ECONOMIC SYSTEMS. An organized approach to producing and distributing goods and services. Purpose is to make important decisions about the use and distribution of resources. All economic systems deal with the same problem SCARCITY unlimited wants vs. Limited resources.
Economic Systems answers the problem of scarcity.
Limited Resources > SCARCITY < Unlimited Wants
Market Economy/Private Enterprise
Command Economy/Centrally Planned Economy
Pure Price System
Market gives producer incentive
Market provides incentive to hire skilled labor
Wide variety of goods and services are available.
Competition encourages good quality goods.
Productivity is rewarded by profits
Market economy fosters self-reliance.
It is possible to become rich.
Consumers can be manipulated by advertising.
Prices and incomes may not reflect what is best for society.
Boom & bust cycle
Monopolies and oligopolies can emerge
Extreme income inequality can exist.
Period of Economic Expansion
GNP: gross national product, the total value of all goods and services produced in a country in one year. It is hoped a steady moderate increase will occur in a given year.
Period of Economic Decline
Share Share prices fall - PANIC!
Less Money for Banks
Many Factories Close
Less Spending Power Power
More Factories Close
Even More Unemployment
WE ARE NOW GOING TO LOOK AT
THE AMERICAN MOVE TOWARD
A MIXED ECONOMY
Following the Great Depression, the
USA was no longer a
"pure" market system!
Social Security Act (1935)
STANDARDS ACT (1938)
John Maynard Keynes (Keynesian Theory)
Increase government $
Increase $ supply
Decrease interest rates
Decrease government $
Decrease $ supply
Increase interest rates
Following 1981 the Reagan administration put in action the following policies…
“from each according to his abilities, to each according to his needs.”
ESSENTAILS OF A MIXED ECONOMY
Laissez faire (Adam Smith) was used to describe the belief that the government should keep their hands off the economy.
MIXED ECONOMIES (CANADA)
• stabilization of the economy to prevent booms and busts
BANK OF CANADA
Govt. marketing boards
Regulation of the market
•prevention of monopolies to preserve competition
Redistribution of wealth to provide security
Provision of financial support to businesses
Crown Corporations(nationalized industry)
Prov. Govt. Alberta
Direct Taxes:those paid by citizens. (GST/Income tax)
Indirect Taxes:hidden in the price of goods. (excise tax)
Canada's debt is the sum our federal government owes in total. As you can see from the graph below, Canada has continued to have annual deficits that add to our accumulated national debt every year.