Economic Systems and the American Economy A. WHAT KIND OF ECONOMIC SYSTEMS DO DIFFERENT GOVERNMENTS USE?

Think about the kind of foods your school offers…..  Are fast food businesses allowed to sell food at your school?  Does your school allow vending machines, if so, what do they have in them?  Who decides what foods students can buy at school?  Does your school have a school store?  Why or why not?

Remember:  Goods are items that are useful, example: DVD player  Services are jobs performed for someone, example: selling the dvd player  Consumer goods are goods intended for final use by individuals, example: Petroleum is a good, but it is refined to make the consumer good gasoline  Capital goods are goods used to produce other goods and services, example: petroleum

Remember:  Nations have different economic systems which determine how to use resources to meet needs and wants of the people  Each economic system asks 3 basic questions:  What should be produced?  How should it be produced?  For whom shall it be produced?

Think about this:  A company wants to get more women interested in its market. What should they produce? How should they produce it, how will they sell it to women?  A College wants to increase student enrollment. What should they do? How should they do it? Who will they do it for? (remember, students depend on parents and scholarships for money for tuition)  The government wants to get more elderly people to vote. What could they do? How should they do it? Who will pay for it?

Remember: There are 4 types of Economic systems

Traditional economy:  Answers to 3 basic questions based on traditions and customs  Things done like they always have been  Everyone knows what is expected  Change is discouraged, production can be inefficient  Choice is rare

Command economy  Government leaders control factors of production and decide how goods and services are used  Individuals have little influence  One advantage is the speed at which economic plans can change  Government sets wages, no incentive to work efficiently  Lack of consumer choices

Market Economy:  “capitalism”, individuals own the factors of production  The market (voluntary exchange of products between buyers and sellers) guides economic choices  Competition creates variety of choices  Competition keeps prices low  Factors of production and money flow back and forth between individuals and businesses  SEE CHART PG 37 in text book

Mixed Economy:  Combines parts of command and market economies  Individuals still own private property and make decisions about economy  Governments set regulations on these

Activity 6: Choosing an economic model  Which economic model best describes the United States?

B. What are the Characteristics of the American Economy?

If you could start a business, what would it be? (Keep it legal!)  Are you making goods or providing a service?  What capital could you bring in to your business?(what resources do you already have?)  Would you need to take out a loan?  Where would you set up business?  Who would you hire?  YOUR ABILITY TO MAKE THESE CHOICES IS A RESULT OF AMERICAN FREE ENTERPRISE!

What are the main characteristics of the American economy?  List 3:

Remember:  Another name for a market economy used in the US is “capitalism”  Pure capitalism is called “laissez faire”, which means the government lets people make their own economic decisions without interference  We will focus on the characteristics of the American Economy

1. Limited role of government:  Regulate quality of food and drugs  Watches over money and banking systems  Makes sure workplaces are safe  Conserves resources

2. Freedom of Enterprise:  Americans are free to own and control factors of production  They can choose what business to go into  They must obey some government restrictions (child labor laws, zoning regulations, hazardous waste)

3. Freedom of Choice:  Buyers choose what to buy  Producers choose what and how much to make

4. Profit incentive:  Desire for profit encourages entrepreneurs to start business  Keeps economy efficient  Economy is adaptable to change

5. Private Property:  Includes ideas!  Americans have right to risk investment and to own assets in order to make profit

6. Competition:  Rivalry among producers helps create best product and lowest price  Must have a weak barrier to trade….in other words it must be easy to start a business and compete

Activity 7: Main Street USA

C. What are the Goals of our Nation?

Why are you in High School?  How will your education benefit you?  Will this help you get things you want or need?  How will getting a good education ensure the success of our nation’s economy?

Remember:  In order to promote general welfare, our free enterprise economy should have the following goals:  Economic freedom: freedom to make choices and accept results  Economic efficiency: use resources wisely  Economic equity: economy must be fair and just, fair hiring practices, minimum wage laws, etc.  Economic stability: reduce extreme ups and downs in standard of living  Economic growth: economy must grow with population

What are our responsibilities to keep our economy functioning well?