1. European Economic Systems United Kingdom Germany Russia

2. Review... Types of Economies TYPES OF ECONOMIC SYSTEMS DefinitionAssociated TermsExamples in Practice 1) Market economyAn economic system in which individuals own and operate the factors of production. Free enterprise Capitalism 2) Command economyAn economic system in which the government owns and operates the factors of production. Socialism Communism Cuba China Laos 3) Traditional economyAn economic system based upon customs and traditions. Economy is based upon agriculture and hunting. Non-Industrialized Agrarian societies Chad Haiti Rwanda 4) Mixed economyAn economic system that has features of both market and command economies. United States Great Britain Japan

3. Economic Continuum No system has a pure command or market economy.  All economies combine aspects of both of the command and market economic systems – to different degrees. ▫USA has some government owned businesses – schools, public colleges, postal services – in addition to the privately owned businesses.

4. United Kingdom What to produce?  Similar to the USA...  Largely a service based economy  Extremely efficient agricultural sector How to produce?  Industries have much freedom  Nationalize some industries – banking For whom to produce?  Private sector provides goods and services for domestic and international markets Where are they on the continuum?  Far to the market side

5. Germany What to produce?  Export based economy  Focused on manufacturing and commodities How to produce?  Businesses are largely privately owned and independent  Increasing involvement of government in financial sectors. ▫Still trying to improve the East German economy to match the West German economy. For whom to produce?  Exports are the primary focus  Billions of dollars are transferred to East German states to help modernize and update factories Where are they on the continuum?  Market side... But not as far as the UK... Closer to a command economy.

6. Russia What to produce?  Government is still largely involved in the economy  Must approve any investments larger than 50 million rubles. How to produce?  Large scale production changes are difficult due to the immense bureaucracy. ▫Some movement towards modernizing factories and agricultural equipment. For whom to produce?  Low tax rates to improve domestic purchases  Trying to allow for market interactions ▫High tariffs and minimal protection of private property make this difficult. Where are they on the continuum?  Roughly dead center on the continuum

7. The Continuum These 3 systems are all mixed economies... Leaning mostly towards a market system.  They do have some elements of a command economy.

8. Review... Key Concepts Tariff – tax ▫A trade barrier that is used to discourage trade with foreign companies ▫This type of barrier would restrict trade ▫Created to increase the prices of imported goods and protect a country’s own industries from foreign competition Quota ▫Restrictions on the amount of a good that can be imported into a country ▫This type of barrier can create shortages and an increase in price. ▫EU placed a quota on Chinese imports of clothing when France and Italy, with strong textile industries, complained about cheap import prices. Embargo ▫Forbidden trade with another country ▫This type of barrier would STOP the importing of an item ▫Can be put in place for safety reasons... Unsanitary conditions – lead paint ▫Also used for political reasons... Countries that violate human rights

9. Summarizing Activity Is it a QUOTA, EMBARGO or TARIFF....  Only 3,000 pairs of American blue jeans can enter France.  The USA charges an extra 10 cents per pound on bananas from Costa Rica.  No Brazilian beef can be sold in Spain.  Only 10,000barrels of oil can be delivered from Saudi Arabia to Italy this month.  The EU will not accept any products from an African nation because its government will not allow free speech or freedom of religion.

10. Economic Growth 4 factors for economic growth ▫Land ▫Capital  Factories, machines, etc. ▫Labor  Human capital ▫Entrepreneurship  Ideas, innovation and risk involved in starting a business How is economic growth measured? ▫Gross Domestic Product (GDP)  Total market value of the goods and services produced by a country’s economy in a specific year. ▫Used to determine the health of a country’s economy and compare it to other countries.

11. How does a country raise its GDP? ▫Invest in human capital  Education and skills training  Smarter people leads to a more productive workforce ▫Increase economic growth.  Literacy rate is used to determine the educational level of people... ▫Higher the literacy rate... Higher the GDP ▫Invest in capital resources  Provides workers with the most current and updated tools. ▫Increases productivity and economic growth Examples... ▫Germany... High GDP  Invested in education and vocational schools ▫Russia and Ukraine... Low GDP  Rebuilding economies after gaining their independence in 1990’s ▫Ukraine had little money for schools and teacher salaries. ▫Russia had outdate machines and technology in their manufacturing plants.

12. What role does natural resource play in the success of a country’s economy? ▫Fuel for a country’s industries. ▫Source of income when exported. ▫Examples  United Kingdom ▫Coal, oil, gas  Germany ▫Rivers, forests, large deposits of coal and iron ore  Russia ▫Located in remote areas ▫Hard to develop due to climate and transportation

13. What role do entrepreneurs play in the success of a country’s economy? ▫Generate new ideas ▫Invest in human, capital and natural resources ▫Willing to take risks ▫Help countries adapt to changing trends  Do not have as much entrepreneurship activity as the USA or developing countries... ▫Due to high taxes, lots of regulations and job security. ▫The EU is trying to change this through reducing taxes and regulations on small businesses.

14. Let’s Practice... List the countries with the 4 HIGHEST GDPs.  United Kingdom, Belgium, France, Germany Do these countries have high or low investment in education and capital equipment?  High List the countries with the 3 LOWEST GDPs.  Poland, Russia, Ukraine Do these countries have high or low investment in education and capital equipment?  Low