The American Economy & Putting It Altogether
https://www.stlouisfed.org/education/economiclowdown-video-series/episode-6-circular-flow
AKA Circular Flow Model https://www.youtube.com/watch?v=2wM0jHL6TQs
Characteristics of a Mixed Market Economy
The American Economy
 Profit Motive
o Economic Freedom
 Self Interest
o Private Property
 Open Opportunity
o Consumer Sovereignty
 Legal Equality
o Laws of Supply/Demand = Price
 Government Intervention to
ensure safety and fairness in
the marketplace
How does the government get involved?
Examples
 Eminent Domain
 Protection of Property Rights
(Courts)
 Contract
 Taxes
 Information- Public Disclosure Laws
 Health, Safety, and Well Being
Mixed Economic Systems
Communist v. Socialism v. Capitalism
Government
Macroeconomic Policy
 Fiscal and Monetary Policy used to
stabilize the economy
Think ….Where are we in the Business
Cycle?
Expansionary (Slow to no
economic growth)
Contractionary (High
Inflation- “Economy
Overheats”
Do you remember what GDP stands for?
Taxes
GDP= C + I + G+ (X-IM)= Total Spending (AKA Aggregate Demand)
Approximately 70% of our Economy is based on this type of
Spending
MV= PQ = GDP
MV (Velocity of $)= Price/Quantity