Socialism Understand Socialism is an economic system based on the premise that some, if not most basic businesses such as steel mills, coal mines, and utilities should be owned by the government so that profits can be more evenly distributed among the people Benefits of socialism Social equality Free education Longer vacations Negative Consequences of Socialism Takes away some of business people's incentives to start work early and leave work late. Brain Drain- The loss of the best and brightest people to other countries. Understanding Communism Communism is an economic and political system in which the state makes almost all economic decisions and owns almost all the major factors of production. Government has no way of knowing that to produce because prices don't reflect supply and demand as they do in free markets. Communism is disappearing, most communists countries today are suffering The Trend Toward Mixed Economies Free Market Economies- exist when the market largely determines what goods and services get produced, who gets them, and how the economy grows. Capitalism is the popular term used to describe this economic system Command economies exist when the government largely decides what goods and services will be produced, who will get them and how the economy will grow. Socialism and communism are the popular terms used to describe variations of this economic system. Mixed Economies- Economic systems in which some allocation of resources is made by the market and some by the government Understanding the Economic System of the United States GDP- the total value of final goods and services produced in a country in a given year Unemployment rate- the number of at civilians least 16 years old who are unemployed and tried to find a job with the prior 4 weeks Inflation- A general rise in the prices of goods and services over time Disinflation- a situation in which price increase are slowing ( the inflation rate is declining) Deflation- a situation in which the prices are declining. Different kinds of unemployment: Frictional unemployment- quit work. Structural unemployment- restructuring of firms of by a mismatch between the skills of job seekers and the job requirements of available
jobs Cyclical unemployment- recession or a similar downturn in the business cycle Seasonal Unemployment- demand for labor varies over the year. CPI ( Consumer Price Index)- monthly stats that measure the pace of inflation or deflation PPI- An index that measure price at the wholesale level. Productivity in the US Gone up in recent yrs because computers and other technology have made the process of production faster and easier for many workers. US econ is a service econ, productivity is an issue. Productivity in the service sector Quality does not equal productivity. New measure of productivity for the service economy Business Cycle- Periodic rises and falls that occur in all economies over time Recession- 2+ quarters of decline Depression- severe recession Stabilizing the economy through fiscal policy Fiscal policy- federal government `s efforts to keep the economy stable by increasing or decreasing taxes or government spending. National debt- the sum of government deficits over time. Monetary policy- management of money supply and interest rates.
3 major indicators of economic conditions are: GDP, unemployment rate, price indexes