Leture 2 National Economy

National Economy
Lecturer: A.Turekhanova
National Economy
A national economy is the production,

distribution and trade, consumption
of goods and services by different
agents of a nation.
History
 National economies before the eighteenth
century weren’t classified and differentiated
 Each country had their own system and methods

of trade and other financial transfers. It wasn’t
until the mid-eighteenth century that the father
of economics, Adam Smith, expanded on the
studies of French physiocrats. He argued that the
invisible hand would create social and economic
prosperity for all if there was little government
interference.
Keynesian Era
 John Maynard Keynes was a British economist. He
believed that free-market capitalism is unstable
and strongly supported government intervention.
He believed that the government is in a better
position to bring about good economic
performance than the market forces.
The Free-Market Revolution
Fredrick von Hayek and Milton Friedman (1960)
Hayek argued that a free market system - that is
protected with strong constitutions and laws, and
well-defined and enforced property rights,- will
allow individuals to pursue their own values and
make the best use of their knowledge.
 Supply-Side Economics
 The debate between no government intervention
and government intervention would continue
throughout the years. By the time Ronald Reagan
became president of the US in 1981, a new form
of economics had arisen: supply-side economics.
 The idea is that tax cuts for wealthy investors,
entrepreneurs, etc. will provide them with a
greater incentive to save and invest. Their
investments will then ‘trickle down’ to the wider
national economy and produce economic benefits
for all. Reagan often said ‘a rising tide lifts all
boats’ to explain this theory.
Goals and Characteristics of a
National Economy
Every country wants its economy to be
successful. Thus, each nation has different
goals that will ensure the success and
stability of its national economy. Some
goals an economy might have are:
Goals
Efficiency.
Equity.
Economic freedom.
Economic growth.
Full employment.
Price stability
Sectors of economy
A sector is an area of the economy in which

businesses share the same or related
business activity, product, or service.
Sectors represent a large grouping of
companies with similar business activities,
such as the extraction of natural resources
and agriculture.
Sectors of economy
Primary Sector - raw materials.

Secondary Sector - manufacturing.
Tertiary Sector - services.
Quaternary Sector - knowledge.
Quinary Sector - an extension of the
tertiary/quaternary sector.
 KEY TAKEAWAYS
 Sectors are used to categorize the economic activity
of consumers and businesses into groupings based on
the type of business activity.
 Primary sector companies are directly engaged in
activities utilizing natural resources, such as mining
and agriculture.
 Secondary sector companies produce goods derived
from the products within the primary sector and
include manufacturing.
 Tertiary and quaternary sectors represent the
services and knowledge-based economy and include
retail and information technology.
 In the financial markets, investment sectors are sub-
sectors that aid in comparing the financial
performance of similar businesses.
However, there are a few characteristics
most national economies might have in
common. Some of these include:
Open economy. This relates to an economy
that is open to selling and buying goods and
services in global markets. Essentially, the
economy is open to free trade.
Closed economy. This relates to an
economy that is not open to selling and
buying goods and services in global markets.
They do not trade with any outside economy.
 Free market economy. This refers to an economy where the
prices and distribution of goods and services are determined by
supply and demand with little government intervention.
 New Zealand, Singapore, and the US are examples of countries
with a free market economy.
 Command economy. This refers to an economy where the

allocation of goods and services, the rule of law, and all
economic activity is controlled by the government.
 The economies of North Korea and the former Soviet Union are
examples of a command economy.
 Mixed economy. This is an economy that mixes both free-

market and command economy characteristics. It combines both
aspects of capitalism and socialism.
 Germany, Iceland, Sweden, and France are a few examples of
countries with mixed economies.
Literature:
 Куатова Д.Я. Экономика предприятия. Учебное пособие.– Алматы: «Экономика». 2011. – 352 с.
 Galiya Berdykulova. Economy, Production, and Management of Enterprise. Textbook. Almaty 2020
 Earl, P. Business economics: A contemporary approach (Экономика предприятия) [Текст] / Peter Earl, Tim Wakeley.- New
York: McGraw-Hill, 2005.- 561p.
 S. Anil Kumar, N. Suresh. Production and operations management (with skill development, caselets and cases). 2nd ed. New Age
Publisher, 2008.
 Jones, T. Business economics and managerial decision making [Текст]: Manchester School of Manaqement UMIST / T. Jones.- USA:
John wiley & Sons, LTD, 2004.- 569 p.
 Филатов ОК. и др. Экономика предприятий (организаций): Учебник / Филатов O.K., Рябова Т.Ф., Минаева Е.В. - 4-е изд.- М.:
Финансы и статистика, 2008.

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National Economy

A national economy is the production,

 Each country had their own system and methods

A sector is an area of the economy in which

Primary Sector - raw materials.

 Command economy. This refers to an economy where the

 Mixed economy. This is an economy that mixes both free-

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