(GED Social Studies/Economics; Lesson 2)-The U.S. Economic System

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In United States, the economic activities of individual’s matters a lot in the growth of U.S. they make their own decisions when it comes to entrepreneur, employment and initiative. This freedom is based on the concept of laissez-faire capitalism. The ideas of Adam smith in the 18th century also contributed to economic system of U.S. he believes that if individuals are allowed to act freely economically, there actions we be of good interest to the economics of the nation as a whole. The free enterprise and competition has helped in the growth of U.S. economic. The U.S. system does not allow monopoly (a single producer that controls the whole industries of production) or oligopolies (whereby groups of companies merge together to control the whole industry of production). 

The U.S. economic goes through business cycles, since it is not control by government. The cycles of phases are;

  • Growth phase; business invest and expand optimistically
  • Slowdown phase; here growth is slowed by one or more factors
  • Recession phase; in the recession phase, businesses lay off workers, consumers spending slows down etc.
  • Recovery phase; the recovery phase is initiated by government, it might be slow or fast but at the end they move into a new growth phase.

In other for businesses to grow, banks and savings and loan associations major job is to make sure money is available through savings. This savings in turn can be used to help businesses grow through loan. Stock exchanges also have a similar purpose. They allow investors to purchase shares of stock (it has to do with part ownership of a business).


  1. Laissez-faire capitalism has to do with? A. Savings B. Freedom C. Entertainment D. Entrepreneurs

Ans= B

  1. A single seller that controls the whole industries of production is known as? A. Oligopoly B. Market C. Monopoly D. Economist

Ans= C

  1. The recovery phase is initiated by whom? A. Government B. Monopolist C. Economist D. Business men

Ans= A

  1. Banks and savings and loan associations job are to? A. Make money available B. Make laws C. Secure shares D. Entertain businesses

Ans= A