ABSTRACT
This chapter discusses the various economic systems that nations prefer to implement and what underlies their choices. The manner in which the fundamental economic questions are answered depends on a society's economic system. There are three broad types of economies: the market economy, the command economy, and the mixed economy. The United States has a mixed economy. By the 1990s, the centrally planned economies in the former Soviet Union and Eastern Europe had collapsed and began switching to capitalism. Also, the Chinese economy started embracing capitalism. These nations are known as transition economies. The advanced nations are those of North America and Western Europe, plus Australia, New Zealand, and Japan. Most nations of the world are classified as developing nations. These nations include most of those in Africa, Asia, Latin America, and the Middle East. Compared to advanced countries, developing countries generally have lower levels of real GDP per capita, shorter life expectancies, and lower levels of adult literacy.
