MACROECONOMICS Chapter
2 and 3
NATIONS and HOW THEY
MAKE CHOICES
________________________________________________________________________________________
REVIEW
Economics
Systems and Free Enterprise
1. Number one problem in
Economics: Scarcity (lack of resources) but unlimited wants and needs
THREE BASIC QUESTIONS
1. What to produce
2. How to produce the good?
3. For whom will the good be
produced
_______________________________________________________________________
3 MAJOR
ECONOMIC SYSTEMS
1. TRADITIONAL
2. COMMAND
3. MARKET
1. TRADITIONAL
·
TRADITION will answer the three
questions
·
They will make decisions based on their history, culture, religion,
traditions (how it has been done forever, They will do the same way they have
done it every year)
·
They have gender specific roles (MEN have certain jobs and WOMEN other
kinds of jobs)
o EX. Countries that are third
war countries (out of the middle of Africa) agriculture base
2. COMMAND
·
The GOVERNMENT will answer
the three questions
·
Command Economy = Planned
Economy = Controlled Economy
·
Central planners plan everything out
o Ex. Communism Soviet Union
(USSR) or Dictatorship
3. MARKET
·
The PEOPLE will answer the
three questions
·
Market Economy = Capitalism
= Free Enterprise
·
Our economy is supplied by supply and demand
·
Very little government interference
AUTHORS
1. Adam Smith
& Free Enterprise
o Wrote the BOOK “Wealth of
Nations”
o Wrote the book about the
free enterprise system, he said greed is good, for it creates competition
o The individuals make the
decisions
2. Karl Marx
& Communism
o Books
o Das Kapital
o The Communist Manifesto
o
The government will make the decisions
SOCIALISM
o
In between command economy and free enterprise
o
When you take money from the wealthy then you redistribute
it to the poor
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