 Central Gov’t makes all decisions on the production and consumption of goods and services  No competition among businesses  No incentive for workers  Communism and Socialism  Iran, North Korea, Cuba

 Economic decisions are based on voluntary exchange made by individuals  Hong Kong, Singapore

 Most modern economies: Market based with little government intervention  France, United States, Canada

A. Adam Smith: Wealth of Nations i. Laissez Faire: “hands off” ii. Invisible Hand: The economy will regulate itself

B. Karl Marx: Communist Manifesto & Das Kapital i. Struggle between workers and owners ii. Workers add value to goods but do not receive the profits  against market economies

Keynesian Theory  Aggressive Fiscal Policy  Cut Taxes while increasing government spending.  This will increase deficit spending  Gov’t spending more than it is taking in