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ECONOMIC SYSTEM 1.OVERVIEW. AN ECONOMIC SYSTEM CAN BE DEFINED AS A "SET OF METHODS AND STANDARDS BY WHICH A SOCIETY DECIDES AND ORGANIZES THE ALLOCATION OF LIMITED ECONOMIC RESOURCES TO SATISFY UNLIMITED HUMAN WANTS. 2. "COMPROMISE" MIXED SYSTEMS POINT: ECONOMIC SYSTEMS THAT CONTAIN SUBSTANTIAL STATE, PRIVATE AND SOMETIMES COOPERATIVE OWNERSHIP AND OPERATED IN MIXED ECONOMIES. 3.ECONOMIC SYSTEM ECONOMIC SYSTEMS POINT:CAN BE DIVIDED BY THE WAY THEY ALLOCATE ECONOMIC INPUTS (THE MEANS OF PRODUCTION) AND HOW THEY MAKE DECISIONS REGARDING THE USE OF INPUTS. 4. BASIC TYPES OF ECONOMIC SYSTEMS MARKET ECONOMY MIXED ECONOMY PLANNED ECONOMY TRADITIONAL ECONOMY PARTICIPATORY ECONOMICS INCLUSIVE DEMOCRACY GIFT ECONOMY BARTER ECONOMY 5. Division of capitalist systems Capitalist economic systems can be subdivided into two categories: hands-on and hands-off systems 6. Division of socialist systems: Socialist economic systems can be subdivided by their coordinating mechanism for economic inputs into planned socialist and market socialist systems. 7. "Hands-on" privateoriented systems: A system in which large privately owned entities control or direct the economy in their favor, or in which private shareholders own, and thus reap the profits, of enterprises that are operated by the state or by employee cooperatives. 8. "Hands-on" state-oriented systems: Economic systems in which the state directs or controls economic activity through economic planning, with economic institutions being primarily publicly owned. Economic systems in which the economy is controlled privately in a usually decentralized fashion and operated based on market principles. 10. "Hands-off" stateoriented systems: Economic systems in which the state runs, owns and/or manages its own resources and enterprises in a freemarket economy with minimal regulation and without government planning. 11. "Hands-off" communal-oriented systems: 12. Economic measures: There are a number of ways to measure economic activity of a nation. 13. GDP 14. Part of a social system: The GDP - Gross domestic product of a country is a measure of the size of its economy. The most conventional economic analysis of a country relies heavily on economic indicators like the GDP and GDP per capita. While often useful, it should be noted that GDP only includes economic activity for which money is exchanged. An economic system can be considered a part of the social system and hierarchically equal to the law system, political system, cultural, etc. There is often a strong correlation between certain ideologies, political systems and certain economic systems (for example, consider the meanings of the term "communism"). Many economic systems overlap each other in various areas (for example, the term "mixed economy" can be argued to include elements from various systems). There are also various mutually exclusive hierarchical categorizations. Economic systems in which the economy is controlled privately in a usually decentralized fashion and operated based on market principles. 9. "Hands-off" private-oriented systems: 15.Evolutionary systems: Karl Marx's theory of economic development was based on the premise of evolving economic systems; specifically, over the course of history superior economic systems would replace inferior ones. Inferior systems were beset by internal contradictions and inefficiencies that make them impossible to survive over the long term. In Marx's scheme, feudalism was replaced by capitalism, which would eventually be superseded by socialism.[5] Joseph Schumpeter had an evolutionary conception of economic development, but unlike Marx, he de-emphasized the role of class struggle in contributing to qualitative change in the economic mode of production. There has been renewed interest in understanding economic systems as evolutionary systems in the emerging field of Complexity economics. 20. Planned economy: This article is about an economic system controlled or directed by the state. For the proposed economic system that employs "participatory" or democratic planning, see Participatory economics. 16. Elements of an Economic System: 1. Manufacturing 2. Regulation 3. Circulation 4. Distribution 17. Government and politics 18. Incentive System: A mechanism for inducing economic agents to engage in productive activity; it can be based on either material reward (compensation) or moral reward (social prestige). 19. Market Systems