Free-Market Economy

private property	communism	social values	the economic situation
economic system	planned economy	Public goods	economist
mixed economies	government	investment	wealth
industries	economic freedom	economic decisions	consumption

Free-Market Economy, 1)_____ _____ in which individuals, rather than government, make the majority of decisions regarding economic activities and transactions. Individuals are free to make 2)____ _____ concerning their employment, how to use or accumulate capital, what expenditures to make, and whether to use their resources now or to save them for later 3)_______. The principles underlying free-market economies are based on laissez-faire (non-intervention by 4)________ economics and can be traced to the 18th century British 5)________ Adam Smith. According to Smith, individuals acting in their own economic self-interest will maximize 6)_______ ______ of society as a whole, as if guided by an “invisible hand.” In a free-market economy the government's function is limited to providing what are known as “public goods” and performing a regulatory role in certain situations.

7) ______ ______, which include defence, law and order, and education, have two characteristics: consumption by one individual does not reduce the amount of the good left for others; and the benefits that an individual receives do not depend on that person's contribution.

Government's role in a free-market economy also includes protecting 8) ______ _______, enforcing contracts, and regulating certain economic activities. Governments generally regulate “natural monopolies” such as utilities or rail service . These industries require such a large 9) ________ that it would not be profitable to have more than one provider. Regulation is used in place of competition to prevent these monopolies from making excessive profits. Governments may also restrict 10)_______ ______ for the sake of protecting individual rights. Examples include laws that restrict child labour, prohibit toxic emissions, or forbid the sale of unsafe goods.

Free-market economies are also criticized. Opponents believe that a free-market economy cannot ensure basic 11) ________ _______, such as alleviating poverty, or that the income distribution that results from a free-market economy may not be equitable. A free-market economy may also permit the accumulation of vast 12)______ and powerful vested interests that could threaten the survival of political freedom.

Alternative economic systems include 13) _____ and 14) ________ _______. In communism, the government plans the economy and all means of production are publicly owned. The economy of the former Union of Soviet Socialist Republics was an example of a 15)______ ______: all decisions regarding production and distribution were made by the government. In contrast, a mixed economy is one where the government does some planning and owns or controls more industries than in a free-market economy. Governments may own key 16) _____ such as steel, aviation, and banking, while the individual still plays an important role. Sweden and France are examples of mixed economies.

Exercise 10. Provide examples for each of the following.

1. Non-essential commodities are such things as

__________, __________, __________, __________.

2. Basic needs are

__________, __________, __________.

3. The economist's methods must be

__________, __________.

4. Central authority decides

__________, __________, __________, __________.

5. Most people produce

__________, __________.

6. Goods can be

__________, __________.

7. Services are such things as

__________, __________, __________.

8. Еconomics is a social science concerned with

__________, __________, __________, __________ of goods and services.

9. Еconomists say a person is 'economically free' if he can do what he wishes with his own

__________, __________, __________.

10. In the whole economy of a country economic anarchy could cause

__________, __________, __________.

11. Contracts between employers and employees are sometimes concerned with

__________, __________, __________, __________.

Exercise 11. Economics Questions test

1. A ______ is the person who directs, supervises and operates a business or a section of a business. This person is in a management position but is not always the owner of the company.

1. worker

2. manager

3. wealthy person

2. In a _____ economy, individuals and businesses own and make most of the decisions about resources. In this type of economy, the people own and control most of the production processes.

1. modest

2. market

3. command

3. In a ______ economy, individuals and governments own and control production together. They both decide how resources will be used, what will be produced and who will buy and use the products.

1. market

2. mixed

3. command

4. A social science concerned with the production, distribution, exchange, and consumption of goods and services is ______.

1. economics

2. economy

3. macroeconomics

5. Price theory or ______, explains how the interplay of supply and demand in competitive markets creates a multitude of individual prices, wage rates, profit margins, and rental changes.

1. macroeconomics

2. microeconomics

3. economics

6. Standard economics can be divided into two major fields. The second field, ______, deals with modern explanations of national income and employment.

1. macroeconomics

2. economics

3. microeconomics

7. Person intended to save money, as by efficient operation is ______.

1. economic

2. economical

3. economist

8. Sum-total of what people do and what they want is called ______.

1. economic system

2. economic activity

3. economy

9. Business activities unregulated by state ownership or control is ______.

1. privatization

2. factory owner

3. private enterprise

10. A plan or course of action, as of a government of business intended to influence and determine decisions, actions and other matters is ______ .

1. politics

2. police

3. policy

11. One of the more or less internally autonomous territorial and political units composing a federation under a sovereign government is ______.

1. nation

2. state

3. economy

12. The measurable, countable, or comparable property or aspect of a thing is ______.

1. quantity

2. quality

3. characteristic