Capitalist and Mixed Systems Key Terms scarcity, traditional economy, command economy, market economy, factors of production, entrepreneur, monopoly, profit, mixed economy Find Out • Why can the economy of the United States be called a mixed economy? • What are the characteristics of capitalism that differentiate it from socialism and communism?
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Section 1 Introduction-1 Capitalist and Mixed Systems Key Terms scarcity, traditional economy, command economy, market economy, factors of production,
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Capitalist and Mixed Systems
Key Terms
scarcity, traditional economy, command economy, market economy, factors of production, entrepreneur, monopoly, profit, mixed economy
Find Out
• Why can the economy of the United States be called a mixed economy?
• What are the characteristics of capitalism that differentiate it from socialism and communism?
In 1776 Adam Smith described capitalism as an economic system controlled by an “invisible hand.” According to Smith, through self interest this invisible hand moves people to decide what goods and services to produce, how to produce them, and to whom to distribute them. Adam Smith’s ideas were popularized in his book The Wealth of Nations, which was published in the same year the United States declared its independence.
A. In the United States and several industrial countries, capitalism is the basic economic system.
III. Characteristics of Capitalism (pages 718–721)
B. Capitalism, also called a free enterprise system, is based on private ownership and on individual economic freedom.
C. Capitalists range from small store owners, persons who own a few shares of stock in a corporation, to industrialists who own large factories, mines, and financial institutions.
D. Capitalism encourages people to become entrepreneurs.
D. In Japanese capitalism, the government works closely with business to limit foreign competition. In South Korea, Singapore, and Taiwan the government has a similar close relationship with business.
E. Generally, the capitalist economies of Western European nations are more controlled and regulated than that of the United States.
Communism is an economic system in which the central government directs all major economic decisions.
Socialism is an economic system in which the government owns the basic means of production, distributes the products and wages, and provides social services such as health care and welfare.
Capitalism is an economic system providing free choice and individual incentive for workers, investors, consumers, and business enterprises.
A free enterprise system is an economic system based on private ownership of the means of production and on individual economic freedom.
5. How has the U.S. government played a growing role in the nation’s economy since the late 1800s?
Checking for Understanding
It has taken responsibility for the well-being of individuals and for the financial condition of the nation. It has assumed increasing responsibility for social policies.
Free Enterprise One of the issues debated by advocates of a planned economy and those who support a free market economy is whether there can be democratic freedoms such as freedom of speech without having economic freedom. Write an essay explaining the connection between economic freedom and civil liberties.