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Splash Screen. Chapter Introduction Section 1: Economic Systems Section 2: Evaluating Economic Performance Section 3: American Free Enterprise Visual Summary. Chapter Menu.

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  1. Splash Screen

  2. Chapter Introduction Section 1: Economic Systems Section 2: Evaluating Economic Performance Section 3: American Free Enterprise Visual Summary Chapter Menu

  3. Take a closer look at the way your high school is organized. Who makes the decisions on lesson plans? Who plans out events that take place during the year? Who makes financial decisions, and how? Are parents and voters involved in the educational system? Obtain information from your school district office or the library to create a chart that lists the rights and responsibilities of people in your school district to meet the needs of education. Read Chapter 2 to learn about the different economic systems that societies set up to meet their specific economic needs. Chapter Intro 1

  4. Every society has an economic system to allocate goods and services. Chapter Intro 2

  5. Chapter Intro-End

  6. Section Preview In this section, you will learn about the different types of economic systems that govern WHAT goods and services to produce, HOW to produce them, and FOR WHOM to produce them. Section 1-Preview

  7. Economic Systems • All societies use an economic system to provide for needs and wants of their people. • Three major economic systems exist: • Traditional • Command • Market Comparing Economic Systems Section 1

  8. Content Vocabulary • economic system • traditional economy • command economy • market economy • market • capitalism • mixed economy • socialism • communism Academic Vocabulary • stagnation • allocate • emphasizing Section 1-Key Terms

  9. A B C Are you familiar with the similarities and differences between a market economy and a command economy? A. Yes B. No C.Somewhat Section 1

  10. Traditional Economies Traditional societies use ritual, habit, or customs to answer the basic questions of WHAT, HOW, and FOR WHOM to produce. Section 1

  11. Economic Systems (cont.) • Most economies combine elements of the three. Comparing Economic Systems Section 1

  12. Economic Systems

  13. Traditional Economies (cont.) • A traditional economy—use of scarce resources and economic activity is based on habit or custom. Section 1

  14. Traditional Economies (cont.) • Advantages • Everyone knows which role to play. • Little uncertainty on what or how to produce. • Customs and traditions determine who is provided for. Section 1

  15. Traditional Economies (cont.) • Disadvantages • Individuals generally not free to make decisions • New ideas discouraged, leading to stagnation and a lower standard of living • Strict rules defined by elders and ancestors Section 1

  16. A B C D Which of the following societies operate under a traditional economy? A.Australian Aborigines B.Botswana C.Mbuti D. All of the above Section 1

  17. Command Economies Command economies rely on a central authority to make most of the economic decisions. Section 1

  18. Command Economies (cont.) • A central authority makes the major decisions in a command economy. Section 1

  19. Command Economies (cont.) • Advantages • Can change direction drastically through emphasizing/allocation • Health and public services available to everyone at little or no cost Section 1

  20. Command Economies (cont.) • Disadvantages • Basic wants and needs of consumers are ignored. • Economies tend to be unproductive, not producing a good product. • Large decision-making bureaucracy lacks flexibility. Section 1

  21. Command Economies (cont.) • Severely limits private property rights • Individual freedom and initiative are limited. Section 1

  22. A B C Which is a disadvantage of a command economy? A.Large decision-making body needed B.Health and public services available to everyone C.Can change from a rural society to an industrial nation in a few decades Section 1

  23. Market Economies In a market economy, consumers and businesses jointly answer the questions of WHAT, HOW, and FOR WHOM to produce. Section 1

  24. Market Economies (cont.) • A market economyallows people to make decisions in their own best interest. • Buyers and sellers exchange goods and services in a market. • Market economies are based on capitalism. • Capitalism means that the factors of production are privately owned. Section 1

  25. Market Economies (cont.) • Advantages • High degree of individual freedom • Adjusts gradually to change over time • Small degree of government interference • Decision making is decentralized • Large variety of goods and services • High degree of consumer satisfaction Section 1

