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Reasons for Government Involvement

Governments play a role in the economy by protecting property rights. The 5 th and 14 th amendments declare that no person may be deprived of “ Life, liberty, or property, without due process of law ”

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Reasons for Government Involvement

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  1. Governments play a role in the economy by protecting property rights. The 5th and 14th amendments declare that no person may be deprived of “Life, liberty, or property, without due process of law” These laws protect PRIVATE PROPERTY – property that is owned by individuals or companies, not by the government or the people as a whole Reasons for Government Involvement

  2. Governments try to make sure that exchanges in the marketplace are fair Laws require businesses to give honest information to consumers or block firms from joining together to prevent competition and fix prices Reasons for Government Involvement

  3. For all these reasons, no nation has a pure free market economy or a pure command economy • Most modern economies are a little of each, or • Mixed Economy: a market-based economic system in which the government is involved to some extent • The degree of involvement varies from nation to nation

  4. Circular Flow Model of a Mixed Economy • This circular flow model shows how government typically interacts with households and firms in the marketplace • According to the model, how does gov’t affect the monetary flow in a mixed economy?

  5. An economic system that permits the conduct of business with minimal government intervention is called free enterprise. The degree of government involvement in the economy varies among nations. Nations are placed on a continuum (a range with no clear divisions) of mixed economies. On one end are centrally planned economies and on the opposite end are free markets economies. Continuum of Mixed Economies Centrally planned Free market Iran South Africa France United Kingdom Hong Kong North Korea China Botswana Canada Singapore Cuba Russia Greece Peru United States Comparing Mixed Economies

  6. Continuum of Mixed Economies Centrally planned Free market Iran South Africa France United Kingdom Hong Kong North Korea China Botswana Canada Singapore Cuba Russia Greece Peru United States Continuum of Mixed Economies The degree of government intervention in the marketplace varies among nations Choose two nations on this continuum. Based on the diagram, write one sentence for each nation describing how its economic system differs from the US Why is China a little bit further to the right on this diagram than Cuba?

  7. Economic Freedom • The US enjoys a high level of economic freedom • Foreign investment is encouraged • Free trade is encouraged • Gov’t protects some domestic industries and retaliates against trade restrictions imposed by other nations

  8. What are the characteristics of a mixed economy? Mixed Economy

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