Macroeconomics – Assignment Example
Economics systems are mechanisms chosen by an economy to decide on how to allocate its resources to different uses. An efficient economic system must, therefore, answer the following fundamental questions:
1) What to produce?
2) How to produce?
3) For whom to produce?
There can be different answers to each of these questions, which results in different economic systems. For example, what to produce can be answered by either producing a good that is necessity for the population, or a good can also be produced that will earn the maximum profit to a producer. A capitalist will always choose the alternative which will give the producer maximum benefits, whereas in command economy, what is needed by the population will be produce. Similarly, how to produce can be answered by producing either through capital intensive methods or by using labor-intensive methods. Similarly, the question regarding for whom to produce will differ from one economy to another. In a capitalist system, goods will be produced for people who can afford them and that are most profitable to firm, whereas in command economy goods will be produced to provide service to the population and for rationing.
The United States of America answers these fundamental questions by operating a mixed economic system. Here the main focus is on free enterprise, but government is there to safeguard the interest of general public and to make sure that businesses do not astray in their search of profit. United States of America decides on what to produce by producing both necessities and luxury goods in private and public sectors. It produces via both labor and capital intensive methods to keep employment high and at the same time to exploit technological advantages. It produces both luxury goods for the rich and necessities for poor and needy people.