Modern Economies –
Free Market, Centrally Planned or
somewhere in between
Mr. Schoonover
9/22/2009
Lecture #2

Draw and label the Circular Flow Model of a
Market Economy.
◦ Give me an example of physical flow in the model
and monetary flow for the model.

What is the “motivating force” in the free
market?

Give me three examples of a Centrally
Planned Economy.

What kind of Economy does the United States
have?
Review

No one Economic System can satisfy
everyone’s wants and needs, this is why
most economies today are a Mixed
Economy.
◦ North Korea and Free Markets?

Mixed Economies are a combination of
Free Market and Centrally Planned
Economies.
Mixed Economies
Draw Diagram in your notes.
 Monetary Flow

◦ Money is taken from our pay checks when we
get paid.
◦ We pay taxes on what we buy.

Physical Flow
◦ Some people work for the Government.
◦ Some of the products made end up in
governments.
Circular flow of a Mixed Economy

So what Economy is the United States?
◦ In what ways is it a Free Market Economy?
◦ In what ways is it a Centrally Planned Economy?
If each Economy in the world is a Mixed
Economy, how come we are not all the
same?
 The amount of government intervention in
Mixed Economies varies.

◦ Why do we have government intervention?
Mixed Economies






Minimum Wage
Social Security
Taxes
Roads
Schools
Health Care?
Types of Government Intervention
Free Market
Centrally Planned
Economies Around The World





Efficiency
Equity
Freedom
Security
Growth
Goals
Goals
Met
Not Met
Efficiency
Equity
Freedom
Security
Growth
What goals does a Mixed Economy
Meet?