Economic Dictionary Economic system The way in which a nation uses its resources to satisfy people’s needs and wants. The way in which a nation uses

Economic DictionaryEconomic Dictionary

Economic systemEconomic system

The way in which a nation The way in which a nation uses its resources to satisfy uses its resources to satisfy people’s needs and wants.people’s needs and wants.

What is the difference between a need and a want? What are examples of each?

Real World ExampleReal World Example

What resources do we have?What resources do we have?

What will be produced?What will be produced? How will it be produced?How will it be produced? For whom will it be produced?For whom will it be produced?

Command EconomyCommand Economy

The The governmentgovernment decides decides what goods will be what goods will be produced, how they will produced, how they will be produced, and how be produced, and how they will be distributed they will be distributed


Example-communist Example-communist countries like Cuba and N. countries like Cuba and N. KoreaKorea

-Workers get same pay so -Workers get same pay so poor quality of goodspoor quality of goods

-little incentive for quality or -little incentive for quality or workers workers

Traditional EconomyTraditional Economy

Economic system in which Economic system in which social roles (elders) and social roles (elders) and culture determine how goods culture determine how goods are made, sold, and bought.are made, sold, and bought.

Resources are determined by Resources are determined by inheritance, based on inheritance, based on primitive methods and toolsprimitive methods and tools


subsistence farmingsubsistence farming People produce most of People produce most of

what they need to survivewhat they need to survive Underdeveloped countries; Underdeveloped countries;

rural areasrural areas Carpet makers, hand made Carpet makers, hand made

craftscrafts

Market Economy (capitalism)Market Economy (capitalism)

Based on individual choices Based on individual choices and voluntary tradeand voluntary trade

Free enterpriseFree enterprise Individuals and business Individuals and business

make economic decisionsmake economic decisions


Skill, education and type of Skill, education and type of job determine salaryjob determine salary

United States’ economy United States’ economy has a large portion of has a large portion of market economymarket economy

Mixed EconomyMixed Economy

Economic system that Economic system that has features of has features of traditional, command, traditional, command, and market and market


Most countries are mixedMost countries are mixed United States- examples: United States- examples:

minimum wage minimum wage (government determines), (government determines), quilts made by the Amish quilts made by the Amish (traditional) and private (traditional) and private owned businesses (market)owned businesses (market)

Voluntary TradeVoluntary Trade

People trade freelyPeople trade freely TradeTrade is the voluntary exchange is the voluntary exchange

of of goodsgoods, , servicesservices, or both. , or both.


One country (US) One country (US) decides to trade with decides to trade with JapanJapan

Japan has products US Japan has products US citizens want-electronic, citizens want-electronic, cars, technology cars, technology

Trade BarriersTrade Barriers

Any law or practice Any law or practice that a government that a government uses to limit free trade uses to limit free trade between countries. between countries. Physical features can Physical features can be trade barriers too!be trade barriers too!


Tariffs (taxes) and quotasTariffs (taxes) and quotas Embargos (US against Embargos (US against

Cuba)Cuba) Physical barriers could be Physical barriers could be

war or landformswar or landforms

Exchange Currency/RateExchange Currency/Rate

Amount of one currency Amount of one currency that can be purchased that can be purchased for a given unit of for a given unit of anotheranother


Money is currencyMoney is currency Value of currency between countries Value of currency between countries

changes -it affects the cost of goods changes -it affects the cost of goods between countriesbetween countries

Ex: A pair of jeans in Japan costs Ex: A pair of jeans in Japan costs 17,880 yen…WOW! How much in US 17,880 yen…WOW! How much in US dollars? The cost is $180. dollars? The cost is $180.

Still a lot of money!Still a lot of money!

CurrencyCurrency

Money in any form that Money in any form that is accepted as a medium is accepted as a medium of exchange, but of exchange, but specially paper money specially paper money

Real World ExampleReal World Example Currency is name of a country’s Currency is name of a country’s

money- it looks different and is money- it looks different and is valued differentvalued different

Euro – the common currency of Euro – the common currency of most of Europemost of Europe

Saudi Arabia-riyalSaudi Arabia-riyal Israel-shekel Israel-shekel Japan-yenJapan-yen

EntrepreneurEntrepreneur

Someone who brings Someone who brings together land, labor, and together land, labor, and capital goods to produce capital goods to produce goods and services goods and services


Business owner who thrives on Business owner who thrives on free enterprisefree enterprise

Bill Gates –MicrosoftBill Gates –Microsoft Facebook, Google, real estate Facebook, Google, real estate

agents!agents! Donald Trump Donald Trump

Would an entrepreneur be allowed in an autocratic form of government? Why or Why not? Answer on your organizer

Human CapitalHuman Capital

Knowledge and skills that Knowledge and skills that allow workers to produce allow workers to produce goods and services and earn goods and services and earn an income. an income.


College education is human College education is human capitalcapital

Trained employeesTrained employees Japan’s greatest resource is the Japan’s greatest resource is the

skill of their people skill of their people How could a low literacy rate (the ability to read or write) affect the economic growth of a country? Answer on your organizer

GROSS DOMESTIC PRODUCT GROSS DOMESTIC PRODUCT (GDP)(GDP)

Total market value of all Total market value of all goods and services goods and services produced in a countryproduced in a country


United States-$13 trillionUnited States-$13 trillion Saudi Arabia-$366 billionSaudi Arabia-$366 billion Botswana-$17 billionBotswana-$17 billion Japan-$4 trillionJapan-$4 trillion South Africa-$587 billionSouth Africa-$587 billion

What can the GDP tell you about a countries economic development? (Write your answer on your organizer)

CAPTIALCAPTIAL

Resources that people use Resources that people use to make other goodsto make other goods


FactoriesFactories MachineryMachinery ToolsTools These are key for economic These are key for economic

growthgrowthIf you had a lemonade stand, what capital would you need for your business to be successful? (Answer on your organizer)

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Economic Dictionary Economic system The way in which a nation uses its resources to satisfy people’s needs and wants. The way in which a nation uses