AP Macroeconomics Module 1 UPDATED ACTUAL Questions and CORRECT Answers

AP Macroeconomics Module 1 UPDATED
ACTUAL Questions and CORRECT
Answers
Command Economy - CORRECT ANSWER - --an economy where the government makes
all economic decisions about how the factors of production are used.
--ex: Cuba
--no incentive to take risks b/c the gov't controls the economy
--market forces do not factor into decisions made by individuals


Market Economy - CORRECT ANSWER - --the forces of supply and demand determine
how economic questions will be answered.
--indiv.s own factors of production, have freedom to buy/sell resources in return for profit/other
incentives


Traditional Economy - CORRECT ANSWER - --an economy in which economic
decisions are made based on traditions
--market forces do not factor into decisions made by individuals


Factors of Production - CORRECT ANSWER - --land, labor, capital, entrepreneurial
ability
(aka resources)


Resources - CORRECT ANSWER - --land, labor, capital, entrepreneurial ability (aka
factors of production)


Capital - CORRECT ANSWER - --person-produced tools of the trade
--ex: buildings, equipment, tools, machines