Name: ______________________
CE.11b
Three Basic Questions
What will be produced?
Who will produce it?
For whom will it be produced?
Traditional Economy
•People perform the same work as their Parent and
Grandparent, regardless of Ability or Potential.
•Economic decisions are based on Custom and Historical
precedent.
Free Market Economy
•Private ownership of property/resources
•Profit motive
•Competition
•Consumer Sovereignty
•Individual choice
•Minimal government involvement in the economy
Command Economy
•Central ownership (usually by government) of property/resources
•Centrally-planned economy
•Lack of Consumer choice
Mixed Economy
•Individuals and businesses are owners and decisions makers for the
Private sector.
•Government is owner and decision maker for the Public sector
•Government’s role is greater than a Free Market economy and Less than
in a Command economy.
•Most economies today, including the United States, are mixed economies
CE.11c
Characteristics of US Economy
Prices are
Small
government
determined by
supply and
demand
involvement
Private
Property
Consumer
Sovereignty
Competition
Profit
CE.12a
Basic Types of Business
One Owner
• Two
or more owners
All the Risks
• Share
All the Profits
•
the risks
Share the profits
•
Authorized by law
•
Share the profits
•
Liability is limited
to investment
Entrepreneur
A person who takes a risk to
produce and sell goods and
services in search of profit.
May establish a business according
to any of the three types of
organizational structures.
CE.12b
Individual and Business saving and investment provide financial Capital that can be
Borrowed for business Expansion and increased Consumption.
Individuals (households) own the resources used in production sell the
resources and use income to purchase products.
Businesses (producers) buy resources make products that are sold to
individuals, other businesses, and the government; and use the profits to buy
more resources.
Governments use tax revenue from Individuals and businesses to provide public
goods and services.
Sales $
Buying $
Expenditures
Taxes
Taxes
goods and
services
Interest $
Public
Income
Wages
CE.12d
Worldwide Markets in which the buying and selling of
goods and services by all nations takes place.
To obtain goods
and services they
cannot produce or
cannot produce
efficiently
themselves.
To buy goods and
services at a lower
cost or a lower
opportunity cost.
To create jobs.
To sell goods
and services to
other
countries.
Virginia and the United States specialize in the production of certain
goods and services, which promotes efficiency and growth.
Innovations in technology (e.g. the Internet) contribute to the Global
Flow of information, capital, goods, and services.
The use of such technology also lowers the cost of production.
CE.13a
Enforcing antitrust
legislation
Supporting
business start ups
Engaging in global trade
Environmental
Protection
Agency (EPA)
Federal
Trade
Commission
(FTC)
Federal
Communications
Commission (FCC)
CE.13b
The government provides benefits to many at the same time.
Many of the services would not be available if individuals had
to provide them.
Interstate Highways
Tax Revenue
Postal Services
Borrowed Funds
National Defense
Fees
Decreased government
spending may result in
lower taxes
Individual & Business
Government
Reduces funds
for borrowing
Government
Reduces demand, which
may result in a slowing
in the economy
Individual & Business
Borrowing
decreases
Reduce the funds
for spending
Government
Tax
decreases
Increase the funds
for spending
Individual & Business
Spending
decreases
SPENDING
SPENDING
and
TAXES
BORROWING
Government
Reduces funds
for borrowing
Government
Increases demand, which
may increase employment
and production
Tax
increases
Increased government
spending may result
in higher taxes
increases
Borrowing
Government
TAXES
Spending
increases
CE.13c
Individual & Business
Individual & Business
Individual & Business
16th Amendment
Authorizes Congress
to tax personal and
business incomes.
CE.12c
Private Financial Institutions
Savings and
Loans
Banks
Receive
Credit Unions
Make
deposits
loans
CE.13d
Acts as
Has the duty to
maintain the
value of national
currency (dollar)
The Nation’s Central
Bank
Regulates
Manages
The amount of
money in the
economy
Banks
Consumer and
Property Rights
Forms of Money
Private
ownership
CE.13f
Coins
CE.13e
Individuals have the
right of
The federal
government’s
bank
Govt agencies establish
guidelines that
Protect public
health and safety
Consumers may take
legal action against
violations of
consumer rights
Federal Reserve
Notes
(currency)
Checks
and debit
cards
CE.14a-f
Starts with
Self-Assessment
Employers Look For
Attitudes and
behaviors of a
strong work ethic
Income Based On
Higher skill
and/or
education levels
Supply and
Demand
Impact of Technology
Keep pace with
technological
changes
Create new jobs
Work across
international
borders
Fiscal Responsibility
•Careful
spending
decisions
•Saving and
investing for
the future
•Having
insurance
•Keeping
to a
budget
•Using
credit
wisely
Understanding
contracts,
warranties,
and
guarantees