 Laissez Faire- Government generally should not intervene in the marketplace.
 Some needs that markets could meet fall to governments so that all members of society can participate.
 Education
 Healthcare
 Mass transit
 Private PropertyProperty that is owned by individuals or companies, not by the govnt or people as a whole
 Constitution protects this fundamental right

 Governments create laws protecting property rights and enforcing contracts.
 Patent Laws
 laws insisting on competition
 Some goals are better met by the open market and some better met by the government.
 Opportunity Cost (what are you willing to give up?)
 Pay taxes to fund the Army?
 To give money to people without jobs?
 Give all people an education?
 To subsidize farms?
 Should government make minimum wage?

Households
EXPENDITUR
ES
PHYSICAL
FLOW
Monetary
Flow
GOVERNMEN
T
EXPENDITURE
S
Firms
Monetary
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PHYSICAL
FLOW

 The foundation of the U.S. economy is the free market.
 Free EnterpriseAn economic system characterized by private or corporate ownership of capital goods.
 Investments are determined by private decision rather than by state control
 China is in a transition (a period of change in which an economy moves away from central planning toward a market-based system.
 To make this transitions, state firms must be privatized
(sold to individuals) and allowed to compete with one another in the marketplace.

 Hong Kongone of the world’s freest markets.
 United States has a free enterprise economy, but the government still intervenes to keep order, provide vital services, and to promote the general welfare.
 We enjoy a high level of economic freedom!
 U.S. law protects private property
 We have a low level of government intervention
 Foreign investment encouraged
 Free trade encouraged (U.S. protects some domestic industries and retaliates against trade restrictions imposed by other nations.)
 Banking industry operates under relatively few restrictions
 Foreign owned banks have few additional restrictions.

NORTH KOREA
CUBA
IRAN
CHINA
RUSSIA
MEXICO FRANCE
UNITED KINGDOM
HONG KONG
SOUTH AFRICA CANADA
POLAND JAPAN UNITED
STATES
SINGAPOR
E