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Lecture #6: Economic Systems

Lecture #6: Economic Systems. Three Economic Questions. Three Economic Questions cont. Three Economic Questions cont. Two Major Economic Systems. Adam Smith. Who came up with Socialism?. 1848, 2 Germans, Karl Marx & Frederick Engels wrote the Communist Manifesto

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Lecture #6: Economic Systems

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  1. Lecture #6: Economic Systems

  2. Three Economic Questions

  3. Three Economic Questions cont.

  4. Three Economic Questions cont.

  5. Two Major Economic Systems

  6. Adam Smith

  7. Who came up with Socialism? • 1848, 2 Germans, Karl Marx & Frederick Engels wrote the Communist Manifesto • They were distressed by the extremely poor conditions of the working class in factories.

  8. Karl Marx

  9. Differences between Free Enterprise & Socialism

  10. Differences between Free Enterprise & Socialism cont.

  11. Differences between Free Enterprise & Socialism cont.

  12. Differences between Free Enterprise & Socialism cont.

  13. Differences between Free Enterprise & Socialism cont.

  14. Mixed Economies

  15. Index of Economic Freedom1.005.00More Economic Freedom Less Economic FreedomSource: 2005 Index of Economic Freedom • (Do not copy the chart): • Which country has the most economic freedom? The least? • What rank is the United States? • Do any of the rankings and scores surprise you? Why?

  16. Mixed Economy • No system in the world is PURE • Mixed Economy Economic system that incorporates elements of different systems (usually command and market) • Example: United States • Market Malls, restaurants, entrepreneurship • Command Minimum wage, labor laws • Traditional “blue laws”, Chick Fil-A

  17. MixedEconomies • All economies are mixed; they are classified based on how much the government is involved in the process • Some government involvement through mandatory laws and regulations that businesses follow • Labor Laws, Minimum Wage • The government provides social programs for those who need help • Medicare, welfare

  18. Continuum of Mixed Economies Centrally planned Free market Iran South Africa France United Kingdom Hong Kong North Korea China Botswana Canada Singapore Cuba Russia Greece Peru United States Source: 1999 Index of Economic Freedom, Bryan T. Johnson, Kim R. Holmes, and Melanie Kirkpatrick

  19. Traditional Economies

  20. Traditional Economies—Modern Day Example • The Hadza of Tanzania are a nomadic hunting culture, without a fixed location or many material possessions. • Fewer than 1,000 remain today • Their traditional economy is based on thousands of years of life in the same region, hunting the same animals. • They build no permanent shelters, have no chieftains, and no economic system!

  21. Review—True or False • A traditional economic system uses customs, traditions, and beliefs to answer the 3 economic questions. • The 2 dominant economic systems are traditional and free enterprise. • Our economic vision is our sense of how the world works. • A socialist thinks price should be set and controlled by the government. • All nations must answer 3 basic economic questions.

  22. Review—True or False • A traditional economic system uses customs, traditions, and beliefs to answer the 3 economic questions. • TRUE • The 2 dominant economic systems are traditional and free enterprise. • FALSE • Our economic vision is our sense of how the world works. • TRUE • A socialist thinks price should be set and controlled by the government. • TRUE • All nations must answer 3 basic economic questions. • TRUE

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