Piece 1
Systems
Macro the Big Picture
Can you
define these
terms?
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•
•
•
•
•
•
•
•
Traditional
Command
Market
Private
Property
Socialism
Communism
Capitalism
Bureaucracy
Regulation
What do you know?
Answer this question in
at least 4 sentences:
Why wouldn’t one type of
economic system work for
everyone?
By the end Essential Questions
of this lesson • How does a nation’s government choose which public goods
services to produce?
you should • and
What trade-offs are made when a nation chooses a market,
mixed, or command economic system?
know….
•
Terms
Content Terms
•
Macroeconomics
•
Economic system
•
Traditional,
Command, Market
economic systems
•
Communism
•
Socialism
•
Capitalism
Academic Terms
•
Bureaucracy
•
Regulation
Why does the private sector lack incentives to produce
certain types of goods and services? (free-rider problem)
Georgia Performance Standard
SSEF4 The student will compare and contrast different economic systems
and explain how they answer the three basic economic questions of what to
produce, how to produce, and for whom to produce.
a. Compare command, market, and mixed economic systems with regard to private
ownership, profit motive, consumer sovereignty, competition, and government
regulation.
b. Evaluate how well each type of system answers the three economic questions
and meets the broad social and economic goals of freedom, security, equity,
growth, efficiency, and stability.
SSEF5 The student will describe the roles of government in a market
economy.
a. Explain why government provides public goods and services, redistributes
income, protects property rights, and resolves market failures.
b. Give examples of government regulation and deregulation and their effects on
consumers and producers.
Literacy Standards
RH.11-12.2 Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear
the relationships among the key details and ideas
RH.11-12.3 Evaluate various explanations for actions or events and determine which explanation best accords with textual evidence,
acknowledging where the text leaves matters uncertain
WHST.11-12.1 Write arguments focused on discipline-specific content.
What is Macroeconomics?
Macroeconomics is the
study of the economy as a
whole
The first step in
understanding any
economy is to determine
which type of economic
system they use.
What is an economic system?
An economic system is a way
to organize a society’s
resources to meet the wants
and needs of its people. There
are three types of economic
systems
• Traditional
• Market
• Command
What makes each economic
system different is the way
they answer the three basic
economic questions
1. What to Produce?
2. How to Produce?
3. For Whom to Produce?
As we try to understand Macroeconomics better by taking a look at each
type of economic system, remember that most economies are actually a
mixture of two or more systems.
AS YOU LEARN ABOUT EACH SYSTEM,
TRY TO DETERMINE WHAT TYPE OF
SYSTEM WE HAVE IN THE UNITED
STATES
Traditional
A traditional economic system uses
habits and customs or traditions to
answer the three basic economic
questions. These countries use their
resources to produce the same goods
that they have always produced in the
same way and individuals do not
usually have the freedom to make
decisions or try new things.
Examples of traditional systems are:
The Inuit
Australian Aborigines
Central African Mbuti
Inuit
Aborigine
Mbuti
Traditional System
Advantages
• Everyone has a role in
society
– no unemployment
– You job is the same as your
parent’s
• There is no question about
what will be produced
• Everyone in the society is
taken care of (elderly and
sick)
Disadvantages
• This system discourages
new ideas
– No new technology
• No tolerance for people in
society who are different
and do not conform.
• Lower standard of living
Discussion
Does the United States have any
elements of a Traditional
Economic System?
Command
In a command economy the government or a central authority makes
decisions about the three basic economic questions. This could be a king, a
dictator, a powerful political party or a president. In these countries, there is
very little property ownership. In other words, though you can own your own
things like a TV, clothes or furniture, very few people are allowed to own a
home or a business. Individual freedoms like freedom of speech are also
limited. The government monitors the media very closely.
The government will decide what is produced, who will produce it and where
they live. This means that education, even college is provided for by the
government for citizen that show appropriate ability. This type of system also
takes care of every citizen in terms of basic needs: housing, healthcare and
food.
Command System
Advantages
• Change can be
accomplished quickly
• Everyone’s basic needs are
provided for at little or no
cost
– Education
– Healthcare
– Housing
Bureaucracy- government
administration consisting of
departments and bureaus
staffed by non-elected officials
Disadvantages
• There are few incentives to
get people to work.
– Focus on quantity not quality
– No reason for workers to be
innovative
• The government has a large,
expensive bureaucracy.
• Does not meet the wants
and needs of consumers.
• Taxes are higher.
Command
Examples of a
command system are:
Soviet Union
Cuba
North Korea
Do you know what
political system each of
those countries has in
common?
Communism
Russia, North Korea, China and Cuba all operate as communist countries.
Communism is a political system (that originated from the document called
the Communist Manifesto written by Karl Marx and Friedrich Engles) where
ownership of resources is shared by the whole country. The idea is that
everyone in society works for wealth so wealth should be shared by the
whole society. Communism is an extreme form of socialism. Socialism is a
mixed economic system where the government owns some but not all of the
resources and provides for some basic needs.
Though the idea sounds fair, communist governments do not work as well in
practice. (fall of the Soviet Union and East Berlin)
Berlin Wall
Quick Write
.
