Economic Systems
Centrally Planned
Mixed
Market
Government ownership of
Mostly private (individual
economic resources and
or business) ownership of
state planning
economic resources
Government and private
ownership of economic
resoures split rather evenly
Decline of Central Planning
Central planning failed to:
 Create economic value
 Provide incentives
 Achieve rapid growth
 Satisfy consumer needs
Laissez-Faire Economics
Less government
interference in commerce
Free choice
• Consumers choose freely from
alternative purchase options
Free enterprise
• Firms decide which products
to sell and markets to enter
Price flexibility
• Most prices follow the forces
of supply and demand
Economic Freedom & Wealth
B
A
L
A
N
C
E
O
F
P
A
Y
M
E
N
T
S
Currrent account = trade balance= net exports
Real goods and services - imports
Money
Home
Abroad
Real goods and services - exports
CAPITAL ACCOUNT
Titles to foreign wealth sold to Americans
Money
Home
Abroad
Titles to American wealth sold to foreigners
Unilateral transfers
Home
Money
Abroad