Four “What’s” of an Economic System $ What is produced? $ What amount is produced? $ What is the method of output distribution? $ What is the rate of economic growth? $ The secret to economic development can be summed up in the saying, “give a man a fish and you feed him for a day, but teach a man to fish and you feed him for a lifetime.” $ ADAM SMITH advocated creating wealth through entrepreneurship. $ Rather than divide fixed resources, Smith envisioned creating more resources so that everyone could be wealthier. $ Smith believed that FREEDOM was vital to the survival of any economy. $ Also, he believed that people will work hard if they have INCENTIVES for doing so. Circular Flow Model • HOW BUSINESSES BENEFIT THE COMMUNITY • The INVISIBLE HAND is a phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all. • Basically, this meant that a person working hard to make money for his or
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