Overview: Which economic system is "better?" The answer depends on what the goals of a society are. In this lesson, you will learn about a variety of goals and how different systems prioritize those goals. Show
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Economic policies are created for to achieve certain goals. Broadly speaking, economic systems strive to achieve some combination of these seven goals:
It is important to recognize that certain goals are in direct conflict with each other (freedom and security) and others are difficult to achieve simultaneously (equity and growth). In these cases, economic systems must prioritize goals. The process of prioritizing goals is typically the source of many political controversies. Intermediate
A nation’s economic system indicates which goals are prioritized. Market economies tend to favor economic freedom, efficiency and growth (with full employment being a desirable side effect of these choices). Since free markets encourage competition and negotiation, other goals like equity, security, price stability and economic sustainability are sometimes sacrificed. While all economic goals may require some government intervention some of the time, equity, security, stability, and even sustainability often require more attention. These goals tend to be more in line with command economy policies, even if they are not actually achieved in those economies. Advanced
Priorities can change over time, sometimes quickly. Cuba, for example, in the 1940s and part of the 1950s, yielded great economic freedom and had a large wealth gap. Within two years of Castro’s takeover, however, farmland across the country had been redistributed; the national tourism office had been taken over; and rents and home prices were controlled by the government. This indicated a severe shift in priorities, from freedom to equity and security. Not all priority shifts are so drastic. In the United States, there are perennial debates over minimum wage laws, government regulations, environmental concerns, banking and investment practices, and the overall role of government in the economy. Each of these issues has one of the economic goals at its core, and every election can shift local, state and national priorities. Click a reading level below or scroll down to practice this concept.PracticeAssessBelow are five questions about this concept. Choose the one best answer for each question and be sure to read the feedback given. Click “next question” to move on when ready. Social StudiesCompare traditional, command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation. Analyze how each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, price stability, full employment, and sustainability. Econ Express ConceptsFundamentalsAll academic subjects have a foundation. This domain features the key concepts upon which Economics is built. What are the 3 economic goals?Specifically, the Congress has assigned the Fed to conduct the nation's monetary policy to support the goals of maximum employment, stable prices, and moderate long-term interest rates.
What best describes the foundation principles of the liberal market economy?Economic liberalism is based on the principles of personal liberty, private property, and limited government interference. The term “liberalism” should be understood in its historical context. Classical liberalism emphasized liberty from government regulation.
What is the goal in a market economy?Market economies tend to favor economic freedom, efficiency and growth (with full employment being a desirable side effect of these choices). Since free markets encourage competition and negotiation, other goals like equity, security, price stability and economic sustainability are sometimes sacrificed.
Which of the following factors promote economic growth?Increases in capital goods, labor force, technology, and human capital can all contribute to economic growth.
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