1. Chapter 2 Notes Economic Systems

2. Economic System The method used by a society to produce and distribute goods and services

3. What goods and Services should be produced? Each decision a society makes comes with opportunity costs We have to decide, besides basic needs, what to devote to national defense, education, public health and welfare, or consumer goods.

4. How should goods and services be produced? How should we produce energy? Should teachers have classes of 20 or 50? Should we produce food on large corporate farms or small family farms? Check out the chart- the top is before modern equipment

5. Who consumes goods and services? Factor Payments- income given to people who supply the factors of production- land, labor, capital or entrepreneurship How are goods distributed? Who gets an expensive car and who rides the bus? It is decided by how societies choose to distribute income

6. Capitalism Based on Adam Smith’s idea Supply and demand Free enterprise Originally Laissez Faire- leave businesses alone Some government regulation (air and water pollution)

7. Market Economy Economic decisions are made by individuals and are based on exchange or trade Also called free markets, or capitalism

8. Communism Ruled by a dictator One party- Communist The government tells workers what to produce Leads to shortages Everyone is equal- in being oppressed (unless you're in the government

9. Command Economy Centrally planned economy- the central government alone decides how to answer all 3 economic questions A central authority is in “command” of the economy ( Communism)

10. Socialism Karl Marx’s idea that all workers were equal and they were the ones that would run the factories and fields Land to be re- distributed by wealthy landowners so everyone would have land Leads to Communism because this does not work with so many people involved

11. Mixed Economy Most modern economies are mixed- a combination of traditional, market and centrally planned economies

12. Economic Security We want to know that every time we go to the store, we can get what we need or get gas etc. Safety Net- government programs to help out when things get financially rough Standard of living- level of economic prosperity These will differ among communities and areas of the nation and the world. Sometimes price of good increases and your paycheck doesn’t

13. Economic Equality What’s fair? Many people believe in equal pay for equal work (women) Lawyers still make more than nurses who work longer hours and do harder work

14. Banking What to Know: Direct deposit Bank cards Credit cards Overdraft protection Automatic transfers Online banking How to apply: Money to deposit Identification Social Security Number (SSN) Signature (job to make money to deposit) ;)

15. Fees (of course