Presentation on theme: "CHAPTER IV ECONOMIC SYSTEMS AND DEVELOPMENT"— Presentation transcript:
1 CHAPTER IV ECONOMIC SYSTEMS AND DEVELOPMENT INTERNATIONAL BUSINESSCHAPTER IV ECONOMIC SYSTEMS AND DEVELOPMENT
2 Learning ObjectivesDescribe 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.
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 EconomyDecline of Central PlanningFailure to Create Economic ValueFailure to Achieve Rapid GrowthFailure to Satisfy Consumer needsFocus 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 ownershipOrigins of the Mixed EconomyDecline of Mixed EconomiesMove 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 economyGovernment’s Role in a Market EconomyEconomic Freedom
11 MARKET ECONOMYMarket 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 priceDemand 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 EconomyFree choiceFree enterprisePrice flexibility
13 MARKET ECONOMY Government’s Role in a Market Economy Enforcing Antitrust LawsPreserving Property RightsProviding a Stable Fiscal and Monetary Environment.Preserving Political Stability.
14 DEVELOPMENT OF NATIONS National ProductionPurchasing Power ParityHuman DevelopmentClassifying Countries.
15 DEVELOPMENT OF NATIONS Economic DevelopmentMeasure 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 AveragesPitfalls of Comparison
17 National ProductionUncounted Transactions Many of a nation’s transactions do not get counted in either GDP or GNP. Some of the activities not included are:Volunteer workUnpaid household workIllegal activities such as gambling and black market transactionsUnreported transactions conducted in cash
18 Purchasing Power Parity value of goods and services that can be purchased with one unit of a country’s currencyPurchasing 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 CountryNewly Industrialized CountriesDeveloping Countries
21 Classifying Countries Developed CountriesCountry 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 operationsEmerging MarketsNewly industrialized countries plus those with the potential to become newly industrialized
26 Classifying Countries Developing CountryNation that has a poor infrastructure and extremely low personal incomesTechnological DualismUse of the latest technologies in some sectors of the economy coupled with the use of outdated technologies in other sectors