America’s Economic System
What are the benefits of America’s
free economic system?
What role does government play in
the American economic system?
What is the American economic
system?
 The US is a “free
enterprise” economy
 What is free
enterprise?
 Individuals control a
society’s resources
 Limited government
involvement
Command
Economy
Free
Enterprise
Economy
USA
Mixed
Economy
What are the basic principles behind a
“free enterprise” economy?
 Three (3) basic ideas:
 Right to choice
 Right to produce what
you like
 Right to turn a max.
profit
 Many of this basic ideas
have influenced
economies around the
world today
What freedoms does the American
economic system offer its citizens?
 Five (5) major
freedoms:
 Right to private
property
 Open Opportunity
 Legal equality
 Free contracts
 Profit motivation
Right to Private Property
 “Free Enterprise”
allows individuals to
own their own
property / materials
 Land
 Natural Resources
 Ideas
Pennsylvania & Natural Gas
Open Opportunity
 Anyone can take part
/ or not take part in
the economy
 Freedom of choice
 Creates variety for
citizens
 Forces all business to
be productive
Fast Food
Gas Stations
Supermarkets
Legal Equality
 Everyone is protected
by the same
economic rights in
the economy
 Right to succeed
 Right to fail
Free Contracts
 People have a choice
when it comes to
entering agreements
in the marketplace
 Mortgages
 Credit Cards
 Checking Accounts
Profit Motivation
 Encouraging people to
improve themselves
through economic
activity
 MAKE $$$$$$$
 Encourages competition
It’s All About the Benjamins,
baby….
How does “free enterprise”
effectively eliminate scarcity?
 Consumers have the
freedom to look for the
best deals out there
 “Most bang for their
bucks”
 This tells entrepreneurs
what a society wants
 Effectively divides
resources
What is the role of the US government in
a “free enterprise” economy?
 In theory, government
has a limited role in
“free enterprise”
 However, government
still needs money to
operate
 Has bills to pay
 Debts to re-pay
What is the role of the US government in
a modified “free enterprise”
economy”?
 Under a “modified” free
enterprise economy:




Tax
Spend
Invest
Borrow money
 Government becomes an
active participant in the
economy
Adam Smith’s “Invisible Hand”
The American government
“hand”
What are the benefits of a modified
“free enterprise” economy?
 Government can use its
money / power to try
and provide the most
good




Subsidies projects
Regulate industries
Protect workers
Provide unemployment
Federal subsidies
Regulating Industries
Protecting workers
Providing Unemployment
What are the drawbacks to a modified
“free enterprise” economy?
 Just like any
businessman,
government has the
freedom to FAIL




Over-charge
Mismanage
Bad investments
Debt
The National Debt Clock