Types of Economies

Warm Up On the boardHappy Monday! (17 more instructional days!)

Welcome to BeadvilleA simulation of Economic Systems Types of Economies Types of Economic SystemsTraditionalCommandMarketMixed

4Traditional EconomyWhat did you Produce?Determined by tradition, ancestors, customs

5How did you Produce it?Produce the same way its always been done; NO SPECIALIZATION

For Whom did you Produce? Produce for tribe, village, local community

Examples:Ex. Native American, Aborigines, Amish

6Command EconomyWhat did you Produce?Determined by the government or central planner

7How did you Produce it?Told how to by central planner; SPECIALIZATION

For Whom did you Produce?The govt or central planner

Ex. China, N. Korea, USSR

8Market Economy What did you Produce?Determined by whatever would make the most profit

9How did you Produce it?The way that made the most profit; SPECIALIZATION

For Whom did you Produce?Consumers, people interested in product

Ex. UNITED STATES!

10Adam Smith & Karl Marx & KeynesThree men who shaped modern EconomicsVocabularyCapitalism: form of economy where production is controlled by citizens not govt

Free enterprise/market: an economy where there is little or no government interference

Invisible hand: Adam Smiths term for the force that controls the economy

Communism: a form of economy where the government controls all economic decisions.

Patent: a temporary government protection on an invention (design).

Copyright: a permanent government protection on an idea.Adam SmithFather of ECONOMICS

Book: The Wealth of Nations

Economic Theory:Laissez-Faire-Govt should not interfere with economyThe Invisible hand will set the prices and quantityCompetition & profit is good!

Economic Goal:ECONOMIC FREEDOM

Karl MarxFather of Communism

Book: Communist Manifesto

Economic Theory:Capitalism leads to the rich getting richer because they cheat the workers.Wealth should be spread among ALL equally.Government needs to control the economy.

Economic Goal: ECONOMIC EQUALITY

John KeynesFather of Keynesian Theory (Fiscal Policy)

Book: N/A

Economic Theory:In times of economic trouble, Government should step in. (Fiscal Policy)By spending money, government can solve a recession

Economic Goal: ECONOMIC GROWTH & STABILITY

#3: How is Keynesian theory a mixed economy?Keynes believed that the government should stay out of the economy (market) unless there is a problem. If so the government should step in to fix it (command).Benefits of Competition in a Market EconomyCompetition createscheaper pricesbetter qualitygreater variety

DISCUSS: If competition is good, and patents & copyrights limit competition, why does the government allow them? Patents & copyrights protect the entrepreneur and promote the invention of new technologies and ideas.Circular FlowCircular FlowShows the interactions between households and businesses in the free marketCircular Flow

HouseholdsA household is a person or group of people living in the same residence.

Households own the factors of production

Households are also the consumers of goods and servicesFirmsa business, or firm, is an organization that uses resources to produce a product, which it then sells.

Firms transform inputs, or factors of production, into outputs, or productsFactor MarketHouseholds supply firms with land, labor, and capital

Firms pay households for land, labor, and capitalProduct MarketHouseholds pay firms for goods and services

Firms supply households with goods and servicesThink, Pair, ShareInstructions:On a separate sheet of paper!

Pretend you are a $100 dollar bill.

After viewing the different circular flow models, determine 10 different ways you could be used.Circular Flow

Circular Flow

Circular Flow

GlobalizationObjectiveExplain the basic concepts of tradeSummarize how nations specialize and become interdependent through tradeExplain the impact of government policies on international trade.VocabularyMigration-big groups of people moving from one place to another.

Comparative Advantage the ability of a country to produce a good at a lower opportunity cost than another country can.

Globalization- people and countries working together despite barriers.

Unfavorable balance of trade- When a nation imports more than it exports.VocabularyFavorable Balance of Trade - When a country exports (sells goods) more than it imports (buys goods)

VocabularyTariff- A tax on an imported good

Quota- A limit on the amount of imported goods

**These protect domestic businesses!**

Embargo- when a group of nations refuse to trade with a selected countryVocabularyOut-sourcing- when companies move jobs from one place to another to cut costs.

VocabularyDividends- money stockholders periodically get from improving stocks.

Capital gains/loss- the money stockholder make or lose when they sell their stocks.

Deregulation- when the government lifts restrictions on businesses

ProtectionismA policy of trade restrictions to help domestic businesses

ExamplesTariffQuotaEmbargosImpact protectionist policiesEmbargos, tariffs & quotas create barriers to international trade and globalization.

Global OrganizationsNAFTAEnded trade restrictions between Mexico, U.S. & Canada

WTOOversees international trade and trade rulesGlobal OrganizationsEUEnded trade barriers between most European nations

IMFHelps build the economy of poor/ developing nationsGlobal OrganizationsWorld BankProvides financial assistance to developing nations

United NationsMaintain international peace and cooperationImpact of NAFTACreated an unfavorable balance of trade in the U.S.

Economic IndicatorsGDP- All that is produced within a country in one year.

Per Capita GDP- how much every person on average produced GDP/population=per capita GDP

Economic IndicatorsCPI- measures inflation/deflation rates.

Unemployment rate- percentage of people without a jobStock Market: Overall value of company stocks.

Rust/Frost Belt- people are leaving this areaSun Belt- people moving to this area for jobsSilicon Valley- center of technology researchResearch Triangle- research center with many collegesDeclining textile and furnitureCompanies have out-sourced jobs to China and Mexico and downsized (shrunk).Some stuff we wanted to mentionMonopolies in the US are illegalUNLESS the govt allows & regulates them

GDP & per capita GDPUndeveloped countries have low per captia GDP Developed countries have high per capita GDP

Tax breaksUse by federal and state govts to lure new business in an area

Some stuff we wanted to mentionIncome-money people makeDisposable: extra income used for wants (vacation, movie tickets, eating out)

Discretionary: income used to pay necessities (i.e. food, electric bills, mortgage)

Exchange Rate: the price of one nations currency compare to another's1USD = .75 EUROAllows tourists to change forms of money when traveling around the worldWorld Trade OrganizationDo World Trade Organizations harm the enviornment?World Trade Organization Background InformationWhat is globalization?

The term globalization refers to the integration of economies, cultures, and government policies around the world. This integration is nothing new. From the earliest small tribal groups to large modern nation-states, trade and investment between peoples has characterized the world's economy for centuries.

How is pop culture an example of globalization?Popular culture is a good example of globalization. The Internet, along with international media outlets such as MTV and CNN, have sped the globalization of popular culture. Teenagers around the world can watch the same videos, listen to the same music, and wear the same clothing styles. Television audiences around the world can experience the same major news and sporting events. These shared experiences can help foster a sense of global community.

How does globalization affect the world's economy?Large companies can organize production on a worldwide scale. Each step in the manufacturing process is carried out in the most advantageous geographic location.For Example

So what's the problem?As globalization proceeds, forces beyond the control of national governments can affect the economic welfare of individual people. For example, an economic crisis in Asia could cause job layoffs in Eastern Europe. Or, workers in one country might lose their jobs when a multinational corporation moves its operations to a country where workers are paid less. Some critics of globalization worry that individual nations have lost control of their own economies. Institutions designed to foster global economic growth and trade, such as the World Trade Organization and the World Bank, have become targets of criticism and protest. Some people believe that these organizations are too powerful and make decisions that have harmful effects on individuals and the environment. To some, global free trade is just an excuse to increase the wealth and power of multinational corporations.