CH. 26 ECONOMIC SYSTEMS STANDARD EE 1.1, 1.2, 2.3

TYPES OF ECONOMIC SYSTEMS MARKET ECONOMY – FREE MARKET SYSTEMS WHERE DECISIONS ARE BASED ON SUPPLY & DEMAND INDIVIDUAL FREEDOM, COMPETITION, GOVERNMENT INTERVENTION TO DEAL WITH EXTERNALITIES, GENERALLY HIGHER PER CAPITA GDP GOVERNMENT MAY PROVIDE SOME GOODS/SERVICES AND MAINTAINS FAIR COMPETITION AMONG BUSINESSES EX. UNITED STATES

TYPES OF ECONOMIC SYSTEMS COMMAND ECONOMY – CENTRAL GOVERNMENT MAKES DECISIONS FOR PRODUCERS SOCIALISM (MEANS OF PRODUCTION OWNED BY SOCIETY) OR COMMUNISM (CLASSLESS SOCIETY IN WHICH ALL PROPERTY IS HELD IN COMMON) GOVERNMENT CONTROL, GENERALLY SLOW GROWTH, LOWER PER CAPITA GDP EX. NORTH KOREA, CUBA

DEVELOPED VS. DEVELOPING COUNTRIES DEVELOPED COUNTRIES HAVE MODERN, INDUSTRIALIZED ECONOMIES, HIGH GDP, AND HIGH STANDARDS OF LIVING EXAMPLES: US, CANADA, MOST OF EUROPE, JAPAN, AUSTRALIA

DEVELOPED VS. DEVELOPING COUNTRIES DEVELOPING COUNTRIES HAVE MORE TRADITIONAL, AGRICULTURE BASED ECONOMIES, LOW GDP, AND LOW STANDARD OF LIVING EXAMPLES: AFGHANISTAN, MEXICO, INDIA, RWANDA

INTERNATIONAL TRADE EXPORTS AND IMPORTS GIVE ACCESS TO PRODUCTS WE MIGHT NOT OTHERWISE HAVE DUE TO SCARCITY EXPORTS – THINGS SOLD TO ANOTHER COUNTRY IMPORTS – THINGS BOUGHT FROM ANOTHER COUNTRY

FREE TRADE FREE TRADE – THE ELIMINATION OF PROTECTIVE TRADE BARRIERS (TARIFFS, QUOTAS) TO ENCOURAGE TRADE BETWEEN NATIONS

FREE TRADE BENEFITSCOSTS LOWER PRICES FOR GOODSLOSS OF LOW SKILL JOBS TO DEVELOPING COUNTRIES WIDER SELECTION OF GOODSINCREASED FOCUS ON MANUFACTURING IN DEVELOPING COUNTRIES CREATES JOBS IN SKILLED INDUSTRIES IN DEVELOPED COUNTRIES INCREASED POLLUTION AND POOR WORKING CONDITIONS IN DEVELOPING COUNTRIES

FREE TRADE ORGANIZATIONS EUROPEAN UNION (EU) – EUROPEAN COUNTRIES TRADE WITH NO BARRIERS AND SHARED CURRENCY (THE EURO)

FREE TRADE ORGANIZATIONS NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) – ELIMINATES TRADE BARRIERS AMONG CANADA, US, AND MEXICO

FREE TRADE ORGANIZATIONS WORLD TRADE ORGANIZATION (WTO) – INTERNATIONAL ORGANIZATION OVERSEES TRADE NEGOTIATIONS TO ENCOURAGE FREE TRADE

MEASURING TRADE BALANCE OF TRADE – DIFFERENCE BETWEEN THE VALUE OF EXPORTS AND IMPORTS MORE EXPORTS THAN IMPORTS = TRADE SURPLUS MORE IMPORTS THAN EXPORTS = TRADE DEFICIT EXTREME TRADE DEFICITS CAN LEAD TO LOWER VALUE CURRENCY IMPORTS BOUGHT ON CREDIT THAT MUST BE REPAID BY EARNING MONEY THROUGH EXPORTS (DOLLAR DECLINES, MAKING US GOODS CHEAPER)