From PPC to Circular Flow

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Presentation transcript:

From PPC to Circular Flow With a pass through the business cycle along the way

Answer this question How much control does the president have over the economy?

Production Possibilities Curve Multiple Choice

Business Cycle GDP Time

Types of Unemployment Cyclical Structural Frictional (Seasonal) Say hi to most of the employees at Hawaiian Falls

Simple Circular Flow Households Firms

Simple Circular Flow + Gov’t Households Gov’t Firms

Types of Economies Traditional Command Market Advantages Sets forth certain economic roles for all members of the community Stable & predictable life Capable of dramatic change in a short time Many basic education, health & other public services available at little or no cost Individual freedom for everyone Able to adjust to change gradually Lack of gov’t interference Decentralized decision making Incredible variety of goods & services Disadvantages Discourages new ideas and new ways of doing things Stagnation and lack of progress Lower standard of living Does not meet wants and needs of consumers Lacks effective incentives to get people to work Requires large bureaucracy, which consumes resources Little flexibility to deal w/ day-to-day changes Lacks room for individual initiative Rewards only productive resources; does not provide for people too young, too old, or too sick to work Does not produce enough public goods such as defense, universal education, or health care Workers and businesses face uncertainty as a result of competition and change

Privately owned by individuals or business Resource Ownership Privately owned by individuals or business What, How, For Whom: Decisions made by private individuals & firms Resource Ownership: Determined by tradition/community What, How, For Whom: Decision made according to tradition Resource Ownership: Most resources owned by the gov’t What, How, For Whom Most major decisions made by gov’t