  26. Market Economies (cont.) • Disadvantages • Not everyone is provided for • May not provide enough of some basic goods and services • High degree of uncertainty for workers and employers Section 1

  27. A B C In the following areas, do you think government needs to increase or decrease its presence? A.National defense B.Environmental protection C.Care for elderly and disabled Section 1

  28. Mixed Economies Most economies in the world today feature some mix of traditional, command, and market economies. Section 1

  29. Mixed Economies (cont.) • Most economies in the real world are mixed economies. • When political systems are considered with economic systems, the picture gets more complicated. • An example is socialism and its extreme, communism. The Spectrum of Mixed Economies Section 1

  30. Mixed Economies (cont.) • The type of political system in a mixed economy is less important than the way basic economic decisions are made. The Spectrum of Mixed Economies Section 1

  31. Mixed Economies (cont.) • Advantages of a mixed economy • Provides assistance for some people who might otherwise be left out • In a democratic society, voters use electoral power to affect WHAT, HOW, and FOR WHOM decisions. • In a socialist society, FOR WHOM is addressed more directly by government. Section 1

  32. Mixed Economies (cont.) • Disadvantages • More services mean higher costs for citizens overall. • In socialist countries, availability of services may be limited or quality deteriorates over time. Section 1

  33. A B C What is the main advantage of a mixed economy? A.Ownership and control by government B.More services are provided at a higher cost to citizens. C.Provides assistance to people otherwise left out Section 1

  34. Section 1-End

  35. Section Preview In this section, you will learn how economic freedom, economic security, and economic equity are related to the level of satisfaction people have with their economic systems. Section 2-Preview

  36. Content Vocabulary • minimum wage • Social Security • inflation • fixed income Academic Vocabulary • adverse • accommodate Section 2-Key Terms

  37. A B C D What happens when our economic system fails to achieve our goals? A. Societies demand laws to modify system until needs are met. B. The government collapses. C.A command society results. D. Inflation occurs. Section 2

  38. Economic and Social Goals Americans share several major economic and social goals. Section 2

  39. ECONOMIC FREEDOM • People can choose their occupations and employers and how they use their money and business owners can decide where and how to produce

  40. Economic Efficiency • Resources are limited or ___? (Scarce) so we have to use them wisely. If resources are wasted, fewer wants and needs can be met

  41. ECONOMIC EQUITY • equal pay for equal work; no discrimination in hiring, no false claims by advertisers • The minimum wage was established on a national level. • Many states established

  42. ECONOMIC SECURITY • protection against illness or layoffs. Some jobs have insurance benefits for employees with injuries or illness • Social Security – federal program of disability and retirement benefits that covers most working people; retired workers, survivors of deceased with S.S. benefits, disabled persons, and Medicare (provides health insurance for people 65 and older) recipients are eligible for benefits

  43. FULL EMPLOYMENT • economic systems should provide as many jobs as possible so people can support themselves and their families and product output for others

  44. PRICE STABILITY • Inflation is the rise in prices at a higher rate than income • High rates of inflation discourage business activity.

  45. ECONOMIC GROWTH • Most people eventually want a better home, newer car, better clothes, etc. Growth is needed for this. Also the population is growing so economic growth is need to meet the needs of more people

  46. Economic and Social Goals (cont.) • As our society evolves, more goals may become important to us. Section 2

  47. A B Do you think the current list of seven goals is enough? A.Yes B.No Section 2

  48. Resolving Trade-Offs Among Goals Conflicts among goals can be solved by comparing the cost of a goal to its benefit. Section 2

  49. Resolving Trade-Offs Among Goals (cont.) • Individuals have different ideas on how to reach a goal or on the goal itself. • Our economic policies have opportunity costs and trade-offs. Section 2

  50. Resolving Trade-Offs Among Goals (cont.) • In many cases, trade-offs among goals are resolved when people compare their estimate of the costs to their estimate of the benefits and then vote for candidates accordingly. • The U.S. economy is flexible enough to allow choices, accommodate compromises, and still satisfy the majority of Americans. Section 2

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