White Plains Public Schools / Overview



Economic Systems or Even Nations Must Choose

Economics Name: __________________________

E. Napp Date: __________________________

Individuals choose. Business owners choose too. Even the leaders of nations must choose. People choose because resources are limited (scarcity). No person can have everything he wants or needs. So, choices must be made.

In fact, every society must answer three key economic questions:

1. What goods and services will be produced?

2. How should these goods and services be produced?

3. Who will consume these goods and services?

Of course, there are different ways to answer these questions. The answers to these questions will determine the nation’s economic system. Economists recognize four economic systems: a traditional economy, a free market economy, a command or centrally planned economy, and a mixed economy. Each economic system answers the key economic questions differently.

Questions:

1. Why must people choose? ________________________________________________________________________________________________________________________________________________

2. What questions must a society answer? ________________________________________________________________________________________________________________________________________________________________________________________________________________________

3. How many economic systems do economists recognize? ________________________________________________________________________

| |Based on habit, custom, or ritual |

| |In other words, people produce and consume as their ancestors did. |

|Traditional Economy |Sons perform the same jobs as fathers. |

| | |

| | |

| |Individuals answer the economic questions |

| |People are free to buy and sell based on their resources |

|Free Market Economy |The government does not intervene |

| | |

| |The government makes all economic decisions |

| |The government owns the factors of production |

|Command or Centrally Planned |The government decides |

|Economy | |

| | |

|Mixed Economy |Combines the different systems |

Now, you try. I will provide a quotation and you will determine whether the person who spoke the words lived in a traditional economy, a free market economy, a command or centrally planned economy, or a mixed economy.

|I live in a |“I do as I am told. The government makes all economic decisions. |

|__________________________ |If we are told to produce more boots, we produce more boots.” |

| | |

|I live in a |“I went to the supermarket and I had many choices. I could even |

|_________________________ |buy a dangerous product. The government does not regulate |

| |products.” |

|I live in a |“My father grew yams. I grow yams. My father used a certain tool.|

|________________________ |I use the same tool. I do not need to change. My ancestors have |

| |given us the right way to live.” |

| | |

|I live in a |“We have many freedoms but the government does intervene when |

|_________________________ |necessary. It orders companies to place warning labels on |

| |dangerous products.” |

|I live in a |“Sons do as their fathers did. Daughters do as their mothers did. |

|_________________________ |We do not change. We keep our traditions. There is security in |

| |keeping traditions.” |

|I live in a |“The government controls many factories and farms but farmers can |

|__________________________ |keep some of their crops. If we work hard, we can keep some of |

| |what we grow.” |

|I live in a |“My father owned a factory. He sold shoes. But I do not want to |

|__________________________ |sell shoes. I want to sell guitars. Fortunately, I can change |

| |production in my factory. I am free.” |

|I live in a |“I do not question the leaders. They tell me to work in this |

|___________________________ |factory. I work in this factory. They tell me to make guns. I |

| |make guns. To question the party is dangerous.” |

|I live in a |“I live in the United States. There are many freedoms but the |

|___________________________ |government does not allow people to sell dangerous products.” |

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Word Bank:

Scarcity, Choose, Four, Three, Free Market, Traditional, Command, Mixed

(

Try these multiple-choice questions on economic systems from the New York State Regents:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Which statement best describes how a command economy functioned in the Soviet Union?

1. The laws of supply and demand controlled the economy.

2. Trade policies mandated that imports exceed exports.

3. The success of the agricultural sector controlled the price of manufactured goods.

4. A central authority determined the type and quantity of goods to be produced.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Which generalization is characteristic of most traditional societies?

1. people move from city to city seeking new jobs

2. sons learn the same trades as their fathers

3. a high degree of social mobility exists

4. all people have the same economic opportunities

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Which topic is central to the study of economics?

