1. OGT SESSION 1
ECONOMICS

2. ECONOMIC SYSTEMS Command Economy
All economic decisions are made by the government
-Countries with dictatorial forms of government have command economies
-Most common type of command economy is communism
Example of nations that had or have command economies today: Soviet Union, Cuba, North Korea, Venezuela, Vietnam

3. ECONOMIC SYSTEMS Market Economy
All businesses are privately owned by citizens, prices and wages are determine by the forces of SUPPLY AND DEMAND
-Supply and Demand: how badly people want a product and how much supply of that product is available determines its cost!
-Countries with democratic forms of government have market economies
-Most common type of market economy is capitalism
Example of a nation that had or have command economies today: UNITED STATES OF AMERICA PRE-1932

4. -Countries with democratic forms of government have market economies
ECONOMIC SYSTEMS
Mixed Economy
Businesses are EITHER privately owned by citizens or by the government. Supply and Demand still determines production and pricing BUT government sets rules that businesses have to follow.
-Laws passed by the government in a mixed economy are typically to product consumers and workers from abuse by big business owners. (example: minimum wage)
-Countries with democratic forms of government have market economies
Example of a nation that had or have command economies today: UNITED STATES OF AMERICA POST-1932

5. ECONOMIC SYSTEMS Traditional Economy
An economy based on custom and tradition. The decisions are based on tradition of the community or family. Goods are made in the home and traded rather than sold for profit.
Example of a nation that had or have command economies today: Tribal regions of Africa and South America

6. ECONOMIC SYSTEMS
Lets look at a couple samples of how questions look on the OGT that will test your knowledge of economic systems
A. from a mixed economy to a
command economy
B. from a command economy to
a mixed economy
C. from a traditional economy to
a market economy
D. from a market economy to a
traditional economy
In a certain country, decisions
regarding production and
consumption of goods are based
upon customs, beliefs, rituals, and
habits. Over time, the economic
system changes to one in which
production decisions are based on
competition and consumer choice.
How has the economic system of
this country changed?

7. ECONOMIC SYSTEMS
Lets look at a couple samples of how questions look on the OGT that will test your knowledge of economic systems
A. from a mixed economy to a
market economy
B. from a command economy to
a mixed economy
C. from a market economy to a
traditional economy
D. from a traditional economy to
a command economy
In a certain country, all decisions
concerning the production of goods
and services are made by the
government. However, following a
political revolution, a new economic
system is set up in which some
decisions regarding production of
goods and services are made by the government and others are made by individuals and private companies.
How has the economy of this
country changed?

8. ECONOMIC SYSTEMS
Lets look at a couple samples of how questions look on the OGT that will test your knowledge of economic systems
if the government takes
control of family-owned farms
B. if privately owned banks
become subject to stricter
regulation
C. if agricultural and factory
workers are required to join
labor unions
D. if industries that had been
owned by the government
become privately owned
Economic systems answer the
question of how goods and services are produced. What is one way a country could change from a
command economy to a market
economy?

9. TRADE TARIFF INFORMATION
IMPORTANT TERMS TO KNOW
Imports: products entering into a country from a different location
Exports: products leaving a country for a different destination
Tariff: tax on imported goods
Embargo/Blockade: a country refuses to trade with another nation for political or economic reasons
5. Trading Blocs: Countries from the same region of the world who will work together to conduct trade with other nations.
They do this because they are likely to get more for their products as a group than competing against one another.
Example: Countries in the Middle East pooling their oil and selling it as one organization: OPEC
TARIFF INFORMATION
***A country will raise tariffs on foreign imports to help companies in their nation sell more goods to consumers
If a foreign company has to pay a higher tax to sell their good in the United States they will have to charge consumers more for that product.
***A country will lower tariffs on foreign imports if there is a product in high demand in their nation that cannot be produced by their own companies

10. Trade
Lets look at a couple samples of how questions look on the OGT that will test your knowledge of Trade
increase taxes on the
production of U.S. automobiles
B. create free trade agreements
with automobile-producing
countries
C. increase tariffs and import
restrictions on foreign
automobiles
D. implement stricter control
of competition among U.S.
automobile manufacturers
Which action could the U.S. government employ to protect U.S. automobile manufacturers from foreign competition?

11. TAXES
TAX Effects
***If the government raises taxes on money made by BUSINESSES it takes away from business owners profits
If business owners are losing money to high taxes they are going to look for things to cut to make up for the money loss….Number ONE CUT—JOBS!
***If workers are seeing more of their hard earned paycheck taken away by taxes they are going to buy fewer products. This means businesses make less money and risk going out of business or having to lay off workers!
*16th Amendment: granted Congress the right to raise money (revenue) by collecting taxes from people’s income (money earned from work)
Tax money is used to pay for schools, public service projects, military, aide to foreign nations, etc.
How much the government taxes workers and business owners can have a HUGE impact on the economy

12. POTENTIAL WRITTEN RESPONSE
Taxes
Lets look at a couple samples of how questions look on the OGT that will test your knowledge of Taxes. The following is an example of a 2 point writing question on the OGT.
POTENTIAL WRITTEN RESPONSE
If the U.S. government were to increase income taxes consumer spending would go down because people would be getting to keep less of the money they earn with each paycheck. Because people are buying fewer products businesses will be making less money and will have to lay workers off leading to a HIGHER unemployment rate.
What would be the expected effect
on consumer spending and on the
unemployment rate if the United
States government were to increase
personal income tax rates?
Write your answer in the Answer
Document. (2 points)

13. Cleaning up the Banking System FEDERAL RESERVE SYSTEM
Improved the nation’s monetary and banking system by allowing banks to control the money supply. The Federal Reserve Board was created to monitor spending/lending and determine the amount of money made available to banks for loans.
Level OneFederal Reserve Board (FED)…members are appointed by the President. They control the money supply to the banks by raising/lowering interest rates I
Level Two 12 Federal Reserve Banks across the U.S. that provide and collect money from local banks within their region. (Cleveland) II
III
Level ThreeThe millions of member banks found in every community across the U.S.

14. HOW DOES THE FED WORK?
ESSAYThe country is in a state of economic depression. Money is scarce, unemployment is high, bankruptcy/foreclosures are rising, and businesses are failing. What can the FED do to fix this economic problem and what impact will the FED’s decision have on consumers, businesses, and the government.
*IT ALL COMES DOWN TO INTERST RATES!-A rate which is charged or paid for the use of money
The Fed should……..
Lower Interest rates to increase the amount of money banks have available for loan and make it easier for people and businesses to get access to that money.
Impact of Lowering Interest Rates?……
Government: More people spending money, more people making income, business making hire profits EQUALS greater TAX REVENUES!
Consumers: The money in circulation will rise encouraging consumers to spend more money
Business: As people spend more, business will hire more workers, increase production, and expand.