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 communismExample 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 capitalismExample 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 SYSTEMSMixed EconomyBusinesses 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 economiesExample 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 SYSTEMSLets look at a couple samples of how questions look on the OGT that will test your knowledge of economic systemsA. from a mixed economy to acommand economyB. from a command economy toa mixed economyC. from a traditional economy toa market economyD. from a market economy to atraditional economyIn a certain country, decisionsregarding production andconsumption of goods are basedupon customs, beliefs, rituals, andhabits. Over time, the economicsystem changes to one in whichproduction decisions are based oncompetition and consumer choice.How has the economic system ofthis country changed?
7 ECONOMIC SYSTEMSLets look at a couple samples of how questions look on the OGT that will test your knowledge of economic systemsA. from a mixed economy to amarket economyB. from a command economy toa mixed economyC. from a market economy to atraditional economyD. from a traditional economy toa command economyIn a certain country, all decisionsconcerning the production of goodsand services are made by thegovernment. However, following apolitical revolution, a new economicsystem is set up in which somedecisions regarding production ofgoods and services are made by the government and others are made by individuals and private companies.How has the economy of thiscountry changed?
8 ECONOMIC SYSTEMSLets look at a couple samples of how questions look on the OGT that will test your knowledge of economic systemsif the government takescontrol of family-owned farmsB. if privately owned banksbecome subject to stricterregulationC. if agricultural and factoryworkers are required to joinlabor unionsD. if industries that had beenowned by the governmentbecome privately ownedEconomic systems answer thequestion of how goods and services are produced. What is one way a country could change from acommand economy to a marketeconomy?
9 TRADE TARIFF INFORMATION IMPORTANT TERMS TO KNOWImports: products entering into a country from a different locationExports: products leaving a country for a different destinationTariff: tax on imported goodsEmbargo/Blockade: a country refuses to trade with another nation for political or economic reasons5. 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: OPECTARIFF INFORMATION***A country will raise tariffs on foreign imports to help companies in their nation sell more goods to consumersIf 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 TradeLets look at a couple samples of how questions look on the OGT that will test your knowledge of Tradeincrease taxes on theproduction of U.S. automobilesB. create free trade agreementswith automobile-producingcountriesC. increase tariffs and importrestrictions on foreignautomobilesD. implement stricter controlof competition among U.S.automobile manufacturersWhich action could the U.S. government employ to protect U.S. automobile manufacturers from foreign competition?
11 TAXESTAX Effects***If the government raises taxes on money made by BUSINESSES it takes away from business owners profitsIf 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 TaxesLets 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 RESPONSEIf 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 effecton consumer spending and on theunemployment rate if the UnitedStates government were to increasepersonal income tax rates?Write your answer in the AnswerDocument. (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 OneFederal Reserve Board (FED)…members are appointed by the President. They control the money supply to the banks by raising/lowering interest ratesILevel Two 12 Federal Reserve Banks across the U.S. that provide and collect money from local banks within their region. (Cleveland)IIIIILevel ThreeThe millions of member banks found in every community across the U.S.
14 HOW DOES THE FED WORK?ESSAYThe 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 moneyThe 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 moneyBusiness: As people spend more, business will hire more workers, increase production, and expand.