1. CHAPTER IV ECONOMIC SYSTEMS AND DEVELOPMENT
INTERNATIONAL BUSINESS
CHAPTER IV ECONOMIC SYSTEMS AND DEVELOPMENT

2. Learning Objectives
Describe what is meant by a centrally planned economy and explain why its use is declining.
Identify the main characteristics of a mixed economy and explain the emphasis on privatization.
Explain how a market economy functions and identify its distinguishing features.
Describe the different ways to measure a nation’s level of development.
Discuss the process of economic transaction and identify the remaining obstacle for business.

3. ECONOMIC SYSTEMS Centrally Planned Economy Mixed Economy
Market Economy

4. ECONOMIC SYSTEMS Economic System
Structure and processes that a country uses to allocate its resources and conducts its commercial activities.

5. CENTRALLY PLANNED ECONONY
ECONOMIC SYSTEMS
MIXED ECONOMY
CENTRALLY PLANNED ECONONY
ECONOMIC
SYSTEM
MARKET ECONOMY

6. Centrally Planned Economy
Economic system in which a nation’s land, factories, and other economic resources are owed by the government, which plans nearly all economic activity

7. Centrally Planned Economy
Origins of the Centrally Planned Economy
Decline of Central Planning
Failure to Create Economic Value
Failure to Achieve Rapid Growth
Failure to Satisfy Consumer needs
Focus on China

8. Mixed Economy Mixed Economy
Economic system in which land , factories and other economic resources are rather equally split between private and government ownership
Origins of the Mixed Economy
Decline of Mixed Economies
Move Toward Privatization

9. Mixed Economy Privatization
Policy of selling government-owned economic resources to private companies and individuals

10. MARKET ECONOMY Origins of the Market Economy
Features of a Market economy
Government’s Role in a Market Economy
Economic Freedom

11. MARKET ECONOMY
Market Economy Economic system in which the majority of a nation’s land , factories, and other economic resources are privately owned ,either by individuals or business.
Supply Quantity of a good or service that producers are willing to provide at a specific selling price
Demand Quantity of a good or service that buyers are willing to purchase at a specific selling price

12. MARKET ECONOMY Origins of the Market Economy
Features of a Market Economy
Free choice
Free enterprise
Price flexibility

13. MARKET ECONOMY Government’s Role in a Market Economy
Enforcing Antitrust Laws
Preserving Property Rights
Providing a Stable Fiscal and Monetary Environment.
Preserving Political Stability.

14. DEVELOPMENT OF NATIONS
National Production
Purchasing Power Parity
Human Development
Classifying Countries.

15. DEVELOPMENT OF NATIONS
Economic Development
Measure for gauging the economic well-being of one nation’s people as compared with that of another nation’s people.

16. National Production Uncounted Transactions Question of Growth
Problem of Averages
Pitfalls of Comparison

17. National Production
Uncounted Transactions Many of a nation’s transactions do not get counted in either GDP or GNP. Some of the activities not included are:
Volunteer work
Unpaid household work
Illegal activities such as gambling and black market transactions
Unreported transactions conducted in cash

18. Purchasing Power Parity
value of goods and services that can be purchased with one unit of a country’s currency
Purchasing Power Parity (PPP)
Relative ability of two countries’ currencies to buy the same “basket” of goods in those two countries.

19. Human Development Human Development Index (HDI)
Measure of the extend to which a people’s needs are satisfied and the degree to which these needs are addressed equally across a nation’s entire population

20. Classifying Countries
Developed Country
Newly Industrialized Countries
Developing Countries

21. Classifying Countries
Developed Countries
Country that is highly industrialized highly efficient , and whose people enjoy a high quality of life

24. Classifying Countries
Newly Industrialized Country (NIC)
Country that has recently increased the portion of its national production and exports derived from industrial operations
Emerging Markets
Newly industrialized countries plus those with the potential to become newly industrialized

26. Classifying Countries
Developing Country
Nation that has a poor infrastructure and extremely low personal incomes
Technological Dualism
Use of the latest technologies in some sectors of the economy coupled with the use of outdated technologies in other sectors

28. ECONOMIC TRANSITION
Obstacles to Transaction
Focus on Russia

29. ECONOMIC TRANSITION Economic Transaction
Process by which a nation changes its fundamental economic organization and creates new free-market institutions.

30. Obstacles to Transition
Lack of Managerial Expertise
Shortage of Capital
Cultural Differences
Environmental Degradation

31. Focus on Russia Rough Transaction Challenges Ahead for Russia
One Bright Spot

32. Focus on Russia Rough Transaction Challenges Ahead for Russia
One Bright Spot

33. THE END