In Tro To Business 1 – Assignment Example
American Economic System American Economic System is a system integrated by an idealistic commitment of capitalists and free markets. Recently, the U.S government has mostly provided solutions that were not met by free market concepts for regulating private businesses to serve as a role of economic agent for maintaining stability in the overall economy (Conte and Carr, Chapter 1). In addition, it has been an observation that government also interfered to find solutions of social issues arising due to free markets. Thus, the American economic system is best described as Mixed Economy.
On the other hand, countries such as China, N. Korea and Cuba all function in a command economy. In a command economy, the government decides how to allocate all the factors of production. Moreover, it decides on what to produce and at what cost it will be produced. Due to high level of interference by the government, in a command economy, it is ensured that the economy is more stable and is not affected by inflation like in the free market system, and the basic function of the command economy remains fair distribution of resources in the people and to not let few individuals control most of the wealth.
Recently, the current economic crises started with the aggressive U.S lending policy, banks provided consumers with easy finance and as soon as the market prices started falling, consumers became unable to pay the banks back and banks were left with huge assets in their balance sheets but with no real market value (Ryan, pg 54-55). This led to the downfall of the biggest lending institutions and the effects were felt by the stock exchanges worldwide. People started losing jobs and investment levels started falling drastically. Countries like China, UAE, Iran and Brazil that did not rely heavily on US economy were not that badly affected, and countries like UK and Japan, which relied heavily on US economy were badly affected. However, things look better now than they did in 2007, and the world hopes that there is an economic boom right around the corner.
Conte and Carr. (Chapter 1). Outline of the U.S. Economy. Springer, 2003.
Ryan, Bob. Toxic Assets, ACCA’s Student Account Magazine. ACCA, 2009.
Retrieved on October 07, 2010 from http://www.accaglobal.com/pubs/students/publications/student_accountant/archive/sa_jan09_ryan.pdf