Economic Systems

I. ?s - All Economic Systems Answer What and how many goods and services should be produced? How should goods and services be produced? For whom should goods and services be produced?

II.Types of Economic Systems Traditional economy – economic questions are answered by custom, habit, religion and ritual Examples: Feudal France and pre- Columbian Mexico

Types of Economic Systems (continued) Command economy – economic questions are answered by central government planners Examples: North Korea, Cuba and the former Soviet Union

Types of Economic Systems (continued) Market economy – economic questions are answered by the free exchange among individuals Examples: Hong Kong and Chile

Types of Economic Systems (continued) Mixed economy – market based economic system in which government plays a limited role Examples: United States, Japan and Poland

Mixed Economy – “The Welfare State” I. Some European countries and Scandinavia (Denmark, Norway, Sweden), Germany, Netherlands…

II. Factors of production Vast majority are privately owned – Sweden 94% Some sectors of the economy are publicly/state owned – transportation, utilities and natural resources

III. Some central planning Major economic goals

IV. Extensive network of social programs Health care, child care, unemployment insurance, education and training

V. High taxes Progressive income tax Value added (national sales tax)

Types of Economic Systems (continued) Transition economy – an economy that is moving away from central planning toward a market based system Examples: China, Vietnam and Russia