Comparing Economic Systems AP COMPARATIVE GOVERNMENT Economic Change

Comparing Economic Systems AP COMPARATIVE GOVERNMENT

Economic Change: Trends & Types Nationalization A process in which the government takes over existing companies and runs them as state owned enterprises, or it’s own enterprises, often with monopoly status in a major sector of the economy. Privatization The tansfer of state owned enterprises and property to private ownership.

4 Main types of Economies

Command Economies (Socialism) an economy in which production, investment, prices, and incomes are determined centrally by a government. Government owns all industrial enterprises and retail sales outlets The economy is managed by a state party planning committee The right to own property is greatly restricted Competition and profit are prohibited Examples: Former Soviet Union

Market Economies (Free Market Capitalism) a capitalistic economic system in which there is free competition and prices are determined by the interaction of supply and demand. Most industry is owned by private individuals The right to own property is accepted and guaranteed Competition and profit are not controlled by the government Example: United States & Germany

Mixed Economy (State Capitalism) an economy in which there are elements of both public and private enterprise. a form of capitalism in which the central government controls most of the capital, industry, natural resources, etc. Industry is owned by both public and private sectors The right to own property is accepted Competition and profit are controlled by the government Example: China & Mexico

Laissez Faire policy of minimum governmental interference in the economic affairs of individuals and society All industry is owned by private individuals The right to own property is guaranteed and protected Competition and profit are not controlled by the government No current examples.

Comparing Economic Systems Command Most Government Control State Capitalism Free Market Capitalism Laissez Faire Least Government Control

Discussion Questions 1. Explain what would cause a government to shift from a command economy to a market economy. 2. Explain what would limit a government to shift from a command economy to a market economy? 3. Identify and explain some of the drawbacks of a free market economy. 4. Identify and explain some of the drawbacks of a command economy.