Material things should not be the goal in life. - Job 31:24-28 Market Economies Material things should not be the goal in life. - Job 31:24-28

Values economic individualism consumer sovereignty profit motive competition private ownership of capital the reign of “supply and demand” (price system) material incentives right to income freedom to buy and sell Little government intervention Inequalities in wealth private property Laissez-faire change encouraged

Adam Smith Q: What ideas did Smith try to propagate? (Yes, I know that is a big word, but we also need to build your vocabulary!)

Features of a Market Economy See “Big Economic Theory Sheets” Questions and Commandments Private Enterprise Economy Chart Compare and Contrast Chart

Scarcity How is scarcity dealt with in a market economy? Discuss

Economic Questions Answered What goods and services should be produced? A: Based on consumer demand 2) How should goods and services be produced? A: through the least expensive and most efficient method; private business 3) How should the goods and services be distributed? A: to those that can afford these items 4) Who answers these questions? A: the market (interaction of buyers and sellers)

Business Cycle LABEL: Boom Bust Inflation Spend Save Depression

Boom and Bust Boom Full employment High inflation High investment High demand Bust High unemployment Low inflation Low investment Low demand Q: Do command economies experience the boom and bust cycle that are present in market economy? Explain

Q: Why is a rollercoaster analogous to the market economy?

Q: To which potential “pitfalls” of the market economy does the cartoon allude?

Inflation INFLATION IS A PERSISTENT RISE over time in the average price of goods and services—in the "cost of living." Inflation and the risk of inflation encourage certain types of spending and investment decisions. A situation where inflation is low enough so that it no longer affects people's economic decisions is referred to as price stability.

Inflation Calculator This website helps you understand the concept of inflation: http://www.bankofcanada.ca/en/rates/inflation_calc.html

Inflation in Canada Read the following information from the Bank of Canada: “The Benefits of Low Inflation” Q: Why is inflation often a vicious cycle?

Fiscal Policy The government’s use of taxing and spending to regulate and influence the economy

Monetary Policy The government’s regulation of the supply of money to influence the economy

The Least You Need to Know… Difference between theory and practice Keynesian economics/demand-side econ. The importance of change Reaganomics/Supply-side economics

History of United States Economy Limited Intervention (to 1929) Government intervened very little in the economy. All the government did was maintain public order, develop laws, provide roads and education, etc. Government did not spend a lot of money and taxes were kept relatively low.

Great Depression (1929-1939) Tuesday October 29, 1929—Stock Market Crash Stocks were bought on borrowed money People tried to get their money back by selling stocks quickly People went bankrupt Individual consumption of goods decreased. In 1932, Franklin D. Roosevelt, Democratic presidential candidate campaigned on “Relief, Recovery, Reform.” Roosevelt was elected. New Deal (1933-1939) “Hundred Days” Congress enacted legislation to help alleviate the economic crisis.

March 4, 2011

Property rights are to be protected Proverbs 22:28

Unit ¾ Zimbabwe Read the news article related to inflation in Zimbabwe Q: How could the inflationary pressures of Zimbabwe be solved through fiscal and monetary policies?