Unit 1: Foundations of Government Economic Systems

Governments make the following economic decisions: - What to produce - How to produce it - For whom to produce (who gets it)

Economic Systems Capitalism Based on free enterprise/ free market Wealth of Nations written by Adam Smith suggested the government take a laissez faire approach to the economy Competition plays a key role

Capitalism Five characteristics of capitalism private ownership & control of property & economic resources free enterprise competition freedom of choice possibility of profits

Capitalism The US has a mixed market economy Free enterprise Government regulations

Socialism Government owns the basic means of production Government plans the use of resources Government distributes products and wages Government provides basic social services Socialists favored taking over the government through revolution

Socialism Democratic Socialism Want democracy in the political sphere Want government involvement and control in the distribution of wealth

Critics argue that this form fails to solve most economic problems Socialism Critics argue that this form fails to solve most economic problems Margaret Thatcher quote on socialism

Communism Based on the ideas of Karl Marx Argued capitalism exploits workers to benefit capitalists

Communism Said when all property is held in common there was no need for government Government makes all economic decisions; owns the land, natural resources, industry, banks, and transportation systems; and controls mass communication.