Chapter 2 Economic Systems

Section 1 Answering the Three Economic Questions

Systems and Questions

• An economic system is the ______used by a society to produce and ______goods and services. The economic system a society employs depends on the societies goals and values. • Because economic resources are ______every society must answer three key economic questions.

– What goods and services should be produced? – How should these goods and services be produced? – Who consumes these goods and services?

• It’s obvious we need ______and shelter, but modern societies face additional considerations. How much of our ______should we devote to national defense, education, public health and welfare, or consumer goods? (Guns v. Butter) Each production ______that a society makes comes at an ______.

• How should we use our resources to ______goods and services? There are ______ways to produce what we want and need – all of which require land, ______and capital.

• By the end of the 1990s, the top ____ goods manufacturers in the U.S. were launching an average of 13 _____ products EVERY ______! In the 50’s retail stores had 3,000 products, now they have ______. But quantities are still ______unlimited. • Societies decide how to distribute the available goods and services

Economic Goals and Societal Values

• Resources are always ______thus societies maximize what they can get for the resources that they have. It increases its economic ______if a society ______assess what to produce.. This cuts ______.

Economic Security and Predictability • We do not like ______. We want to know that we can get milk, bread and water each time we go to the ______store or gas when we need it. • If you made a list of personal goals and compared it with a list of a person of your age made in another part of the world, the list would be very different because of their economic system.

• List 2 goals you have for 2009 • 1.______

• 2.______

• We also want to know that there is ______if someone needs it. Most feel that governments should supply ______, or sets of government programs that protect people experiencing unfavorable economic conditions.

• Safety nets or sets of government programs ______people experiencing ______economic conditions are provided by many countries. List 3 safety nets that the government provides: 1. ______2. ______3. ______

Economic Equity, Growth & Innovation

• Most believe in equal pay for equal work, but society does not ______all jobs equally and not everyone can work. A nation’s economy must ______for a nation to improve its ______or level of economic prosperity especially when population is growing. Innovations in ______increase the efficiency of production and usher in new ______.

• List 4 goods/services that began in your lifetime: 1. ______2. ______3. ______4. ______

Should we all have the same amount?? ______• Who should determine who has what? ______

• Why aren’t all jobs valued the same? ______

• Is it ok/fair that an athlete makes millions every year, while a teacher may barely make a million in a lifetime? ______

– Should the government step in? ______Goals

• Environmental protection, full employment, universal medical care, is some concerns of countries. All nations must prioritize the economic goals, or arrange them in order of importance. One fact remains; achieving any economic goal comes only with a ______. Make a pie Chart below & decide how much the government should spend on each area: Social Security, Defense, Medicare, Health, Education, Veterans benefits, Transportation, Agriculture, Space/Science, General Government

Economies and Values

• A traditional economy relies on ______, or ritual to decide what and how to produce and to whom to distribute. There is no room for ______. It revolves around the ______, and is usually divided along ______lines. These communities are small and close, and support the entire group versus ______. They ______, rarely adopt new technology, lack modern ______and have a ______standard of living.

Market

• Market economies base economic decisions on ______and on exchange and/or trade. They are called free markets, or ______.

Command

• In a centrally planned economy, the ______alone decides how to answer ______three key economic questions. Mixed • Most modern economies are mixed economies – market=-based with governments limited role.