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Economics Gabby Noonan German I. What is Economics? Economics is the study of how to use our resources to efficiently produce, distribute or allocate.

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Presentation on theme: "Economics Gabby Noonan German I. What is Economics? Economics is the study of how to use our resources to efficiently produce, distribute or allocate."— Presentation transcript:

1 Economics Gabby Noonan German I

2 What is Economics? Economics is the study of how to use our resources to efficiently produce, distribute or allocate and consume goods/services to satisfy unlimited wants. Economics is an inexact and social science. Economics can help to make predictions and probabilities, but these are never certainties.

3 What is Economics? There are 3 main questions that can be answered by any economic system. 1) What will be produced? 2) How will it be produced? 3) For whom will we produce? Economics is also said to be a mixture of art and common sense, through which we can see “The Big Picture”.

4 How Do We Approach Economics? There are two different ways to approach economics. 1)Positive Economics- This consists of facts, anything that can be proven correct or incorrect by scientific inquiry. 2)Normative Economics- This approach consists of facts, value judgments and anything that can not be proven by scientific inquiry.

5 What are the Types of Economic Systems? There are mainly two systems in economics- Socialism and Capitalism. Although there are mainly two systems, many economic principles and theories derive from either Socialism or Capitalism. Most countries have a mixed economy, such as Welfare Capitalism in the United States.

6 Capitalism Capital (resources) are privately owned by individual citizens, there is a right private property. The motivating force of Capitalism is self interest. Price systems are used in the market, which means price determines everything.

7 Capitalism The distribution of goods in a capitalistic society is to each according to his/her quantity and value of contribution to society. This distribution scheme causes an unequal spread of income and wealth. Many of the values of Capitalism are founded on the ideas of Adam Smith. Smith, the author of “The Wealth of Nations”, came up with the idea of the Invisible Hand. This meant having competitive markets, price systems and the distribution of good and income to the strongest competitors.

8 Socialism Capital (resources) are owned by society. It advocates the collective or government ownership of goods. There is no right to private property in this system. In this system means of planning, producing, and distributing goods is controlled by a central government. The motivating force of Socialism is altruism and government commands. The distribution of goods in a socialist society is from each according to ability and to each according to need.

9 Socialism As an economic system, Socialism is a planned economy in which resources are allocated by need. The spread of wealth and income is more equal in a socialistic society, however the individuals tend to lose motivation because the pay off is vastly less. This distribution scheme is a humane, but mostly an inefficient one.

10 Socialism The most influential of socialist theory is derived from Karl Marx and Friedrich Engels, who marked Socialism as the stage that would end Capitalism and precede Communism. One of the main principles from the Marxist concept of socialism is that the class system could be eliminated, the state wouldn’t be as needed and that people would no longer be shaped by their “wage slavery”.

11 Welfare Capitalism Welfare Capitalism is a prime example of a mixed economy. In a welfare capitalistic society, the principles of capitalism are followed, but with government involvement. The government will step in to take care of citizens and help to maintain a minimum standard of living.

12 Role of the Government in Capitalism 1. To break up monopolies or monopolistic powers and to promote and foster competition. 2. To provide collective social goods (public goods) such as street lamps, highways and Armed Forces. Public goods are non-excludable and the marginal cost=0. 3. Correct for the positive/negative externalities. An example of this is pollution. Pollution is a negative externality created by society that must be accounted for.

13 Role of the Government in Capitalism 4) The government must redistribute incomes more equitably. 5) The government provides a framework of rules, regulations and laws to uphold the right to private property. They must enforce contracts and these laws to keep order and allow for individual success, or else Capitalism can not thrive.

14 Role of the Government in Socialism 1) To plan how the shared good will be distributed among society. 2) To put into effect the public goods, such as a social healthcare system. The government will plan and distribute the health services equally throughout the country. 3) To maintain order in society, ease the class divide and prevent a social uprising within the country.

15 Capitalism vs. Socialism Capitalism It is roughly estimated that about 78% of countries follow capitalistic principles. Some of the most economically successful countries practice a form of capitalism. "Socialist societies have been dramatically outperformed by any number of successful capitalist countries, especially in Asia.” Socialism In a recent Newsweek study, the top 100 countries were ranked according to 5 categories. This research found that the socialist nations of Sweden and Norway were ahead of the US. 2010/08/15/interactive- infographic-of-the-worlds- best-countries.html 2010/08/15/interactive- infographic-of-the-worlds- best-countries.html

16 Capitalism vs. Socialism Capitalism Some of the largest criticisms of capitalism are the uneven distribution of wealth, imperialism, class division and the tendency of market monopoly. Environmentalists argue that capitalism requires constant economic growth, which will deplete the world’s resources. Socialism One of the main arguments against socialism is that it limits the prosperity of its citizens. One of the major problem of socialism is the shift to extreme government control and dictatorships.

17 How do They Compare Statistically? Sweden Literacy Rate- 99% Avg schooling- 15.4 yrs Life Expectancy- 74 yrs Income Inequality-25% Productive Growth-$36.8k Political Stability-89 GDP-$406.07 Billion United States Literacy Rate- 99% Avg Schooling- 15.8 yrs Life Expectancy- 70 yrs Income Inequality-40.8% Productive Growth-$46.4k Political Stability- 82.5 GDP- $14.26 Trillion

18 Economics in Germany Germany identifies its self as a “soziale Marktwirtschaft”, which is a social market economy. Germany is a mixed economy that applies the principles of both capitalism and socialism to its structure. They are considered to be a conservative and dynamic economy. This system came into use after government reformation took place and has been in effect since. The terms social and market are stressed to demonstrate that the government now has limited control, that the country provides aid to those in need and has developed a human dimension within the system.

19 Germany vs. United States Germany Population- 81,757,600 GDP- $2.81 Trillion Per Capita- $34,212 HDI- Ranked#10 with a 0.885 (^12) United States Population-310,815,000 GDP- $14.26 Trillion Per Capita- $47,701 HDI- Ranked #4 with a 0.902(^9)

20 Current German Economics German economic growth is now slowing in the third quarter after record expansion in the second. The Federal Statistics Statistics Office in Wiesbaden reported a 2.3% growth to GDP in the second quarter. GDP in Germany is adjusting for seasonal effects and has only risen.7% in the third quarter. Germany is making steps towards normalizing the economic activity through controlled government spending, repaying of national debt and by maintaining “full momentum”. “We’re coming out of the economic downturn with full momentum, our growth is gaining speed. We expect to take this positive momentum into the next fiscal year.”-Siemens Chief Executive Officer Peter Loescher

21 Works Citied 1) Dolan,Edward Huda,Safiul Lindsey, David E. Understanding Microeconomics 2 nd Edition 2) Smith,Adam An Inquiry into the Nature and Causes of the Wealth of Nations 3) Black,Jeff Randow,Jana “Germany’s Economic Growth Slows From Record Pace ” news 4) infographic-of-the-worlds-best-countries.html

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