Capitalism, growth and inequality
- Capitalists are individuals who use the factors of
production in an attempt to make money.
- When economists refer to capitalism, they are
describing an economy populated with capitalists.
Capitalism and markets
- Command economies are not capitalist because all FOP
are allocated by the state.
- Mixed economies are partially as some FOP are
allocated by the state whereas others are allocated by
the price mechanism.
- Free market economies are completely capitalist as all
FOP are allocated by the price mechanism.
Capitalism and economic growth.
- Capitalists invest their money in the economy, which
leads to an outward shift in aggregate demand.
- This creates a positive multiplier effect as an
increase in investment leads to an increase in
employment, and hence consumer spending due to greater
incomes and so on.
- Finally, the profit motive encourages businesses to
improve the quality and the efficiency of the factors
of production.
- This leads to an outward shift in LRAS and therefore
an increase in RGDP.
- Capitalists are individuals who use the factors of
production in an attempt to make money.
- When economists refer to capitalism, they are
describing an economy populated with capitalists.
Capitalism and markets
- Command economies are not capitalist because all FOP
are allocated by the state.
- Mixed economies are partially as some FOP are
allocated by the state whereas others are allocated by
the price mechanism.
- Free market economies are completely capitalist as all
FOP are allocated by the price mechanism.
Capitalism and economic growth.
- Capitalists invest their money in the economy, which
leads to an outward shift in aggregate demand.
- This creates a positive multiplier effect as an
increase in investment leads to an increase in
employment, and hence consumer spending due to greater
incomes and so on.
- Finally, the profit motive encourages businesses to
improve the quality and the efficiency of the factors
of production.
- This leads to an outward shift in LRAS and therefore
an increase in RGDP.
