1. UNIT 7 PAGES 556-560 OVERVIEW OF THE US ECONOMY

2. OVERVIEW OF BASIC ECONOMIC SYSTEMS Traditional : based on customs and traditions Command : government officials make all ecnomic decisions Market : mostly up to individuals producing and consuming Mixed : can include elements of traditional, command, and market This is what most economies are today

3. THE FREE-ENTERPRISE SYSTEM The US economy is also referred to as a free- enterprise system. Under this type of system, individuals have the right to own private property and to make individual choices about how to use that property and how to make money. Consumer: a person who buys goods and services. Producer: person or company that provides goods and services.

4. CIRCULAR FLOW MODEL

5. PRICES AND SUPPLY AND DEMAND The connection between quantity demanded for a good or service and its price is described by the law of demand. Supply is the quantity of goods and services that producers are willing to offer at various possible prices during a given time period. Prices and quantity supplied are related. The interaction of supply and demand establishes a price, called the equilibrium price, at which consumers are willing to buy all of the goods that producers are willing to make.

6. INVESTMENT AND THE ECONOMY In the US, you are free to save your money or invest it. One popular way to invest your money is through stocks. You can also invest directly in starting a new business. Money invested by outsiders to help new businesses grow is called venture capital. Many companies use their own money to invest in technological research and development.

7. ADAM SMITH’S IDEAS Wrote “Wealth of Nations” Gave basic outline of economic theories in market economies. Invisible hand: supply, demand, competition will regulate free market Laissez Faire: government should not interfere with the economy Hands off approach