Economies of the World

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Economies of the World

• How does a countrys economy effect its place in
  the world?

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1. 3 economic questions.

• What to produce?
• How to produce?
• For whom to produce?
• Leads to specialization- most countries have one
  or several items they produce that are native to
  their territory

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Examples

• Florida specializes in exporting citrus fruits
• Holland specializes in exporting flowers and
  cheese
• Saudi Arabia specializes in exporting oil

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2. Global Trade

• Specialization leads to global trade
• Very few countries are completely self-sufficient
• Most have to get certain goods from other places
• Think of 3 examples of goods in which the U.S.
  has to import from other countries

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3. Trade Barriers

• Tariffs- taxes on goods/services from other
  countries (makes them more expensive)
• Quotas- a limited amount of product can be sold
  to a country
• Embargos- all trade is cut off, usually for
  political or cultural reasons

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4. NECESSITY..

• When trading globally, the only necessary factor
  is that there is a system for exchanging
  currencies
• Without this, trade would probably not exist

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5. GDP

• Gross Domestic Product- how much money a country
  makes in a year from imports/exports
• 2 factors influence GDP
• Investment in human capital (education
  training)
• Investment in capital (machinery, factories,
  technology)
• Explain the correlation between the above two
  factors and a countrys GDP.

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6. 3 types of economies

• Market (Capitalist)- decisions about investment,
  production, and distribution is based on supply
  demand
• Traditional- goods/services are often traded
  without the exchange of money
• Command- all factors of production are controlled
  by a central authority (the government)

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7. A secret 4th economy...

• And by far the most widely used
• MIXED
• A mix of both market and command
• Free market practices are encouraged (following
  the law of supply and demand, entrepreneurship,
  etc.) but are regulated by the government
• Competition between businesses gives consumers
  choices
• EX U.S.A.- we are encouraged to own businesses,
  but must follow federal labor, production, and
  distribution laws. Plus, we have to pay taxes.

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Terms to know

• GDP
• Factors of production
• Scarcity
• Supply and demand
• Investment
• Import
• Export
• Currency exchange

• Embargo
• Tariff
• Quota
• Market
• Command
• Traditional
• Mixed
• Consumer/producer