Unit 2

Economics Systems Economic system: – Traditional system: – Command system:

Market system: – Market: – Adam Smith—1700s—Scotland Wrote Wealth of Nations Self-interest Incentive Invisible Hand

– Karl Marx—Communist Manifesto— 1800s—German Battle between Proletariat & Bourgeoisie 10 Point Program – Abolition of private property – Tax the rich more heavily – Abolish rights of inheritance – Take property of rebels & immigrants – Create central gov’t run bank to control economy – Create state run transportation system – State owns all factories – Distribute wealth evenly between all citizens – Free education for all

Mixed Economic Systems Capitalism: – David Ricardo—1700s/English Comparative Advantage: those that create goods more cheaply/efficiently will have an advantage—make more $ – Thomas Malthus—1700s/English Believed that population would be checked by famine, disease – Poor are most overpopulated—it’s their own fault – Rich should take advantage of the poor due to their place in the world

Features of the US Free Enterprise System Right to own private property & enter into contracts – Legally binding w/ consequences – Oral or written Make individual choices based on self-interest Engage in economic competition & rivalry – WHY IS COMPETITION SO IMPORTANT? Maintain limited gov’t involvement

Circular Flow Model Illustrates flow of money/goods/services in US economy between 3 actors – Households – Business – Government – SHOW ON BOARD

6 Goals of US Economy/Gov’t Maintain economic freedoms Increase productivity and efficiency of resource use—make more with less Maintain equity and fairness Create economic security Maintain a stable economy – Price stability – Full employment Increase economic growth – Raise standard of living