Macro the Big Picture Piece 1 Systems

What do you know? Answer this question in at least 4 sentences: Why wouldn’t one type of economic system work for everyone? Can you define these terms? Traditional Command Market Private Property Socialism Communism Capitalism Bureaucracy Regulation

By the end of this lesson you should know…. Essential Questions How does a nation’s government choose which public goods and services to produce? What trade-offs are made when a nation chooses a market, mixed, or command economic system? Why does the private sector lack incentives to produce certain types of goods and services? (free-rider problem) Terms Content Terms Macroeconomics Economic system Traditional, Command, Market economic systems Communism Socialism Capitalism Academic Terms Bureaucracy Regulation Georgia Performance Standard SSEF4 The student will compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce. a. Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation. b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability. SSEF5 The student will describe the roles of government in a market economy. a. Explain why government provides public goods and services, redistributes income, protects property rights, and resolves market failures. b. Give examples of government regulation and deregulation and their effects on consumers and producers. Literacy Standards RH Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas RH Evaluate various explanations for actions or events and determine which explanation best accords with textual evidence, acknowledging where the text leaves matters uncertain WHST Write arguments focused on discipline-specific content.

What is Macroeconomics? Macroeconomics is the study of the economy as a whole The first step in understanding any economy is to determine which type of economic system they use.

What is an economic system? An economic system is a way to organize a society’s resources to meet the wants and needs of its people. There are three types of economic systems Traditional Market Command What makes each economic system different is the way they answer the three basic economic questions 1.What to Produce? 2.How to Produce? 3.For Whom to Produce?

AS YOU LEARN ABOUT EACH SYSTEM, TRY TO DETERMINE WHAT TYPE OF SYSTEM WE HAVE IN THE UNITED STATES As we try to understand Macroeconomics better by taking a look at each type of economic system, remember that most economies are actually a mixture of two or more systems.

Traditional A traditional economic system uses habits and customs or traditions to answer the three basic economic questions. These countries use their resources to produce the same goods that they have always produced in the same way and individuals do not usually have the freedom to make decisions or try new things. Examples of traditional systems are: The Inuit Australian Aborigines Central African Mbuti Inuit Aborigine Mbuti

Traditional System Advantages Everyone has a role in society – no unemployment – You job is the same as your parent’s There is no question about what will be produced Everyone in the society is taken care of (elderly and sick) Disadvantages This system discourages new ideas – No new technology No tolerance for people in society who are different and do not conform. Lower standard of living

Discussion Does the United States have any elements of a Traditional Economic System?

Command In a command economy the government or a central authority makes decisions about the three basic economic questions. This could be a king, a dictator, a powerful political party or a president. In these countries, there is very little property ownership. In other words, though you can own your own things like a TV, clothes or furniture, very few people are allowed to own a home or a business. Individual freedoms like freedom of speech are also limited. The government monitors the media very closely. The government will decide what is produced, who will produce it and where they live. This means that education, even college is provided for by the government for citizen that show appropriate ability. This type of system also takes care of every citizen in terms of basic needs: housing, healthcare and food.

Command System Advantages Change can be accomplished quickly Everyone’s basic needs are provided for at little or no cost – Education – Healthcare – Housing Disadvantages There are few incentives to get people to work. – Focus on quantity not quality – No reason for workers to be innovative The government has a large, expensive bureaucracy. Does not meet the wants and needs of consumers. Taxes are higher. Bureaucracy- government administration consisting of departments and bureaus staffed by non-elected officials

Examples of a command system are: Soviet Union Cuba North Korea Do you know what political system each of those countries has in common? Command

Communism Russia, North Korea, China and Cuba all operate as communist countries. Communism is a political system (that originated from the document called the Communist Manifesto written by Karl Marx and Friedrich Engles) where ownership of resources is shared by the whole country. The idea is that everyone in society works for wealth so wealth should be shared by the whole society. Communism is an extreme form of socialism. Socialism is a mixed economic system where the government owns some but not all of the resources and provides for some basic needs. Though the idea sounds fair, communist governments do not work as well in practice. (fall of the Soviet Union and East Berlin) Berlin Wall

Quick Write Answer this question in at least 5 sentences. Does the United States have any elements of a Command Economic System?