(1) tracking the development and spread of diseases

(2) understanding the causes of ethnic rivalries

(3) examining the distribution and use of limited resources

(4) studying the growth and role of political parties

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

An aspect of a society that an economist would study in depth would be the

1. development of self-image

2. problem of scarcity of resources

3. origins of religion, legends, and festivals

4. migratory patterns of animals

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Which is a key economic question faced by all countries?

1) How big should the army be?

2) How much money should be raised in taxes?

3) How many schools should be built?

4) What goods and services should be produced?

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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No System is perfect:

Let’s look at a market without government regulation:

Upton Sinclair wrote The Jungle about working conditions before government regulation. Today, workers have many protections. The government has created rules governing working conditions. However, when Sinclair wrote The Jungle, employers were free to focus only on profits or money and not on the safety of workers.

The Jungle

Upton Sinclair

p119

  “There were the wool-pluckers, whose hands went to pieces even sooner than the hands of the pickle men; for the pelts of the sheep has to be painted with acid to loosen the wool, and then the pluckers had to pull out this wool with their bare hands, till the acid had eaten their fingers off. There were those who made the tins for the canned meat; and their hands, too, were a maze of cuts, and each cut represented a chance for blood poisoning. Some worked at the stamping machines, and it was seldom that one could work long there at the pace that was set, and not give out and forget himself, and have a part of his hand chopped off.”

Questions:

1: What happened to the hands of wool-pluckers? ____________________________________________________________________________________________________________________________________________________________

2: Why did this happen to the hands of wool-pluckers? ____________________________________________________________________________________________________________________________________________________________

3: Why did workers who made the tins for canned meat risk blood poisoning? ____________________________________________________________________________________________________________________________________________________________

4: What happened to workers at stamping machines? ____________________________________________________________________________________________________________________________________________________________

5: In a totally free market, the government does not create rules governing the workplace. Today, the government does have rules governing the workplace. Therefore, today, the United States is a mixed economy. There are many freedoms but there are also government rules. Writers like Upton Sinclair helped change the economy of the United States. How did Upton Sinclair’s book lead to change? ____________________________________________________________________________________________________________________________________________________________

No system is perfect:

Let’s look at a command economy:

George Orwell wrote Animal Farm to show the dangers of central planning. Orwell used a farm where the animals had been mistreated as his setting. The animals had a revolution and overthrew the farmer. They established a communist state. However, the leaders of the revolution quickly became the new “bosses”. Orwell believed that too much government power was dangerous. In the following excerpt, Orwell reveals the fate of a particular worker (a horse).

ANIMAL FARM

excerpts from Chapter IX

Boxer's split hoof was a long time in healing. They had started the rebuilding of the windmill the day after the victory celebrations were ended. Boxer refused to take even a day off work, and made it a point of honour not to let it be seen that he was in pain. In the evenings he would admit privately to Clover that the hoof troubled him a great deal. Clover treated the hoof with poultices of herbs which she prepared by chewing them, and both she and Benjamin urged Boxer to work less hard. "A horse's lungs do not last forever," she said to him. But Boxer would not listen. He had, he said, only one real ambition left -- to see the windmill well under way before he reached the age for retirement.

...After his hoof had healed up, Boxer worked harder than ever. Indeed, all the animals worked like slaves that year. Apart from the regular work of the farm, and the rebuilding of the windmill, there was the schoolhouse for the young pigs, which was started in March. Sometimes the long hours on insufficient food were hard to bear, but Boxer never faltered. In nothing that he said or did was there any sign that his strength was not what it had been…

Late one evening in the summer, a sudden rumour ran round the farm that something had happened to Boxer. He had gone out alone to drag a load of stone down to the windmill. And sure enough, the rumour was true. A few minutes later two pigeons came racing in with the news; "Boxer has fallen! He is lying on his side and can't get up!"

1: What happened to Boxer? ____________________________________________________________________________________________________________________________________________________________

2: Boxer was never permitted time to rest, to heal. Why do you think Boxer was not permitted time to rest or heal? ____________________________________________________________________________________________________________________________________________________________

3: What appears to be more important: the worker or the work? ____________________________________________________________________________________________________________________________________________________________

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