America’s Economic System What are the benefits of America’s free economic system? What role does government play in the American economic system?

What is the American economic system? The US is a “free enterprise” economy What is free enterprise? Individuals control a society’s resources Limited government involvement

Free Enterprise Economy Command Economy Free Enterprise Economy USA Mixed Economy

What are the basic principles behind a “free enterprise” economy? Three (3) basic ideas: Right to choice Right to produce what you like Right to turn a max. profit Many of this basic ideas have influenced economies around the world today

What freedoms does the American economic system offer its citizens? Five (5) major freedoms: Right to private property Open Opportunity Legal equality Free contracts Profit motivation

Right to Private Property “Free Enterprise” allows individuals to own their own property / materials Land Natural Resources Ideas

Pennsylvania & Natural Gas

Open Opportunity Anyone can take part / or not take part in the economy Freedom of choice Creates variety for citizens Forces all business to be productive

Fast Food

Gas Stations

Supermarkets

Legal Equality Everyone is protected by the same economic rights in the economy Right to succeed Right to fail

Free Contracts People have a choice when it comes to entering agreements in the marketplace Mortgages Credit Cards Checking Accounts

Profit Motivation Encouraging people to improve themselves through economic activity MAKE $$$$$$$ Encourages competition

It’s All About the Benjamins, baby….

How does “free enterprise” effectively eliminate scarcity? Consumers have the freedom to look for the best deals out there “Most bang for their bucks” This tells entrepreneurs what a society wants Effectively divides resources

What is the role of the US government in a “free enterprise” economy? In theory, government has a limited role in “free enterprise” However, government still needs money to operate Has bills to pay Debts to re-pay

What is the role of the US government in a modified “free enterprise” economy”? Under a “modified” free enterprise economy: Tax Spend Invest Borrow money Government becomes an active participant in the economy

Adam Smith’s “Invisible Hand”

The American government “hand”

What are the benefits of a modified “free enterprise” economy? Government can use its money / power to try and provide the most good Subsidies projects Regulate industries Protect workers Provide unemployment

Federal subsidies

Regulating Industries

Protecting workers

Providing Unemployment

What are the drawbacks to a modified “free enterprise” economy? Just like any businessman, government has the freedom to FAIL Over-charge Mismanage Bad investments Debt

The National Debt Clock