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Chapter_3_short_version - Chapter 3 THE EVOLVING U.S...

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THE EVOLVING U.S. THE EVOLVING U.S. ECONOMY IN PERSPECTIVE ECONOMY IN PERSPECTIVE Chapter 3 Chapter 3
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3-2 The Market Economy The Market Economy The U.S. economy is a market economy – an economic system that gives private property rights to individuals and relies on market forces to coordinate economic activity. Private property rights – the control a private individual or firm has over an asset or right.
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3-3 The Market Economy The Market Economy Markets work through a system of rewards and payments. Individuals are free to do whatever they want as long as it is legal. Fluctuations in prices coordinate individuals’ wants.
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3-4 The Market Economy The Market Economy Most economists believe the market is a good way to coordinate economic activity. The primary debate among economists is: about how markets should be structured. whether markets should be modified and adjusted by government regulation.
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3-5 Capitalism and Socialism Capitalism and Socialism Capitalism is an economic system based upon the market. The means of production are owned by a small group of individuals (capitalists). Socialism is an economic system based on individuals’ good will toward others, not their own self-interest. Everyone contributes what they can and gets what they need.
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3-6 Capitalism and Socialism Capitalism and Socialism The first socialist economies were called Soviet-style socialist economies – economies that used central planning to solve economic coordination problems. In the 1960s the term socialism was used to describe Western European economies that had major welfare systems and government involvement in market economies. Today most economies are differentiated by the degree to which they rely on markets, not whether they are a socialist or capitalist economy.
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3-7 The U.S. Economy The U.S. Economy
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3-8 The U.S. Economy The U.S. Economy Households supply factors of production to businesses for payment in the factor market .
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