Market Market economies operate in the best interest of those that participate in the market. So the three basic economic questions are answered by consumers and producers. In this system there is a great deal of freedom to open a business or purchase property. Producers supply the goods and services they think the public will buy. If consumers do not buy a product, producers will not make a profit and must either change what they produce or they will fail. Market economies are often called capitalist. Capitalism is a system where individuals own resources and factors of production.

Market System Advantage Individuals have freedom to own private property Little or no government involvement in the economy Large variety of goods and services Change is gradual Disadvantage Provides very few public goods (defense, healthcare, education) No security for workers if markets and competition changes Does not support elderly, very young or disabled, only rewards productivity

Discussion As a whole class, list elements of the United States that would fit into a market economic system in one column. List elements that would fit in command in a different column. Do you think the US has a good mix of both?

Evaluating Ourselves As Americans, we share several economic and social goals that help us evaluate our society and make adjustments as necessary. They are 1.Freedom 2.Security 3.Equity 4.Growth 5.Efficiency 6.Stability On a separate sheet of paper, write your own definition of each of these goals as it relates to our country.

Economic and Social Goals Freedom- making your own decisions about your job, your business and how to use your money. Security- if you lose your ability to work through no fault of your own, there is a safety net available to provide for you if you cannot provide for your self or your family Equity- you have access to economic opportunities, justice and fairness, a workplace free of discrimination On your paper, try to give an example of each of these that you are familiar with

Economic and Social Goals Growth- the opportunity to get a better job, a higher income; to continue to produce more to maintain a high standard of living Efficiency- working smarter not harder, using our country’s resources wisely; producing more with less Stability- maintain health levels of inflation(rise in prices) and interest rates On your paper, try to give an example of each of these that you are familiar with

Now that you know… Evaluate our Mixed economic system based on our economic and social goals. What are we doing well? What can be improved? What regulations has the government created to achieve these goals? Regulation- a rule or a law

Can You… Answer these Questions? How does a nation’s government choose which public goods and services to produce? What trade-offs are made when a nation chooses a market, mixed, or command economic system? Why does the private sector lack incentives to produce certain types of goods and services? (free- rider problem) Define these Terms? Macroeconomics Economic system Traditional, Command, Market economic systems Communism Socialism Capitalism Bureaucracy Regulation Performance These Standards? SSEF4 The student will compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce. a. Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation. b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability. SSEF5 The student will describe the roles of government in a market economy. a. Explain why government provides public goods and services, redistributes income, protects property rights, and resolves market failures. b. Give examples of government regulation and deregulation and their effects on consumers and producers. Sample Questions

1.In the American economy, the goal of economic equity is MOST connected with A giving participants a fair chance to succeed B restoring laissez-faire capitalism C creating limits on corporate profits D subsidizing businesses that would otherwise fail 2.The idea that producers make goods that consumers like and are willing to pay for is a principle of which of the following economic systems? A traditional B command C market D socialism 3.In which economic system does the government own the means of production? A traditional B mixed C market D command 4.In a market economy, how are the basic economic questions of what, how, and for whom to produce answered? A by using a nation’s social customs and traditions B by using a combination of traditional and command economies C by the individuals and firms in the nation’s marketplace D by the nation’s federal and/or local governments Try These

Answer Key 1.A 2.C 3.D 4.D

Finally What major events have occurred recently that deal with the evaluation of our economic system and understanding how we study the country as a whole?

Resources Economics GPS Frameworks: Unit 4- “The Government and the Economy: Superhero or Villain” nomics%20Unit%204.pdf nomics%20Unit%204.pdf Georgia Department of Education’s Economics/Business/Free Enterprise EOC Assessment Guide – Assessment/Assessment/Documents/Milestones/Assessment%20Guid es/GM%20Economics%20EOC%20Assessment%20Guide% p df Assessment/Assessment/Documents/Milestones/Assessment%20Guid es/GM%20Economics%20EOC%20Assessment%20Guide% p df Georgia Department of Education Released EOCT’s and answer keys Assessment/Assessment/Pages/EOCT-Released-Tests.aspx Assessment/Assessment/Pages/EOCT-Released-Tests.aspx