1155 - employment decision will most likely choose the...

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www.thinkwell.com info@thinkwell.com Copyright 2000, Thinkwell Corp. All Rights Reserved. 1155 –rev 10/26/2000 Overview of Economic Systems ! Economic systems answer several questions: What will be produced? How will it be produced? Who will receive the goods and services? ! In a laissez-faire system, citizens make decisions for themselves. ! In a planned system, life choices are governed by a central planner. ! In the real world, all economies are mixed systems, and the role of the government is to strike a balance between the two. The term laissez-faire is French for “let alone” or “hands off.” In a laissez- faire system, individuals are motivated by price. Consider the example on the left. This woman faced with an
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Unformatted text preview: employment decision will most likely choose the higher-paying job. People in a laissez-faire system have maximum individual freedom, but may inadvertently impose costs on others. In a planned system, life choices are limited and governed by a central planner. The central planner may find it difficult to gather information and motivate the individuals within the economy. A central planner may also abuse his/her authority. In the real world, all economies are mixed. The illustration on the left shows the spectrum of economic systems. Notice that the United States lies relatively closer to the laissez-faire end than China does. The role of the government is to regulate the balance of laissez-faire and planned systems....
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