Do Now List three examples of ways in which the US government or NY state provides goods and services, or regulates how goods and services are provided

Mixed Economies

Rise of Mixed Economies Every economic system has problems. * Traditional economies have little potential for growth or change * Centrally planned economies hold innovation, do not adequately meet consumer needs, and limit freedom * Free market economies, even with all their advantages, have drawbacks

Reasons for Government Involvement Early free market thinkers (Adam Smith) believed that, left alone, the free market would provide the greatest benefit for consumers and raise the standard of living –Favored LAISSEZ FAIRE – the government generally should not intervene in the marketplace (hands-off government)

Reasons for Government Involvement Governments play a role in the economy by protecting property rights. The 5 th and 14 th amendments declare that no person may be deprived of “Life, liberty, or property, without due process of law” –These laws protect PRIVATE PROPERTY – property that is owned by individuals or companies, not by the government or the people as a whole

Reasons for Government Involvement Governments try to make sure that exchanges in the marketplace are fair Laws require businesses to give honest information to consumers or block firms from joining together to prevent competition and fix prices

For all these reasons, no nation has a pure free market economy or a pure command economy Most modern economies are a little of each, or –Mixed Economy: a market-based economic system in which the government is involved to some extent The degree of involvement varies from nation to nation

Circular Flow Model of a Mixed Economy This circular flow model shows how government typically interacts with households and firms in the marketplace According to the model, how does gov’t affect the monetary flow in a mixed economy?

Continuum of Mixed Economies The degree of government intervention in the marketplace varies among nations 1.Choose two nations on this continuum. Based on the diagram, write one sentence for each nation describing how its economic system differs from the US 2.Why is China a little bit further to the right on this diagram than Cuba?

Economic Freedom The US enjoys a high level of economic freedom –Foreign investment is encouraged –Free trade is encouraged –Gov’t protects some domestic industries and retaliates against trade restrictions imposed by other nations

What are the characteristics of a mixed economy? Mixed Economy Elements of Market System Elements of Centrally Planned System Private Property Exchanges take place in markets Balances needs and freedom Gov’t involved in factor market Gov’t involved in product market Gov’t transfers money Gov’t regulates markets