1. Economic Systems and the American Economy
Chapter 2

2. Section 1: Economic Systems
Every society has an economic system to allocate goods and services.
The Three Basic Questions
What Should Be Produced
How Should it Be Produced
For Whom Should It Be Produced

3. Types of Economic Systems
Traditional System- Decisions based on customs
Command System- government controls the factors of production
Market System- individuals own the factors of production and make economic decisions
Market- free exchange of goods and services
Circular flow of income and output

4. Types of Economic Systems
Mixed Economy- combining characteristics of two or more systems
Examples
Traditional
Command
Market
Mixed

5. Section 2 Free Enterprise with some regulations
Adam Smith, The Wealth of Nations, Market system based on Capitalism.
Capitalist System or Market economy.
Initially government was limited to national defense and keeping the peace.
The role has grown for government.

6. Five Characteristics of the American Economy
1. Freedom of enterprise- individuals own and control the factors of production. 2. Freedom of Choice 3. Profit incentive 4. Competition 5. Private Property

7. Section 3: The goals of the Nation
1. Economic efficiency- Using resources wisely so people will be as well off as possible.
2. Economic Growth- Expand the economy to produce more goods, jobs and wealth.
3. Economic Equity- Balance an economic policy so everyone benefits fairly

8. Goals of the nation
4. Standard of Living- Material well being of an individual, group, or nation.
Rights and Responsibilities
Support yourself and family
Use education productively
Elect responsible Government officials

9. Section 4: Socialism and Capitalism
Pure Socialism- closest N. Korea and Cuba
Marxian view of Socialism- Karl Marx
Continual struggle between groups or classes in society.
Proletariat- workers control
Socialism to Communism- No government

10. Socialism and Capitalism
Socialism since Marx
Democratic Socialism- elect socialists, control of some parts of economy
Authoritarian Socialism- revolution for socialist goals. Government control (Communism)
Benefits of Capitalism
Higher rate of economic growth