economics. economic systems 5 types of economic systems - 2 are free-market economies - 3 are...
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Economics
Economic Systems
5 Types of Economic Systems
- 2 are Free-Market Economies
- 3 are Centrally Planned Economies
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Keys to a good economy
Low unemployment
Low and stable inflation
Thriving stock market
Income equality
Good education
• macroeconomic aims...
1) low and stable inflation2) high and sustained economic growth3) balance of payments not in deficit4) low unemployment
microeconomic aims1) efficient resource allocation- ensure that there is no missing markets2) income equality
Free Market
• Traditional
• Capitalism
Centrally Planned• Socialism
• Fascism
• Communism
Free Market Economies
• Individuals make their own choices, not government
• There is the possibility of making a bad choice or being swindled or cheated
• It requires each individual to know how to make good economic choices
1. Traditional EconomyAlso called “the barter system”
People trade goods and services for other goods and services directly
No currency is involved
2. Capitalism- Emphasizes ______ of _____ and individual
________ for workers, investors, consumers, and business enterprises
- Free Enterprise System - _______ and ______ free to make their own economic decisions
- Laissez-Faire – Leave the economy alone, “let it be” with little gov’t regulation
- List of capitalist countries
freedom choiceincentive
buyerssellers
Capitalism
- free enterprise
- private ownership and control of property and economic resources
- competition among businesses
3. Socialism
- Government attempts to distribute wealth _______
- Government controls _______ and _______, and decides what is _______
- Government owns the means of __________ - List of socialist countries
equally
wages pricesproduced
production
Socialism
- distribution of wealth equally
- public ownership of most land, factories, and other means of production
- government provides public services
4. Fascism
• Also called National Socialism• Government _________, but does not own
businesses• ___________ sets wages and prices• Purpose of Fascism is centralization of
economic power to the government, and away from ____________
• List of Fascist countries
controls
Government
individuals
5. Communism
- Government has total control of all ______ of _________, and owns __________
- Karl Marx – wrote The Communist Manifesto• To Marx, all of history was a struggle between social classes
competing for control of productive property.• The value of a commodity was set by the amount of labor put
into it.• Marx saw the state and its government as tools by which the
capitalists maintained their order and privileges.
means productioneverything
Karl Marx
Communism
- state owned land, natural resources, industry, banks, and transportation facilities; state controlled mass media
Tax Structures• Flat Tax
– All persons pay the same percentage of tax– Finland, Estonia, Switzerland pay a Flat Tax
• Progressive Tax (Suggested by Karl Marx)
– Pay an increasing percentage of tax based on income
– Most common tax in the world today– United States has a progressive tax– http://en.wikipedia.org/wiki/
Income_inequality_in_the_United_States
Flat Tax
0
10
20
30
40
50
60
$10,000 $20,000 $30,000 $40,000 $50,000 $60,000
Annual Income
Per
cen
tag
e o
f T
ax
Progressive Tax
0
10
20
30
40
50
60
$10,000 $20,000 $30,000 $40,000 $50,000 $60,000
Annual Income
Pe
rce
nta
ge
of
Ta
x
Modified Flat Tax
0
10
20
30
40
50
60
$10,000 $20,000 $30,000 $40,000 $50,000 $60,000
Annual Income
Per
cen
tag
e o
f T
ax
Levels of Industrialization
Three Levels of Industrialization- Underdeveloped Countries
- Developing Countries
- Developed Countries
Underdeveloped CountriesHigh Birth Rates + High Infant and Child Mortality Rates
= _____ Population GrowthNo Infrastructure, Low TechnologyHigh Poverty, No Medical CareExamples: Afghanistan, Niger,Somalia, Ethiopia
slow
Developing Countries
High Birth Rates + Low Infant and Child Mortality Rates = _____ Population Growth
Some Infrastructure, Scattered Access to Technology
Extremes between Rich and Poor, Some Medical Care
Examples: Most of Central and
South America, Middle East
rapid
Developed Countries
Low Birth Rates + Low Infant and Child Mortality Rates = _____ Population Growth
Lots of Infrastructure, Plentiful Technology
Low Poverty, Good Medical Care
Examples: United States, Europe
no