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Chapter 2

Economics and Business

Book Version 6
By Boundless
Boundless Business
Business
by Boundless
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Section 1
Introduction to Economic Systems
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Economic Systems

A country's economic system is made up of institutions and decision-making structures that determine economic activity.

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Impacts of Supply and Demand on Businesses

The mechanisms of supply and demand in a competitive market determine the price and quantities of products.

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Growth Economics

Long term trends in economic growth can be measured by tracking changes in a nation's gross domestic product (GDP) over time.

Section 2
Businesses Under Capitalist Systems
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Free Enterprise

A free-enterprise system is based on private ownership as the means of production.

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Capitalism in the U.S.

Democratic capitalism is a political, economic, and social system with a market-based economy that is largely based on a democratic political system.

Section 3
Measuring Economic Performance
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The Business Cycle

The business cycle is the medium-term fluctuation of the economy between periods of expansion and contraction.

Economic Indicators

Economic indicators are key statistics about diverse sectors of the economy that are used to evaluate the health and future of the economy.

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Gross Domestic Product

GDP is defined as the value of all the final goods and services produced in a country during a given time period.

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Employment Levels

Employment level, as defined by cyclical, structural and frictional unemployment, is one of the most important economic indicators.

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Productivity

Productivity is a measure of production efficiency, and its level has major impacts on overall economic performance.

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Stability Through Fiscal Policy

Governments can use fiscal policy as a means of influencing economic variables in pursuit of policy objectives.

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Growth Through Monetary Policy

Monetary policy seeks to further economic policy goals through influencing interest rates.

Section 4
Businesses Under Socialist Systems
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Socialism and Planned Economies

Socialism is characterized by social ownership of the means of production.

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The Benefits of Socialism

Socialism has a number of theoretical benefits, based on the idea of social equality and justice.

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The Disadvantages of Socialism

Despite the theoretical benefits of socialist economic systems, there are also disadvantages that may arise in application.

Section 5
Businesses Under Communist Systems
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The Communist Economic System

The communist economic system is one where class distinctions are eliminated and the community as a whole owns the means to production.

The Benefits of Communism

Communism ideology supports widespread universal social welfare, including improvements in public health and education.

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The Disadvantages of Communism

Businesses under Communist system have very strict limitations as to what they can and cannot do, which can hamper productivity and innovation.

Section 6
Businesses under Mixed Economic Systems
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Mixed Economies

A Mixed Economy exhibits characteristics of both market and planned economies, with private and state sectors providing direction.

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The Benefits of Mixed Economies

A mixed economy allows private participation in production while ensuring that society is protected from the full swings of the market.

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The Disadvantages of Mixed Economies

The disadvantages of mixed economies can be understood through examining criticisms of social democracy.

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Economics and Business
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