Constitution- a written plan that provides the rules for a government.
1. beliefs shared by citizens
2. basic structure of government (powers and duties)
3. supreme law of the country
Major Types of Government
Authoritarian- controls all aspects of citizens lives
 Totalitarian States (Hitler, Stalin)
 Power concentrated with a few (oligarchy) Example: China
 Opposition is not allowed
 Limited freedoms
Democratic- rule of the people
 Direct- Everyone makes all decisions
 Representative- elected representatives to carry out the power of the
voters




Principles of Democracy
Citizen participation- regular elections- accepting election results
Rule of Law- majority rule with minority rights- equality
Economic Freedom- Transparency- Accountability- Individual Rights
Independent Judiciary- Competing political parties
Economics Fundamentals
Economics- how nations use their limited resources to satisfy wants and needs.
Government regulation- control of resources
All types of economies have:
1. Producers- make the goods and services to sell
2. Distributors- get the products to the buyers
3. Consumers- purchasers of the goods and services
Economics must answer 3 key questions:
1. What and how much should be produced?
2. How should goods and services be produced?
3. Who get the goods and services produced?
Types of Economic Systems
1. Capitalism- emphasizes private ownership of the factors of production,
freedom of choice, and individual incentives.
Free market- government places no limits on the freedom of buyers and
sellers to make economic decisions.
Adam Smith- Wealth of Nations
Laissez-faire “To let alone”
The invisible hand of the market will guide economic choices
Competition is the key to capitalism
2. Mixed Economies- combines elements of capitalism and Socialism
Socialism- government plays a large role in the economy, but does not completely
control it.
Owns the majority of land and industries
Determines the use of resources and distributes products and wages
Provides education, healthcare, and welfare
Higher taxes to pay for social services- Does this hurt economic growth?
More equal distribution of wealth
First appeared with the Industrial Revolution in the 1800’s
Increased wealth for a few and suffering for the many
Lots of poverty and poor working conditions
Violent exchange or peaceful reforms
Democratic Socialism- Democracy and Socialism- Common in Europe
Communism- economic system in which the government controls the factors of
production
Command economy- government makes all economic decisions and owns all
the resources and means of production
Communication is state controlled
Karl Marx- Communist Manifesto
Bourgeoisie- capitalist who owned the means of production (rich people)
Proletariat- workers who produced the goods
Old Soviet Union, Cuba, N. Korea