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1/24: Economic Systems

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by

Jason Smith

on 26 January 2017

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Transcript of 1/24: Economic Systems

Command Economy:
A Definition
Government makes decisions about production, pricing and distribution
Requires massive government decision-making
Appeal of command economies
Avoid another Great Depression
World War II experience
Problems with
command economies
Failures
Low economic growth (none in Soviet Union in 1970s and 1980s)
Low quality goods
Shortages (and, more rarely) gluts
No incentive for hard work or innovation
Problems command economies don’t have: unemployment, inflation

Illusions
No free flow of economic information
Unrepresentative revelations
Even some experts fooled
Capitalism: A Definition
Economy
Includes goods and services produces
Measured by gross domestic product (GDP)
Prosperity requires growth; shrinkage termed recession

Decisions
What to make (production)
Where to direct goods and services (distribution)
How much to charge for goods and services (price)

Market
Combination of producers and consumers (supply and demand)
Market decisions come from no single individual or office
Economic Trendlines:
1920s to 1950s
Prosperity (1920s)
Technological advances
Increasing productivity

Depression (1930s)
High unemployment, low economic growth
Stock crash only part of story

Recovery (1940s and 1950s)
Causes unclear (New Deal?, War?, neither?)
Education grows (GI Bill)
Economic Trendlines:
1960s to Present
Prosperity (1960s)
High growth, low unemployment
Increased consumption

Difficulty (1970s and early 1980s)
Unemployment high, growth low
High inflation (prices rise, money loses value)
Cause 1: deficit spending for Vietnam war and social programs
Cause 2: high oil prices 1.3.3.

Recovery and Prosperity (late 1980s - 2008)
Inflation stopped by restricting money supply (painful)
Recovery fueled by computer technology
Financial crash of 2008
CAPITALISM
COMMUNISM
ECONOMIC SYSTEMS DURING THE COLD WAR
THANK YOU!
Full transcript