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either. . .or
both. . . and

neither. . . nor

not only. . .  but also


after,    in order (that),   unless,   although,   insofar as,   until,   as,   in that,   when,   as far as,   lest,   whenever,   as soon as,   no matter how,   where,   as if,   now that,  wherever,   as though,   once,   whether,   because,   provided (that),   while,   before,   since,   why,   even if,   so that,   even though,   supposing (that),   how,   than,   if,   that,   inasmuch as,   though,   in case (that),  till.

conjunctive adverbs

after all,    in addition,    next,    also,   incidentally,   nonetheless,   as a result,   indeed,   on the contrary,   besides,   in fact,   on the other hand,  consequently,   in other words,   otherwise,   finally,   instead,   still,   for example,   likewise,   then,   furthermore,   meanwhile,   therefore,   hence,   moreover,   thus,   however,   nevertheless

 Explain an Argument In a society that favors economic equity over economic freedom, who would benefit? Explain.

Possible response: Poor people, unemployed people, and others with lower incomes. In a society favoring economic freedom, people generally consume only what they can pay for themselves; in a society favoring economic equity, people’s share of the economic pie would be more equal.

 Which is the more important economic goal for society in a traditional economy, equity or growth? Cite evidence to support your answer.

Equity is more important, and evidence of this is that often people in such societies work to support the entire community, so sharing is a vital aspect of economic life. Also, economic success in such societies is attained by meeting the community’s needs, not by raising the standard of living through economic growth.

Household income rose between 1976 and 2011 at all five income levels—but not at equal rates. Analyze Graphs Which income group saw the greatest change?

(The highest income group saw the greatest gain.)


In the United States, transactions like the one shown here help determine what goods and services are produced, how they are produced, and who consumes them. Describe How is this transaction helping to answer the three basic economic questions?

 The man’s ability to choose and pay for the food spurs the vendor to make desirable food and sell it from her cart. So, what is produced, how it is produced, and who gets to consume it are determined by the choice of the consumer and his ability to pay for it.)

In recent years, many retailers have turned to the Internet to sell their goods and services. Describe How might the use of the Internet help achieve the economic goal of efficiency?

(Using the Internet allows retailers to market all kinds of products that are self-selected by shoppers. There is virtually not limit to the volume of goods and services offered.)

 Identify What societal values play a role in how the three basic economic questions are answered in the United States?

(Americans value freedom, and economic freedom gives them the opportunity to make their own choices. They value security, and economic security assures them that they will get paid for their work and that in hard times they can rely on a government safety net. They value fairness, and economic equity assures them that the consumption of goods and services will be fair.)

What goods and services should be produced? How should these goods and services be produced? Who consumes these goods and services? hat goods and services should be produced?

 (Those goods and services that customers want and are willing to buy in the marketplace.) How should these goods and services be produced? (They should be produced in the way that produces the lowest cost and best quality.) Who consumes these goods and services? (Customers in the marketplace who are willing and able to pay for them.)

 Read the section “Factor and Product Markets” and review Figure 2.3, “Circular Flow Model of the Economy.” How do households supply firms with land, labor, and capital? Provide an example of each.

Sometimes households sell firms the land they need for their business. For example, if a business buys several lots in a neighborhood in order to build a store there. If people in a household work for a living, they sell their labor to a firm. When households put their money in savings, the banks use that money to loan to firms.

This farmer specializes in raising one crop, using income from its sale to purchase equipment and other goods. Test Conclusions What evidence can you see that the farmer earns income from the specialized production of one crop?

(The farmer has a large piece of harvesting equipment, which must have been purchased with proceeds from farming. The farmer also has irrigation equipment, a truck, and other goods present in the illustration that were purchased.)

In a free market, incentives of all sorts influence individuals to act in their own self-interest. Identify Central Ideas Use one of the examples from this diagram to explain how the incentive given leads to the response indicated.

(Possible answer: The positive incentive of a tax credit causes people to have a self-interest in taking public transportation, which earns them money and at the same time leads to a lower consumption of gas.)

The idea of the invisible hand lies at the heart of free market thinking. Analyze Political Cartoons What is the attitude of the corporate leaders in this cartoon toward the invisible hand?

(The cartoon suggests that the corporate leaders have a deep reverence for the invisible hand.)

Which of the advantages of the free market do you think is most important to producers? Explain your answer.

(Possible answer: Growth is the most important advantage to producers, because it ensures a steady supply of new opportunities.)

Interpret Explain how the modern farm is more specialized than the traditional farm. What replaces the human and animal labor in the modern farm?

