Economics 3/4

Who makes decisions Who makes decisions concerning the 3 economic concerning the 3 economic

questions in a Central questions in a Central

Economy? Give ExamplesEconomy? Give Examples..

The government decides what to The government decides what to produce, how much to produce, and produce, how much to produce, and

how much to charge. how much to charge.

Ex. Military uniforms would be chose Ex. Military uniforms would be chose by committee over the production of by committee over the production of

sweaterssweaters

What characterizes an authoritarian government?

They exact strict obedience from their citizens and do not allow individuals

freedom of thought and action.

Outline the events that led to Russia becoming a Outline the events that led to Russia becoming a communist government. communist government. (Soviet Union)(Soviet Union)

1917- 2 revolutions.1917- 2 revolutions.

March- Czar Nicholas was forced from the throne March- Czar Nicholas was forced from the throne and a provisional government was set up.and a provisional government was set up.

November- the provisional government was November- the provisional government was taken over by the Bolsheviks, led by Vladimir Lenin. taken over by the Bolsheviks, led by Vladimir Lenin. They renamed themselves communists.They renamed themselves communists.

What were collectives?What were collectives?

Large farms leased from the state to groups off Large farms leased from the state to groups off peasant farmers.peasant farmers.

Farmers managed operation of the collectives, Farmers managed operation of the collectives, but they were still required to produce what the but they were still required to produce what the government instructed.government instructed.

Explain the relationship between government and the Explain the relationship between government and the

workerworker

Agricultural workers were guaranteed employment and Agricultural workers were guaranteed employment and income, and the government established quotas and income, and the government established quotas and distribution.distribution.

Where was the incentive?Where was the incentive?

Because there was no competition, individuals Because there was no competition, individuals had few incentives to produce more or better had few incentives to produce more or better crops.crops.

What was the opportunity cost of the Soviets emphasizing What was the opportunity cost of the Soviets emphasizing heavy industry?heavy industry?

• Heavy industry required a large capital investment to produce items used in other industries.

• The makers of consumer goods and services paid the opp. cost of this concentration of resources. They were stuck with leftover, lower quality resources with which to operate.

1. What did Joseph Stalin do to improve agricultural production?

Joseph Stalin created five year plans to boost production.

Section 4 Modern Economies

What is Laissez-Faire?What is Laissez-Faire?

Doctrine that government generally Doctrine that government generally should not intervene in the should not intervene in the

marketplace.marketplace.

What is government’s role in the factor What is government’s role in the factor market?market?

The government purchases land, The government purchases land, labor, and capital from households In labor, and capital from households In the factor market. the factor market.

What is government’s role in the product market?What is government’s role in the product market?

Governments purchases goods and services in Governments purchases goods and services in the product market. They need buildings and the product market. They need buildings and office buildings, telephones, computers, and fax office buildings, telephones, computers, and fax machines, for examples.machines, for examples.

What is free enterprise?What is free enterprise?

Economic system characterized by private or corporate Economic system characterized by private or corporate ownership of capital goods is called. ownership of capital goods is called.

Explain how North Korea’s economy operates.. How does Explain how North Korea’s economy operates.. How does China operate? China operate?

Government owns all the property and all Government owns all the property and all economic output. economic output.

State owned industries produced 95 percent of State owned industries produced 95 percent of North Korea’s goods. Almost all imports are North Korea’s goods. Almost all imports are banned, and production of goods and services by banned, and production of goods and services by foreign companies is forbidden foreign companies is forbidden

The economy is dominated by government.The economy is dominated by government. 25% of all enterprise are owned by individuals.25% of all enterprise are owned by individuals.