Economics

Economics is the study of how people make their money and a study of choices. Which pair of shoes to buy – the ones on sale or the ones you really like, which cost much more. Whether to continue saving your money for an IPOD you want, or to use some of it to go to a movie Whether to give some money to a fundraiser for school or to housing for the homeless.

I. ECONOMIC SYSTEMS: All countries have an Economic System that sets rules for their different methods of production and consumption (buying and selling).

Major Economic Systems There are three major economic systems: traditional, market, and command. Most countries today use a mix of these economic systems.

Traditional Economy Economic decisions are based on customs and beliefs. A barter system is normally used. People often grow their own food and make their own goods.

Market Economy (Also called: Free Enterprise/ Capitalism) Individuals make decisions about what to buy and sell. Characteristics also include private ownership of businesses, competition, and free trade

Command Economy Government owns businesses and decides what goods and services will be produced and who will produce them. An assembly-line worker works on the axle of a Moskvich car, made by AZLK. Enterprises in the Soviet Union were more than just places of work; they were responsible for a broad range of social welfare functions—building and maintaining housing for their workforces, and managing health, recreational, educational, and similar facilities. http://en.wikipedia.org/wiki/Economy_of_the_Soviet_Union

Developed Countries Developed Country: Country with a strong economy and a high quality of life. There is usually a lot of freedom and openness in the economic system. Many of the world’s wealthiest and most powerful nations are developed countries. Examples: United States, Germany Many developed countries have a combination of a democracy and a market economy. New York City, USA Berlin, Germany

Developing Countries Developing Country: Country with less productive economies and a lower quality of life. These countries often suffer from low technological advancements, high unemployment, widespread poverty, and uneven distribution of wealth and facilities (such as healthcare). Two-thirds of the world’s people live in developing countries. Examples: Guatemala, Nigeria, Afghanistan Lagos, Nigeria Market in Guatemala

Developing Countries, continued Often, Developing Countries have a large informal economy—a part of the economy based on odd jobs that people perform without government regulation through taxes. Example page 265 Many developing countries still have some type of traditional economy, as many of the residents still live in rural areas, or they are part of the informal economy. Venezuela's informal economy

Closed Economies A closed economy is a self-sustained economy with no trading or business relations with any other economy outside it. A closed economy has little exposure to the outside world. A closed example would be North Korea A closed economy can almost always be described as a command economy Often, the more closed an economy is, the poorer the country.

II.THE ECONOMY AND MONEY: People, businesses and countries obtain the items they need and want through economic activities. Countries differ in their amount of economic activity and the strength of their economy.

Person who buys goods and services. Goods Consumer Person who buys goods and services. Goods Objects or materials that humans can purchase to satisfy their wants and needs. Services Any activities performed for a fee. Jobs in the Service Industry include hair dressers, doctors, painters, etc...

GDP (Gross Domestic Product) The total value of goods and services produced in a country in a year. Per Capita GDP – GDP per person in a country = One Year

Currency Type of coin or paper money used in a country or region.

Barter System The exchange of goods and services for another. (No currency is used.)

The Law of Supply and Demand Supply—how much of something is available Demand—the amount of something consumers are willing or able to buy In a Market Economy this law determines prices of goods and services. Scarcity – A condition of limited resources and unlimited wants.

Inflation Overall increase in the price of goods and services across a country’s economy.

A decline in manufacturing, employment, and sales. Recession A decline in manufacturing, employment, and sales.

Depression A severe/long economic recession. X long time

Industrialization Agriculture The process of using machinery for all major forms of production Agriculture The production of crops or livestock

Standard of Living A measure of how well people are living. Determined by the amount of goods and services they can buy.

Competition Rivalry between businesses selling similar goods or services; often leads to lower prices

Exports Imports Tariffs Goods or services a country sells and sends to other countries Imports Goods or services that a country brings in or purchases from another country Tariffs A tax added to imported goods