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