NAME______________________________________________ DATE ___________________ CLASS ____________
Guided Reading Activity
The American Free Enterprise System
Lesson 1 American Free Enterprise Capitalism
Review Questions
Directions: Complete the statements below. Refer to your textbook as you write the answers.
A. Characteristics of Free Market Capitalism
1. An economy based on free enterprise has both __________________ __________________ and
__________________.
2. Economic freedom grants the ability to __________________ the things you want and
__________________ where and for whom you want. Businesses can __________________ the
workers they want and are free to __________________ success or failure.
3. In __________________ __________________ , __________________ acquire items they believe are
worth __________________ than the money charged, while __________________ believe the item
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sold is worth __________________ than the cash paid. Both parties believe they __________________
from the transaction.
4. In a capitalistic system, people can do whatever they choose to their property due to
__________________ __________________ __________________. Additionally, they have the
opportunity to __________________ and __________________ based on the value of their property.
5. __________________ __________________ drives producers to improve their __________________
well-being. Because of this, the lure of __________________ guarantees a constant supply of goods
and services from all kinds of producers.
6. Capitalism helps ensure __________________ resources are used efficiently by promoting
__________________ among producers.
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NAME______________________________________________ DATE ___________________ CLASS ____________
Guided Reading Activity cont.
The American Free Enterprise System
B. Benefits of Free Market Capitalism
1. Individual freedom exists economically and politically in places where __________________ and
__________________ allow people to choose their government as well as their purchases.
2. Because in market economies production is based on people’s __________________ , not just their
needs, there is a wide __________________ of options available for many kinds of goods and
services.
3. Price can drive __________________ in market economies, where consumers’ demands lead to
producers’ innovations that make the most of scarce or expensive __________________.
4. Companies competing for business produce better __________________ , usually for
__________________ money. This promotes economic __________________.
_________________, scarce, have utility, and are _________________ from one person to another.
C. Disadvantages of Free Market Capitalism
1. The most recent example of uneven economic growth in the United States was the
__________________ __________________ , which lasted 18 months between 2007 and 2009.
During this period, the nation’s GDP shrank about __________________ and
___________________ percent.
2. The widening gap between __________________ and __________________ may require
government interventions some criticize as too __________________ in nature.
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5. Economists think of __________________ as the accumulation products that are
NAME______________________________________________ DATE ___________________ CLASS ____________
Guided Reading Activity cont.
The American Free Enterprise System
3. In the __________________-side of the market, suppliers tend to __________________ with other
suppliers to avoid __________________ or to become more efficient. This means that participant on
the __________________-side of the market have fewer suppliers to chose from.
4. Businesses have most of the same rights as __________________. They can sue and be sued, they
can enter into __________________, and they can own __________________. However,
corporations cannot __________________ like you can.
Summary and Reflection
Directions: Summarize the main ideas of this lesson by answering the question below.
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Describe the characteristics of our economic system? Of the benefits and disadvantages of our freeenterprise capitalism, which do you think are stronger? Why?
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