What kind of economy does the United States have?

ECONOMIC THEORIESCHAPTER 1, SECTION 4PAGES 26-30

TERMS AND ROLES

Economics: The study of human efforts to satisfy seemingly unlimited wants through the use of limited resources

Three decisions an Economics System Must Make:

1. What and how much should be produced

2. How goods and services should be produced

3. Who gets the goods and services that are produced

CAPITALISM(FREE ENTERPRISE)

•Economic system providing free choice and individual incentive for workers, investors, consumers, and business enterprises

5 Main Characteristics:

1. Private ownership and control of property and economic resources

2. Free Enterprise3. Competition among business4. Freedom of choice5. Possibility of profits

CAPITALISM (CONT.)

Free Market – Buyers and sellers were free to make unlimited economic decisions in the marketplace

Adam Smith – Wrote “Wealth of Nations,” and came to the basic idea of Laissez-faire, which means “to let alone.”

COMMUNISM

Karl Marx (1818-1883) – Wrote The Communist Manifesto and Das Kapital.He believed that in capitalist nations the population is divided into:1. Bourgeoisie – own means of

production2. Proletariat – workers who produce

goods

Communism – One class, property belongs to everyone and there would not be a need for government

Command Economy – Government planners decide how much to produce, what to produce, and how to distribute the goods and services

SOCIALISM•Government owns the basic means of production, determines the use of resources, distributes products and wages, and provides social services such as education, health care and welfare.

3 Main Goals:

1. The distribution of wealth and economic opportunity equally among people

2. Society’s control, through it’s government, of all major decisions about production

3. Public ownership of most land, of factories, and other means of production

SOCIALISM (CONT.)Democratic Socialism – The people have basic human rights and have some control over government officials through free elections and a multi-party system