The modern farm produces only one crop, whereas the traditional farm produces many crops. The modern farm uses machines powered by fuel to do jobs formerly done by humans and animals.

Summarize As you read “The Features of Centrally Planned Economies,” use this graphic organizer to summarize the main features and disadvantages of a centrally planned economy.

Possible responses: Features: • Government owns all factors of production • Government makes all decisions • Bureaucrats make detailed plans • No consumer sovereignty. Disadvantages: • Results in poor quality goods, shortages, and falling production • Does not achieve equity • Efficiency suffers • Allows no freedom of choice

Determine Central Ideas What method do centrally planned economies generally rely upon to control labor?

The government controls where people work and what they are paid.

Summarize Explain why each of the following goals is difficult to achieve in a centrally planned economy: (a) economic freedom, (b) economic growth.

(a) government control of decisions (b) inefficiency of system, lack of incentives

Cite Evidence What makes Sweden an example of “market socialism”?

In Sweden, free market practices exist alongside government controls that redistribute wealth and provide extensive services.

Draw Conclusions Read the quotation from Marx taken from The Communist Manifesto and the description of Marx’s basic beliefs. Then explain why Marx believed that labor was more important than capital.

because goods can be produced, and wealth generated, through labor, even if capital is lacking

Generate Explanations Why do you think all communist governments have been authoritarian in nature?

because they require strict obedience to enforce the principles of a centrally planned economy

Identify Steps in a Process What were Stalin’s goals for the Soviet economy, and how did he try to achieve them?

He wanted to boost industrial and agricultural production. To do this, he imposed a series of five-year plans that emphasized the growth of heavy industry and the formation of large, state-run farms.

Cite Evidence (a) What was the benefit of the Soviet decision to concentrate on heavy industry? (b) What was the opportunity cost of this decision? Who paid it?

(a) The Soviet Union modernized and became a superpower. (b) The production of consumer goods lagged, shortages developed, and citizens suffered the effects

Identify Cause and Effect Why did the Chinese government institute new economic policies in the 1970s? What was the result?

China’s economy suffered under command policies. The reforms were designed to boost the economy, and they worked. The economy began to grow.

Summarize How is economic freedom undermined in centrally planned economies?

Economic freedom is sacrificed to societal goals. Central planning places controls on workers and citizens to achieve its ends; it discourages competition and takes economic choices away from producers and consumers.

Explain an Argument Why is economic growth harder to achieve in a command economy than in a free market economy?

Innovation is a key to growth, and command economies tend to discourage innovation and change. There is also no profit incentive to encourage entrepreneurship.

Assess an Argument Central planning is supposed to help achieve economic equity in society. Do you think this argument has merit, based on results?

Answers will vary. Central planning has achieved some positive results through the guarantee of jobs and income. It has also produced economic output and helped some economies develop, as it did in the Soviet Union. But the benefits are not uniform or consistent.

Cite Evidence What strong evidence exists that centrally planned economies have not generally served the needs of countries?

the fact that many or most countries that adopted central planning have moved toward mixed or capitalist systems

Customers at a Cuban bakery receive their daily ration of bread allowed by the Cuban government. Express Problems Clearly In this situation, who is deciding how much bread is produced by this bakery?

(The government of Cuba, which establishes how much bread people can have, determines who consumes the goods produced by the bakery.)

Socialism and communism share key similarities but also have key differences. Draw Conclusions Why do you think communism typically requires an authoritarian government while socialism does not?

(Possible answer: Communism allows for fewer options and ranges of systems, and therefore it requires stricter government control.)

Under Stalin, the communist Soviet government set ambitious production goals. Identify Central Issues How does this graph represent the concept of central planning?

(It illustrates how central planners answered the basic economic questions of what will be produced and how will it be produced.)

China’s grain output fell sharply after the start of the Great Leap Forward. Draw ConclusionsBased on this evidence, how would you characterize the success of central planning during the Great Leap Forward?

(Possible answer: During this time, central planning was a terrible failure in China.)

A woman shops in a mostly empty Soviet food store in 1990. Express Problems Clearly How does this photo illustrate the shortcomings of the Soviet Union’s centrally planned economy?

(The photo shows that the economy has not efficiently provided goods where there is a need for them.)

Contrast Societies with command and free market economies answer the basic economic question “What goods and services should be produced?” in different ways. What is the main difference?

The main difference is that in an command economy, this question is answered by a central planning organization, whereas in a free market system, the markets answer this question.