Answer this question in at least 5 sentences
Does the United States have any
elements of a Command
Economic System?
Market
Market economies operate in the best interest of those
that participate in the market. So the three basic
economic questions are answered by consumers and
producers. In this system there is a great deal of freedom
to open a business or purchase property. Producers
supply the goods and services they think the public will
buy.
If consumers do not buy a product, producers will not
make a profit and must either change what they produce
or they will fail. Market economies are often called
capitalist. Capitalism is a system where individuals own
resources and factors of production.
Market System
Advantage
• Individuals have freedom to
own private property
• Little or no government
involvement in the
economy
• Large variety of goods and
services
• Change is gradual
Disadvantage
• Provides very few public
goods (defense, healthcare,
education)
• No security for workers if
markets and competition
changes
• Does not support elderly,
very young or disabled, only
rewards productivity
Discussion
As a whole class, list elements of the
United States that would fit into a market
economic system in one column. List
elements that would fit in command in a
different column.
Do you think the US has a good mix of
both?
Evaluating Ourselves
As Americans, we share several economic and social goals that help us
evaluate our society and make adjustments as necessary. They are
1. Freedom
2. Security
3. Equity
4. Growth
5. Efficiency
6. Stability
On a separate sheet of paper, write your own definition of each of these
goals as it relates to our country.
Economic and Social Goals
• Freedom- making your
own decisions about your
job, your business and how
to use your money.
• Security- if you lose your
ability to work through no
fault of your own, there is
a safety net available to
provide for you if you
cannot provide for your
self or your family
• Equity- you have access to
economic opportunities,
justice and fairness, a
workplace free of
discrimination
On your paper, try to give
an example of each of
these that you are familiar
with
Economic and Social Goals
• Growth- the opportunity
to get a better job, a
higher income; to continue
to produce more to
maintain a high standard
of living
• Efficiency- working
smarter not harder, using
our country’s resources
wisely; producing more
with less
• Stability- maintain health
levels of inflation(rise in
prices) and interest rates
On your paper, try to give
an example of each of
these that you are familiar
with
Now that you know…
Regulation- a rule or a law
Evaluate our Mixed economic system based on our economic
and social goals. What are we doing well? What can be
improved? What regulations has the government created to
achieve these goals?
Can You… Answer these Questions?
•
•
Define these Terms?
• Macroeconomics
• Economic system
• Traditional,
Command,
Market
economic
systems
• Communism
• Socialism
• Capitalism
• Bureaucracy
• Regulation
•
How does a nation’s government choose which
public goods and services to produce?
What trade-offs are made when a nation chooses a
market, mixed, or command economic system?
Why does the private sector lack incentives to
produce certain types of goods and services? (freerider problem)
Performance These Standards?
SSEF4 The student will compare and contrast different economic systems
and explain how they answer the three basic economic questions of what to
produce, how to produce, and for whom to produce.
a. Compare command, market, and mixed economic systems with regard to private
ownership, profit motive, consumer sovereignty, competition, and government
regulation.
b. Evaluate how well each type of system answers the three economic questions
and meets the broad social and economic goals of freedom, security, equity,
growth, efficiency, and stability.
SSEF5 The student will describe the roles of government in a market
economy.
a. Explain why government provides public goods and services, redistributes
income, protects property rights, and resolves market failures.
b. Give examples of government regulation and deregulation and their effects on
consumers and producers.
Sample Questions
Try These
1. In the American economy, the goal of
economic equity is MOST connected with
A giving participants a fair chance to
succeed
B restoring laissez-faire capitalism
C creating limits on corporate profits
D subsidizing businesses that would
otherwise fail
2. The idea that producers make goods that
consumers like and are willing to pay for
is a principle of which of the following
economic systems?
A traditional
B command
C market
D socialism
3. In which economic system does the
government own the means of
production?
A traditional
B mixed
C market
D command
4. In a market economy, how are the basic
economic questions of what, how, and
for whom to produce answered?
A by using a nation’s social customs and
traditions
B by using a combination of traditional
and command economies
C by the individuals and firms in the
nation’s marketplace
D by the nation’s federal and/or local
governments
Answer Key
1.
2.
3.
4.
A
C
D
D
Finally
What major events have occurred recently that deal with the
evaluation of our economic system and understanding how
we study the country as a whole?
Resources
• Economics GPS Frameworks: Unit 4- “The Government and the Economy:
Superhero or Villain”
https://www.georgiastandards.org/Frameworks/GSO%20Frameworks/Eco
nomics%20Unit%204.pdf
• Georgia Department of Education’s Economics/Business/Free Enterprise
EOC Assessment Guide
– http://www.gadoe.org/Curriculum-Instruction-andAssessment/Assessment/Documents/Milestones/Assessment%20Guid
es/GM%20Economics%20EOC%20Assessment%20Guide%20081715.p
df
• Georgia Department of Education Released EOCT’s and answer keys
http://www.doe.k12.ga.us/Curriculum-Instruction-andAssessment/Assessment/Pages/EOCT-Released-Tests.aspx