1. From right to left, what three economic systems appear on the Spectrum of Economic Systems?

a. Capitalismb. Socialismc. Communism

2. Who owns the means of production under capitalism?

Private individuals/businesses

3. What are three advantages of capitalism?

a. Efficiency

b. Individual Freedom – to either produce or buy whatever individuals want

c. Flexibility – to accommodate changes in consumer preferences or prices of resources

Chapter 19, Section 1

4. What are the disadvantages of (pure) capitalism?

a. Public goods such as roads, public schools, a system of justice etc. are ignored

b. Poor people, unemployed, and less productive members of society would be ignored

c. Can be unstable (e.g., Great Depression) life can be incredibly tough without safety nets such as Social Security, unemployment tax, etc.

5. Who owns many basic productive resources under socialism?

The government

6. What are two advantages of socialism?

a. People that are less fortunate and less product still share in the benefits of society

b. Universal benefits such as free education, health care, welfare, guaranteed jobs in government industries

7. What are two disadvantages of socialism?

a. Less efficient, e.g., if certain jobs are guaranteed, more workers might be hired than necessary

b. Special interests gain more power (e.g., ruling class has more influence to control government policies)

8. Who owns property under theoretical communism?

Property is collectively owned (no such thing as private property)

9. What are two advantages of communism?

a. Worker security – the state directs workers into their jobs and they cannot be fired or dismissed

b. Free health care, education, and military defense system

10. What are four disadvantages of communism?

a. Loss of individual freedom

b. Inefficiency of centralized planning

c. Low productivity and shoddy products

d. Can’t move jobs, same pay regardless of how hard you work

Chapter 19, Section 2

1. Who set up a communist government in Russia?

Vladimir Lenin in 1917

2. Which dictator of the Soviet Union oversaw the rapid industrialization and collectivization?

Josef Stalin

3. Why was central economic planning in the Soviet Union so difficult?

Centralized planning meant the government had to figure out and plan for the amount of goods and services needed in every single industry. This is insanely difficult if not impossible. It did not help that planners were often political appointees with no understanding of the industry they planned for.

4. How did production quotas and the lack of effective incentives contribute to the collapse of the Soviet economy?

Lack of effective incentives resulted in workers being extremely less productive and production quotas resulted in some of the poorest-quality consumer goods in the world

(e.g., shoe quotas example)

5. a. Which Soviet leader introduced perestroika?

Mikhail Gorbachev

b. What motivated him to do so?

The economy had become too complex for central planning

Chapter 19, Section 3

1. What are four major problems faced by a country making the transition to capitalism?

a. Privatization – changing from government-owned to individual-owned companies

b. Loss of Political Power – e.g., Communist party was ruling class under communism, power spread to more groups/individuals

c. Discipline of Capitalism – likely to encounter disadvantages of capitalism far before advantages

d. Responding to New Incentives – individuals must now take own initiative and make own economic decisions rather than being told where to work

2. What are two ways in which privatization has been accomplished?

a. Vouchers – Used in Poland and Hungary – either given or sold at low prices, then used to purchase shares of the company being privatized

b. State-owned companies sold to foreign corporations

3. Why are countries in transition likely to experience the instabilities of capitalism before they experience the benefits of capitalism?

These countries have not had enough time to establish social safety nets such as Social Security and unemployment, which can mean a very tough life for some people

Chapter 19, Section 4

2. What word describes most Japanese workers’ attitudes toward their employers?

Loyal – worker loyalty is incredibly high, employees often start work very early and stay very late every day (12 hour days are not unusual)

4. Why is Japan so dependent on international trade?

Very few natural resources on the island; however, Japan has a policy of protectionism that makes selling foreign products in Japan extremely difficult

5. What four countries are called the “Asian Tigers”

Hong Kong, Singapore, Taiwan, South Korea

Communism (Command economy) Philosophy of Communism written by: Advantages: Property is owned by: Established in Russia via the Russian Revolution by ________________ in (year) ________ Rapid industrialization and collectivization of economy oversaw by ________________ Russia’s movement away from communism was started by ______________ with a policy called ____________, which reduced the government authority over the economy, because ___________________________________________________________________________, which is also one reason why the Soviet economy collapsed. Piecework Black MarketSocialism Basic productive resources are owned by the ____________ while remaining resources are owned and operated ___________ Advantages/Benefits: Capitalism (Market economy) {ESSAY} Define and know two advantages/disadvantagesPrivatization Voucher systemProblems faced by a country transitioning to capitalismJapan Protectionism Worker loyaltyAsian Tigers