Category: Economics

➤ Why does a command economy restrict private ownership and competition?
Command systems limit private ownership to concentrate control over resources and direct economic outcomes. The state often nationalizes key industries to coordinate investment, achieve social goals, and remove profit incentives. Restricting competition helps planners enforce production targets, control prices, and prioritize public projects over individual enterprise.

➤ How do you distinguish positive and normative statements in economics?
Ask whether the claim is testable or expresses a value judgment. Positive statements state facts or hypotheses that can be checked, such as an unemployment rate. Normative statements express opinions or prescriptions and often include words like “should” or “ought,” for example recommending a target unemployment rate or judging policy fairness.

Statistical DiscrepancyRefer to the accompanying national income data (in billions of dollars). In these data, U.S. GDP is
Multiple Cholce$315 billion.$324 billion.$305 billion.$367 billion.

A _______ is the price of one currency, such as the dollar, in terms of another, such as the euro.
stock exchange index
securities market
rate
commodities exchange rate
foreign exchange rate

4. When is a change in quantity supplied different from a change in supply?
A change in quantity supplied is a movement along the supply curve caused by a price change. A change in supply is a shift of the entire curve due to non-price factors like input costs or technology. For example, a tax cut shifts supply right, while a higher market price moves quantity supplied up along the curve.

3. Why are institutions and procedures important in government?
Institutions and procedures provide order, predictability, and legitimacy. They define how decisions are made, how power transfers occur, and how rights are protected. Clear rules reduce abuse, allow accountability through elections and courts, and help implement public programs efficiently. Robust procedures sustain stable governance and citizens’ trust.