chapter 2 notes economic systems. economic system the method used by a society to produce and...
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Chapter 2 Notes
Economic Systems
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Economic System
• The method used by a society to produce and distribute goods and services
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What goods and Services should be produced?
• Each decision a society makes comes with opportunity costs
• We have to decide, besides basic needs, what to devote to national defense, education, public health and welfare, or consumer goods.
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How should goods and services be produced?
• How should we produce energy? Should teachers have classes of 20 or 50? Should we produce food on large corporate farms or small family farms?
• Check out the chart- • the top is before
modern equipment
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Who consumes goods and services?
• Factor Payments- income given to people who supply the factors of production- land, labor, capital or entrepreneurship
• How are goods distributed?
• Who gets an expensive car and who rides the bus?
• It is decided by how societies choose to distribute income
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Capitalism
• Based on Adam Smith’s idea
• Supply and demand• Free enterprise• Originally Laissez Faire-
leave businesses alone• Some government
regulation (air and water pollution)
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Market Economy
• Economic decisions are made by individuals and are based on exchange or trade
• Also called free markets, or capitalism
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Communism
• Ruled by a dictator• One party- Communist• The government tells
workers what to produce
• Leads to shortages• Everyone is equal- in
being oppressed (unless you're in the government
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Command Economy
• Centrally planned economy- the central government alone decides how to answer all 3 economic questions
• A central authority is in “command” of the economy
• ( Communism)
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Socialism
• Karl Marx’s idea that all workers were equal and they were the ones that would run the factories and fields
• Land to be re-distributed by wealthy landowners so everyone would have land
• Leads to Communism because this does not work with so many people involved
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Mixed Economy
• Most modern economies are mixed- a combination of traditional, market and centrally planned economies
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Economic Security
• We want to know that every time we go to the store, we can get what we need or get gas etc.
• Safety Net- government programs to help out when things get financially rough
• Standard of living- level of economic prosperity
• These will differ among communities and areas of the nation and the world.
• Sometimes price of good increases and your paycheck doesn’t
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Economic Equality
• What’s fair?• Many people believe in
equal pay for equal work (women)
• Lawyers still make more than nurses who work longer hours and do harder work
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Banking
• What to Know:• Direct deposit• Bank cards• Credit cards• Overdraft protection• Automatic transfers• Online banking
• How to apply:• Money to deposit• Identification• Social Security Number
(SSN)• Signature• (job to make money to
deposit) ;)
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Fees (of course