Economic Systems

p.128

Country’s Systems

• Political System-how the government is set up

• Economic System- what the country produces

-who controls resources

Political Systems

• Republic/Democracy--people vote for government representatives- USA

• Constitutional Monarchy--king or queen and elected parliament- Great Britain, Spain

• Dictatorship--ruled by a single leader supported by the military, no elections-Iraq under Saddam Hussein

• Oligarchy--a group of rich people in charge, -Pakistan, Kuwait

• Anarchy-no government

Economic Systems

what the country produces and who controls resources

Traditional Economy

Based on agriculture Advantages (+)

-healthy, peaceful-subsistence farming (make everything by themselves)-no pollution-everyone has useful skills

Example-the Amish• Disadvantages (-)• poor education• hard work• little money• no technology

Communism(command economy)

Government controls all resources

Advantages (+)• safe• free college, and healthcare• equal pay

Example-N. Korea, CubaDisadvantages (-)• no private businesses• poor quality of goods• no freedom• poverty,• money spent on military

Capitalism(market economy)

Based on private property, no government control

• Advantages (+)• Businesses make lots of

money• Easy to start a business

(no country)

• Disadvantages (-)• No government regulations• Pollution• Child labor, • no minimum wages• High poverty

Mixed Marketbased on private property, and limited

government controlExample U.S.Advantages (+)• You can own a business,

and make a profit• Government collects

taxes to spend on different programs (education, seniors, military)

• Disadvantages (-)• High unemployment• Jobs outsourced to

countries with cheaper labor

• Expensive colleges, • Expensive healthcare

The U.S. Economic System p.131• 1. private property-

-we can own a house, land• 2. freedom of choice-

-we can buy at different stores• 3. freedom of enterprise-

-we can own a business• 4. limited government control-

-government collects taxes, and regulates businesses (no child labor, minimum wages, no pollution)

Factors of Production p.133

• Land

• Labor-workers

• Capital- money

• Entrepreneurs-businessmen

• Technology

Prices in a Free MarketLaw of Supply and Demand

• Goods on the market what people want to buy

• Supply___ Prices____ Supply___Prices___

• Demand__Prices____ Demand_ Prices___

• Competition__Prices__ Quality___

The Business Cycle

Prosperity (high production)

» recession (U.S.)• (slow down in the economy)

expansiondepression

Production Unemployment rate (%)- 8% -US 20128 people out of 100 don’t have jobsThe Great Depression-1929-1939 25% unemployment

Deficit and Debt p. 162Budget- plan how much $ we can save and spend

Income=Expenses=Balanced

Budget

Income> Expenses=Budget

Surplus

• Income< Expenses=Budget

Deficit

Trade-buying and selling goods

• Exports=Imports=Balance of Trade

• Exports> Imports=Trade Surplus• Exports< Imports=Trade Deficit

• Free Trade-trading with other countries without paying tariffs (taxes on imported goods)

Assignments

• Workbook p. 43,45,46• Articles-North Korea, Cuba