Chapter 2 Economic Systems

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					    CHAPTER 2



     Economic Systems
     SECTION 1: Types of Economic Systems
     SECTION 2: Features of the U.S. Economy
     SECTION 3: The U.S. Economy at Work




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    SECTION 1
    Types of Economic Systems


     Objectives:
      How are the three basic economic questions
       answered in traditional, command, and
       market economies?
      What are the roles of self-interest and
       incentives in a market economy?
      What types of mixed economies exist today?

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    SECTION 1
    Types of Economic Systems
     How the three basic economic questions
     are answered in various economies:
      Traditional economy
        what to produce determined by tradition
        how to produce determined by custom
        for whom to produce determined by the number of
          members in the society
      Command economy—answers to all questions
       determined by government officials
      Market economy—answers to all questions
       determined by individuals
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    SECTION 1
    Types of Economic Systems
     Roles of self-interest and incentives in
     a market economy:
      Self-interest drives people to fulfill their
       needs and wants and helps the market grow.
      Incentives help people decide which
       economic choices are in their self-interest.




4
    SECTION 1
    Types of Economic Systems
     Types of mixed economies currently
     in existence:
      authoritarian socialism
      capitalism
      democratic socialism




5
    SECTION 2
    Features of the U.S. Economy


     Objectives:
      What are the basic principles of free
       enterprise in the United States?
      What are the two markets of the circular-
       flow model?
      How does the circular-flow model reflect
       exchange?

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    SECTION 2
    Features of the U.S. Economy

     Basic principles of free enterprise in
     the United States:
      freedom to own private property and enter into
       contracts
      freedom to make choices
      freedom to engage in economic competition
      freedom to make decisions based on self-interest
      freedom to participate in the economy with limited
       government involvement and regulation

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    SECTION 2
    Features of the U.S. Economy

     Two markets of the circular-flow
     model:
      product market
      resource market




8
Circular Flow Model
                            Resources and Payments


                          Income/ Goods and Services




                     Payments and
                                                       Taxes/Resources
                     Services



    Goods and                                                        Goods and
    Services/Taxes                                                 Services/Taxes




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     SECTION 2
     Features of the U.S. Economy

      How the circular-flow model reflects
      exchange:
       shows the flow of resources and products to
        businesses and the government
       displays the flow of payments to individuals




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     SECTION 3
     The U.S. Economy at Work


      Objectives:
       How do nations decide how to use scarce
        resources?
       What are the major goals of U.S. economic
        policy?
       Why do economic goals sometimes conflict?


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     SECTION 3
     The U.S. Economy at Work
      How nations decide how to use scarce
      resources:
       Households, businesses, and the government
        work together to set goals.




12
     SECTION 3
     The U.S. Economy at Work


      Major goals of U.S. economic policy:
         freedom
         efficiency
         equity
         security
         stability
         growth
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     SECTION 3
     The U.S. Economy at Work
      Why economic goals sometimes
      conflict:
       differences in the goals of various
        socioeconomic groups
       differences in how to achieve goals




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     CHAPTER 2
     Wrap-Up
      1. How does the U.S. economic system compare to
         traditional and command economic systems?
      2. In which category of mixed economic systems does
         the U.S. fit? Explain your answer.
      3. Give an example of a traditional economic system.
         What are the consequences to an individual
         consumer who enters into a contract?
      4. What are the economic principles of private
         property and voluntary exchange?

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     CHAPTER 2
     Wrap-Up
      5. What are the goals of U.S. economic policy?
      6. Why are scarcity and choice basic economic
         problems?




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posted:5/17/2013
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