[ 2.4 ] Mixed Economies

[ 2.4 ] Mixed Economies Learning Objectives Explain the rise of mixed economic systems. Explain how government actions affect a circular flow model of a mixed economy. Compare the mixed economies of various nations along a continuum between centrally planned and free market systems. Describe the role of free enterprise in the United States economy.

[ 2.4 ] Mixed Economies Key Terms laissez faire private property intellectual property mixed economy economic transition Privatization

The Reasons for Mixed Economies As an American, you expect a high degree of economic freedom. But that does not mean you can walk into a convenience store after school and buy a pack of cigarettes. It doesn’t mean that you, as a high school student, can get a part-time job operating a forklift in a factory. And it sure doesn’t mean that you get to decide whether or not to pay taxes! Why not?

The Reasons for Mixed Economies Why Government Gets Involved in the Economy Balancing Government Involvement and Economic Freedom

The Reasons for Mixed Economies Governments may limit child labor to protect children’s health and safety. The Fair Labor Standards Act of 1938 sets U.S. policy on child labor, but states may have additional rules.

Circular Flow Model of a Mixed Economy To illustrate accurately how most modern economies work, we must add government to our circular flow diagram (Figure 2.10). Government enters this flow and interacts with resource owners—firms and households—in a variety of ways.

Circular Flow Model of a Mixed Economy Government Actions in the Factor Market Government Actions in the Product Market Government Actions Transferring Money

Circular Flow Model of a Mixed Economy This circular flow model shows how governments interact with households and businesses in a mixed economy. Analyze Charts How does government affect the monetary flow in a mixed economy?

Circular Flow Model of a Mixed Economy Government transfers some of the money it collects to people and businesses. Evaluate Data Which part of the circular flow model of a mixed economy does this table represent?

Mixed Economies Today Most modern economies are mixed economies. Governments are involved to some degree, but some are involved more deeply than others. You can see these differences in Figure 2.12, which shows a range of mixed economies in today’s world.

Mixed Economies Today Mixed Economies with Heavy Government Involvement Mixed Economies Tending Toward Free Markets

Mixed Economies Today While almost all countries have mixed economic systems, some lean farther toward planned economies and others lean more toward free markets. Analyze Information How would you describe the location of the United States on this continuum?

Mixed Economies Today Singapore is a far-eastern nation known for its nearly pure—and vibrant—free market economy.

The Economy of the United States While the American economy is a mixed system, the foundation of the United States economy is the free market. The United States free enterprise system is characterized by individual or corporate ownership of capital goods. Investments in firms are made in a free market by private decision.

The Economy of the United States The Role of the Government Overall Economic Freedom

The Economy of the United States In 2012, New York mayor Michael Bloomberg sought to ban large-sized soft drinks based on health concerns. The plan drew protests. Explain How might such a ban restrict freedom?

The Economy of the United States Even in our free market, government places a number of restrictions on consumers. Analyze Charts What is the purpose of government in each of these examples?

Quiz: The Reasons for Mixed Economies Governments have often become involved in market-based economies in order to A. preserve the traditional economy. B. address various limits of the free market system. C. reduce disruptive innovation. D. address shortcomings of central planning.

Quiz: Circular Flow Model of a Mixed Economy Police protection and national defense are examples of what government role in the circular flow model? A. producing goods and services from factors purchased in the factor market B. making purchases of land, labor, and capital in the product market C. contributing to the monetary flow between households and firms in the factor market D. hindering the physical flow of factors between households and firms in the product market

Quiz: Mixed Economies Today China’s economy is considered more mixed than North Korea’s because China A. recently took control of Hong Kong. B. has freer markets. C. has traditionally relied on central planning. D. was the first to adopt communism.

Quiz: The Economy of the United States What is an argument that some analysts use to criticize government regulation? A. It endangers safety. B. It promotes competition. C. It results in inefficiency. D. It provides for security.