IX. Answer the following questions to discuss the details of the text. Use the text for reference.

1. What is economy?

2. What is an economic system?

3. Can you explain the difference between “economy” and “an economic system”?

4. How many basic economic systems are there?

5. What basic economic systems are there?

6. What does the economic system of the country depend on?

7. What economic system do most nations use?

8. What economic system have people used for the most of human history?

9. What can you say about a traditional economic system?

10. Who owns tools, land and equipment in a traditional economy?

11. Who makes basic economic decisions in a traditional economy?

12. What are the advantages of the traditional economic system?

13. What are the disadvantages of the traditional economic system?

14. Where are traditional economies common nowadays?

15. What economic system is called command economies?

16. Who owns and controls land and capital goods in a command economy?

17. Who makes basic economic decisions in a command economy?

18. What are the examples of command economies?

19. What are the advantages of the command economic system?

20. What are the disadvantages of the command economic system?

Different economic systems (Part 2)

The market economy (also called capitalism or the pri­vate enterprise system) is the result of the millions of buying and selling decisions made by millions of individuals. No one runs the economy. It runs itself. Most modern-day econo­mies, are basically market economies.

Traditionally, a mar­ket is the place where people buy and sell things. But for economists, the word «market» means something slightly different. It refers to the actions of buying and selling, not just to the place where things are bought and sold. A mar­ket can exist even if buyers and sellers never meet - for example, a mail-order business. A market is made up of people and actions. In any market whether it is shoe repair shop, a movie theater, or a gas station buyers exchange money for a product or service. Economic decisions in a pure market economy are made by buyers and sellers in the marketplace. Land and capital goods - factories, tools, etc. - are privately owned.

A market economy is really made up of two markets: a resource market and a product market. In each of these two markets, something is exchanged between producers and individuals.

In the resource market, the resources that producers need are exchanged for money. Individuals provide resources to producers. Producers in turn provide money to individuals.

Producers pay:

• wages in exchange for labor

• rent in exchange for land

• interest on borrowed money

• profits (or dividends) to individuals who invest money and thus become part-owners of the business.

In the product market, products and services are ex­changed for money. Producers provide products and ser­vices to individuals. Individuals in turn provide money to producers in payment for the products or services.

Market economy as all the other types of economic sys­tems has advantages:

• Large numbers of people are involved in making economic decisions.

• Individuals are free to decide on and work for their own best interests.

• Producers are free to produce what they wish.

• Individuals are encouraged to develop new ideas and tech­nologies. This helps to create a wide variety of goods and services.

• The economy is flexible and able to change to meet people's needs.

• People are free to choose what type of work they wish to do.

• Consumers are free to buy the goods and services they choose.

Its disadvantages are that:

• Individuals who are unable to work have no way of meet­ing their own needs.

• There is no guarantee that individuals will succeed in their business or work.

• The needs of society as a whole are often overlooked. If individuals work only for their own interests, the good of society may suffer. Air and water pollution are examples.

• The economy is subject to ups and downs called busi­ness cycles. The down parts of cycles hurt everyone.

• The market economy exploits labor.

Socialist ideas are part of the economic system in sev­eral Western European countries today. Great Britain and Sweden are two examples. In these countries, public utili­ties, transportation, and medical services are nationalized. That is, they are publicly owned and operated by the gov­ernment. However, most industry in Great Britain and Swe­den is privately owned, just as in other capitalist countries. The government controls part of the economy to protect welfare of all its citizens. These countries are sometimes called capitalist-welfare states.

In the industrial countries pure command and pure mar­ket economies do not exist today. All industrial countries now have combinations of market and command econo­mies called mixed economies.

The United States has a mixed economic system. It has the basic features of a market economy, but it is not a pure market system. Government regulates some parts of the economy. In Sweden there is a governmental ownership of postal services, railroads, airlines and hydroelectric power. In spite of its reputation as a socialistic state, Sweden's in­dustries are actually 90% owned by private investors and capitalists. So, almost every developed country: Russia, Canada, Great Britain, etc., has a mixed economic system.