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Transcript
“Comparing Economic Systems” I: Types of Economies 1. Often they exchange goods by bartering (trading in kind). 2. agricultural or craft products 3. based on tradition, custom, or habit. 4. Non-industrial countries (third world) some still have traditional economies especially in small villages and remote places. 1. Households and businesses operate together in the marketplace exchanging goods and services. 2. businesses and individuals regulate this production and exchange. Decide how to produce, what to produce, and for whom to produce it for. 3. Adam Smith and his Wealth of Nations book became the basis for capitalism. 4. There are no PURE Market economies in the world. 1. The Central Gov’t makes all economic decisions. ◦ Answers the 3 economic questions-How, What and to Whom should we produce. ◦ Sets prices for wages, goods, services ◦ Makes production decisions. 2. Found in old communist countries. ◦ Ex: Former Soviet Union, China before 1990’s. ◦ Ex: Today it would be North Korea 3. Communist Manifesto (1848)=Karl Marx argued that the economy would be fair only if workers (proletariat) controlled production. 1.Combination of market and command economies. 2. Any production that requires a license, like making medicine, or following a regulation like pollution controls. (EPA) 3. The United States is founded on capitalism and free market ideology but our economy is a MIXED Economy. The government intervenes to: regulate to insure public safety, honesty in the business marketplace, promote society’s self-interest and public good. Our Mixed Economy is a Free Enterprise System. A: Each person is free to try and make money ◦ 1. Private property: important in free enterprise economy. ◦ Patents and copyrights are protected. ◦ Patent is a license granted by the gov’t to exclusive use/invention. ◦ A copyright applies to something that is created like a book, movie, song, or work of art. The copyright protects the owner/author/creator from someone copying the work and making money. 1.Voluntary Exchange: people choose what or how much to buy, or they can save their money. 2.Full Employment: almost everyone seeking employment finds a job. 3. Allow businesses to make profit. ◦ Competition helps Keep prices low and quality high Fuels economic growth so more people prosper Economic efficiency 1. The firm with the lowest cost per item produced is said to be the most efficient. 2. Productivity measures how much the firm produces per every person it employs. GDP: Measurement of a nation’s wealth. What is it? Total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment, and government spending, plus the value of exports minus of imports. Per Capita GDP: total GDP divided by the population. GDP is used to compare economic success b/w nations A: Socialism and Communism: 1. Socialism gov’t owns major industries and provides social programs, like national health insurance, but taxes its citizens heavily; France, Venezuela, Russia. Philosophy based on belief that wealth should be redistributed throughout society. Can allow for some private ownership and democracy Centrally planned economy with all economic and political power resides in the central gov’t. Communist gov’ts are authoritarian=strict obedience to the gov’t no individual power. Little or no private ownership The term Communist was adopted by Vladimir Lenin when he took control of Russia in 1917 Socialism is an economic system Communism is both an economic and political system. Most all developing countries; US, Canada, France, Great Britain, China, Soviet Union, Germany, have mixed economies. The US leans more free market. France, Venezuela, and Norway lean more socialist. What is important to remember is that OUR ECONOMY IS A MIXED ECONOMY. A: Market Economy B: Command/Planned Economy C: Mixed Economy