[ 2.3 ] Centrally Planned Economies

The Features of Central Planning Suppose you lived in Cuba. Each month, the government would give you cards entitling you to buy a set amount of food at low prices. However, this amount often will not last the entire month. To buy enough food for the rest of the month, you would need to pay much higher prices. If you are like most Cubans, this is difficult because your salary is low. Even if you had money, you might not be able to buy the food you want because shortages are common.

Command Economies Central authority makes most decisions Government = main economic influence Normal people are “commanded” about how the economy will be run

Command Economy Advantages Disadvantages Easily changed Little uncertainty Basic education, health, and public services at no cost Socialist in nature Doesn’t always meet wants/needs of consumers No incentive to work Little flexibility on day to day basis New ideas discouraged Advantages Disadvantages

The Features of Central Planning Customers at a Cuban bakery receive their daily ration of bread allowed by the Cuban government. Express Problems Clearly In this situation, who is deciding how much bread is produced by this bakery?

Two Communist Economies In recent years, China has undergone significant economic reform, leading to the limited introduction of free market principles—and companies.

Quiz: The Features of Central Planning Who makes most basic decisions in a centrally planned economy? A. investors B. consumers C. government D. market forces

Quiz: How Socialism and Communism Differ What did Karl Marx believe about capitalism? A. that it was the source of all value B. that it led to exploitation of workers C. that it distributed wealth fairly in society D. that it was the inevitable product of socialism

Quiz: Two Communist Economies Which policy change was partly responsible for economic growth in China starting in the 1970s? A. imposing more controls on Chinese farmers B. forcing factory workers to work on farms C. promoting new agricultural products D. giving farmers the chance to own land

Quiz: Disadvantages of Central Planning What is one reason centrally planned economies tend not to be efficient? A. Workers lack the incentive to work harder. B. Decision-makers do not have enough power. C. Decision making is too decentralized to be effective. D. Factories produce too many types of goods.

[ 2.4 ] Mixed Economies

Why Government Gets Involved in the Economy The Reasons for Mixed Economies Why Government Gets Involved in the Economy Ensure fairness among the markets Advertisements Intellectual property and patents Treatment of workers Treatment of the environment Balancing Government Involvement and Economic Freedom What rights are you willing to give up?

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?

How Socialism and Communism Differ Socialism and communism share key similarities but also have key differences. Draw Conclusions Why do you think communism typically requires an authoritarian government while socialism does not?

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?

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 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?

Three Basic Economic Systems: market command mixed both what? Supply and Demand Government both how? Supply and Demand Government both Supply and Demand for whom? Government

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.

Video… “Meltup” Tomorrow: Class Discussion on the prompt… Is America currently doing everything it can to achieve our social and economic goals? Consider things like: Inflation Economic Freedom Unemployment Economic Stability Social services Write three discussion questions that somehow relate to this prompt. Use the video, your notes, and your knowledge of our current economy. Questions should not have easy, clear answers. They should lead to interesting, opinionated discussion.