Understanding the American Mixed Economy

This assignment delves into the workings of the American mixed economy. It analyzes how consumer influence shapes production decisions in a market economy, explains the limitations of GDP as an economic indicator, and highlights the crucial role of government regulation in maintaining a balanced business environment.

Running head: INTRODUCTION TO BUSINESS
Introduction to Business
Name of the Student
Name of the University
Author Note

1INTRODUCTION TO BUSINESS
Answer 1
The Americans have always disliked Communism and the ideologies associated with the
tenets of Communism thus the state sponsoring the methods of Capitalism was a far-fetched
idea. The devastating economic scenario created by Great Depression lead to the creation of
mixed economy. The growths of labor unions also lead to addition in the business regulatory
laws. The Americans believes that the government should be kept in check so that it does not
become tyrannical. To escape the feudal framework mixed economy was encouraged. All the
points mentioned above resulted American Business to develop into a mixed economy.
Answer 2
In the case of market economy, it is possible for an individual to have a voice in
answering the basic four economic questions. To a company the opinion of a consumer matters
the most as consumer behavior determines the popularity of a company. Thus to appease the
consumers the organizations produce accordingly. This means that the individuals influence
“what to produce” and “for whom to produce” indirectlyi. In the similar manner, the companies
or organizations who control the factors of production they decide “how to produce” and “what
resources to use” and both the decisions depend on the demands of the individual consumers.
Answer 3
Gross Domestic Product (GDP) is the measurement of the market value of all the final
products or goods produced in a country in a year. Through GDP it is possible to measure the
size of an economy but it does not reflect in any way on the financial status of the people of a
nation or the buying capacity of the populace ii. GDP is not a reliable indicator of a nation’s
economic health, as it cannot determine the purchasing power of the buyers in an economy. The

2INTRODUCTION TO BUSINESS
rate of employment or unemployment can be a better indicator, which can shed light on a
country’s economic conditions.
Answer 4
The involvement of government in an economy is very important or else the economic
framework of a country will face downfall. The government of United States regulates various
trusts, unions, and monopolies otherwise; the big organization would have taken over the
business framework causing a huge hike on the prices of the products, which would have been
extremely detrimental for free economic system. The government also protects the interests of
the common people, which the big companies would have ignored in order to make profits
leading to the suffering of people. Taxation is also important for the development of the society.

i Pride, William M., Robert J. Hughes, and Jack R. Kapoor. Foundations of business. Cengage Learning, 2014.
ii Fraumeni, Barbara M. "Gross domestic product: Are other measures needed?." IZA World of Labor (2017).
Reference List
Fraumeni, Barbara M. "Gross domestic product: Are other measures needed?." IZA World of
Labor (2017).
Pride, William M., Robert J. Hughes, and Jack R. Kapoor. Foundations of business. Cengage Learning,
2014.