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Presentation on theme: "© EMC Publishing, LLC."— Presentation transcript:

1 © EMC Publishing, LLC

2 2 Section 1 Economic Systems © EMC Publishing, LLC

3 Three Economic Questions
All nations in the world must decide how to answer three economic questions about the production and distribution of goods. What goods will be produced? How will the goods be produced? For whom will the goods be produced? economic system © EMC Publishing, LLC

4 Two Major Economic Systems
Free enterprise: individual choices capitalism or a market economy. Socialism: government a command economy. © EMC Publishing, LLC

5 Major Differences Between Free Enterprise and Socialism
The government plays a different role in each type of economy. free enterprise system: resources are owned and controlled by individuals. socialism, these resources are controlled by the government. © EMC Publishing, LLC

6 Major Differences Between Free Enterprise and Socialism (cont.)
In a free enterprise system, the government plays a small role in the economy. In a socialistic system, the government may make these decisions. © EMC Publishing, LLC

7 Major Differences Between Free Enterprise and Socialism (cont.)
Socialism: Central Planning Income distribution: Taxes. © EMC Publishing, LLC

8 Decentralized Socialism Versus Communism
Decentralized socialism and communism socialism and that communism is a particularly strong form. oversees much that occurs in the economy but does not control every Communism: government comes close to controlling all legal economic activities. © EMC Publishing, LLC

9 Mixed Economies A country’s economic system may contain some parts of free enterprise and socialism. © EMC Publishing, LLC

10 Exhibit 2-1 from the Student Text
1.0 100.0 Less economic freedom More economic © EMC Publishing, LLC

11 The Visions Behind Free Enterprise and Socialism
A vision is a sense of looking at, understanding, and explaining how the world works. Adam Smith was an eighteenth-century economist whose ideas are fundamental to free enterprise. Greatest good for the majority of the people\ Self-interest = invisible hand © EMC Publishing, LLC

12 The Visions Behind Free Enterprise and Socialism (cont.)
Karl Marx was a nineteenth-century economist who pointed out what he believed to be many of the failures and injustices of free enterprise. socialism and communism. Marx did not see self-interest as leading to good things. Capitalist exploit workers LABOR THEORY OF VALUE SURPLUS VALUE (PROFIT) SHOULD GO TO WORKERS © EMC Publishing, LLC

13 Friedrich Hayek and the Road to Serfdom
Economist Friedrich Hayek (1899–1992) published a book titled The Road to Serfdom. Hayek believed that central or government planning lead to a kind of dictatorship, Unfree society Berlin after WWII. © EMC Publishing, LLC

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