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Intro to Econ Week 2

by: Katie Truppo

Intro to Econ Week 2 Econ 201

Katie Truppo
GPA 3.4

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Standard of living, economic systems
Into Economics: Survey Course
Kenneth Baker
Class Notes
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This 4 page Class Notes was uploaded by Katie Truppo on Saturday August 20, 2016. The Class Notes belongs to Econ 201 at University of Tennessee - Knoxville taught by Kenneth Baker in Fall 2015. Since its upload, it has received 16 views.


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Date Created: 08/20/16
Inrto III Output and production comes in units Barrels of oil, tons of steel, etc. However, you can’t aggregate those into a meaningful statistic So, all final production is converted into is market value (what it sells for) This number is GDP, and represents the total value of a country’s yearly production Standard of Living and Economic Well-Being Economists measure Economic Well-Being as the Standard of Living The higher the number (standard of living) the better they live The U.S. Economy U.S. contains about 7% of the worlds total land (3rd largest) Less than 5% of population live in U.S. (3rd most populus) U.S. produces about 1/5 - 1/4 of worlds output Economic Systems Economic System: The organization and methods used by a society to provide for its people What goods/service to make How should we make them How should we allocate them Traditional Economy: answers the three questions the way they have always been answered (Amish) Pros: Less friction in society High sense of community Cons: Restriction of individual freedom Slow economic growth Slow progress of standard of living Command Economy: answers the three questions through decisions of central authority figure Central planners determine production, how to produce, and allocation Pros: Can institute change rapidly Provide economic security to citizens Cons: Extremely difficult to accurately calculate and produce Quality suffers Market Economy: answers the three questions through the use of markets and price system PRICES will answer the three questions Accomplished through interactions of countless individual decision makers Pros: Produces the most possible out of the limited resources available Larger variety of G & S produced Tends to lead to faster economic growth and higher standard living Cons: The division of resources/incomes/wealth can be egregiously uneven Possible misallocation of resources Markets can fail under variety of conditions Adam Smith and the Invisible Hand "The power of everyones individual self interest is the best way to utilize resources in the most efficient way" U.S. is a mixed economy: three questions answered through some combinations of traditions, command, and markets Capitalism An Economic system characterized by: No state planning of economic activity Resources of production are privately owned and controlled No pre-set plan of how to allocate goods and services Underlying theme: more concerned with private self interest Strengths: Economic efficiency Economic freedom Weaknesses Has a (natural) tendency towards an unequal distribution Cases of “market failure" Karl Marx was Capitalism’s strongest critic Strong proponent of of socialism Against capitalist greed Socialism An economic system characterized by: Fairly high level of state involvement Resources of production are a mix of state own/controlled and private ownership Heavily centralized authority involved in the final allocation of goods/services Underlying theme: more concerned with public interest Strengths: More equitable distribution Economic freedom Weaknesses: Not as efficient Less impetus for individuals innovation and achievement


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