Economic Systems – Part 4, Lecture notes of Economics

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Where would you place the United States on the scale below?

Entirely Centrally Planned Entirely Free Market Equally Mixed Mostly Centrally Planned Mostly Free Market

Economic Systems – Part 4 - Mixed Economies UNIT 2 – ECONOMIC SYSTEMS

Reflect on your own freedom to make choices.

• As a consumer, is there anything you are restricted

from purchasing in the American economic system?

• As a laborer, are there any

restrictions on the types of

work you can do?

• As a taxpayer, can you

decide how much you want

to pay?

The Rise of Mixed Economies

• Every economic system has problems:
  • (^) Traditional – little potential for change or growth
  • Command – stifle innovation, fails to meet consumer needs, limits freedom
  • Market – little focus on national defense, social inequality

Mixed

Economy

• An economic system that blends elements of market economies with elements of command economies.
• In this system, government is always involved to some extent – but the degree of government involvement varies from nation to nation.

The role of government

National Defense Ensure Safety and Fairness Infrastructure Protect Private Property

Instead, modern economies are MIXED ECONOMIES. No nation today has a pure free market economy or a pure command economy.

Index of Economic Freedom The Heritage Foundation The Index of Economic Freedom is an annual index and ranking created in 1995 by The Heritage Foundation and The Wall Street Journal to measure the degree of economic freedom in the world's nations. The Most Free

1. Hong Kong
   2. Singapore
2. New Zealand
3. Switzerland
4. Australia
5. Ireland
6. Estonia
7. United Kingdom
8. Canada
9. United Arab Emirates VIDEO The Least Free
10. North Korea
11. Venezuela
12. Cuba
13. Rep. of Congo
14. Eritrea
15. Equatorial Guinea
16. Zimbabwe
17. Bolivia
18. Algeria
19. Djibouti INDEX

Economic

Transition

A period of change in which a nation moves from one economic system to another

Privatization

The process of selling businesses or services operated by the government to individual investors and then allowing them to compete in the marketplace

Circular Flow Model of a Mixed Economy

- Transferring Money - Government participates in the Factor Market:

• Own land, labor, capital.
• The government pays 2.7 million employees every year for their labor.
• That's a total of $152.2 billion. Government participates in the Product Market:
• Purchase goods and services.
• Need resources for offices, telephones, computers.
• Provide goods and services such as roads.

A Perspective on America's Mixed Economy

What examples did you see of...

• Traditional economy
• Economic Growth
• Economic Freedom
• Economic goals in conflict
• What else?

Market Economy & Government