D. The Flow of Money and Goods in A Market Society ● circular flow model: a diagram that shows the circular movement of money, resources, and goods and services among households and producers in an economy ● household: a person or a group of people living together ● firm: an organization that uses resources to produce and sell goods or services; a business ● product market : a market in which firms sell goods and services to households ● factor market: a market in which households sell land, labor, and capital to firms ● factor payment : income earned when an individual sells or rents a factor of production that he or she owns; for example, wages are a factor payment made to workers in exchange for their labor ● The reason markets work so well is that one person's output always becomes another person's input E. Capitalism Gives Rise to Socialism and Communism ● Industrial Revolution: a period of rapid industrial growth and development during the 1700s and 1800s ● capitalist: an individual investor who accumulates capital, such as machinery, factories, and railroads ● capitalism: the free market economic system ● socialism: a political and economic philosophy based on collective or government ownership of a society’s resources and means of production, with the goal of achieving social and economic equality ● communism: a political and economic system in which all property and wealth is collectively owned by all members of society; the final stage of socialism in Marxist theory ● The term capitalism came to be synonymous with the free market economic system. ● Socialism is a political and economic philosophy that calls for property to be owned by society as a whole, rather than by individuals, for the equal benefit of all. ● The final phase of socialism, in the view of Marx and Engels, is communism , a political and economic system in which all property and wealth are owned by all members of society. F. Modern Command Economies: Decision Making by the State ● economic planning: the process by which economic decisions are made or influenced by central governments rather than by private individuals ● In the Soviet Union, private ownership of property was forbidden. The state owned the factors of production.
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- Fall '16
- Craig Zupi
- Capitalism, Economic system, Planned economy