literally the meaning of the word "democracy?"

rule by the people

What is a direct/pure democracy?

All citizens directly participate in government

Do direct/pure democracies really exist? Why or why not?

Do not really exist; they are not practical

What is a representative democracy?

A government in which citizens elect other citizens to represent their interests

What are two characteristics of a representative democracy?

1.) they have constitutions (usually written) 2.) they have protections for citizens' rights (such as free speech)

What is another term for a representative democracy?

republic

What is the relationship between the chief executive (president) and the legislative branch in a PRESIDENTIAL DEMOCRACY?

there is COMPLETE separation of powers; the chief executive cannot serve in the legislative branch

What is the relationship between the chief executive (prime minister or premier) and the legislative branch in a PARLIAMENTARY DEMOCRACY?

there is NOT separation of powers; the chief executive is chosen from the largest party in the legislative branch