American Free Enterprise. Types of Economic Systems There are THREE basic economic systems: 1. Free...

American Free Enterprise

Types of Economic Systems There are THREE basic economic

systems:

1. Free Market Economies—wherein all economic activity is conducted by PRIVATE BUSINESSES, without government interference.

2. Command Economies—wherein all activity is conducted by the GOVERNMENT.

3. Mixed Economies—where activity is DIVIDED between PRIVATE and GOVERNMENT control.

WHAT ABOUT THE US?Most economic activity in the US is conducted by private businesses…However, the US government is also involved in the economy…This involvement is referred to as REGULATION.

• For this reason, we say that America has a MIXED free-market economy…Because we operate a free-market economy with LIMITED government interference.

Mixed Economies Where Governments Dominate North Korea—the government conducts 95% of all economic activity.

China—the government conducts 75% of all economic activity.

China, however, is in TRANSITION…

Moving away from government control to private control.

South Korea—A mixed-freemarket economy

North Korea—A command-economy .

Mixed Economies Where the

Free Market

Dominates Hong Kong—was once administered by Great

Britain… And had nearly total economic freedom… LEFT ALONE—without government interference…. It developed one of the wealthiest societies on

the planet. It reverted back to Chinese control in 1999… Is now a special economic zone… And has been allowed to keep its free system.

Now, Back to America… The US commitment to free

market economics has led to this country developing:

1. The largest economy in the world…

2. And one of the highest standards of living.

The MOST IMPORTANT guarantor of economic freedom…

Is the right to property… Which is protected by the… FIFTH AMENDMENT to the

Constitution.

The Importance of Private Ownership

Private property is the FOUNDATION of our prosperity.

Americans are willing to make HUGE SACRIFICIES—

In terms of time, effort, money—

For payoffs that might not occur until the DISTANT future.

When property rights are not SECURE…

There is little incentive to WORK…

And nations that do not protect private property…

Tend to be very POOR.

Nations with STRONGEST private property protections.

1. Finland2. Sweden3. Singapore4. Norway5. Luxembourg6. Denmark7. New Zealand8. Holland

Nations with WEAKEST private property protections.

1. Yemen2. Libya3. Venezuela4. Angola5. Burundi6. Bangladesh7. Zimbabwe8. Ivory Coast

A Troubling Trend?

Despite our commitment to economic freedom…

And the tremendous prosperity it has created…

Our government is becoming steadily more involved in the economy…

And we have moved steadily along the continuum from freedom to government control.

Types of Regulation Some regulations are helpful:

Information requirements help you make informed purchases.

Some regulations only APPEAR to be helpful:

The minimum wage doesn’t actually help ANYBODY.

And some regulations are completely RIDICULOUS:

Since 2000, the government has paid farmers $1.3 billion…

NOT TO GROW CROPS.

The economic principle that says people should be allowed to decide what and when they want to buy and sell is known as...A.) Free Trade

B.) Voluntary Exchange

C.) Voluntary Purchasing

D.) Legal Equality

Which of the following is not an example of the government mandating consumers be informed about the products they are buying?A.) Food ingredient labels

B.) Caloric intake labels

C.) Cigarette warning labels

D.) 50% off sale

Which of the following constitutional rights is the most important for those who engage in business activity?

A.) Right to private property

B.) Right to free speech

C.) Right to be taxed

D.) Right to free religous expression

Which of the following countries has an economic system in which the government owns the highest percentage of the productive resources?

A.) China

B.) Hong Kong

C.) United States

D.) North Korea

A market-based economy with limited government involvement is known as a ____________________.

A.) Command Economy

B.) Free Economy

C.) Mixed Economy