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Concept Connector Handbooks

Bibliography

Overview

This handbook links economics with his-tory by presenting the three key economic questions that all societies must answer. The answers reveal how those societies have chosen to organize their economies in order to reach their economic goals. The handbook goes on to identify and describe four modern economic systems and the interdependence of economies throughout the modern world.

Test Preparationn

Student Quiz

Ask students to write an example of an economic activity that would take place in one a modern economic system. For example, for a mixed economy, a student might write “The government works with a shoe company to construct a new factory.” Have students read their examples to the class, and have other students determine the economic system.

n

Flashcards

Students might also make flashcards for terms in the glossary on the following pages. Have them quiz one another, by holding up either the term or its definition.

Analyzing the Visualsn

Ask students to read the three key economic questions. Ask

How are a society’s economic goals linked to the three key questions?

(Depending on how it values different economic goals, a society might answer the questions differently.)

n

Ask

What is the man in the photograph using to cover the wall?

(German paper money)

Tell them that after World War I, Germany’s currency lost most of its value. This economic crisis helped extremists like Adolf Hitler gain power. Ask

Why would an economic crisis lead people to seek radical changes in leadership?

(When people cannot find jobs or feed their families, they tend to blame government policies and support politicians who promise to fix the economy.)

For the Teacher

Bentley, Jerry H.

Old World Encounters: Cross-Cultural Contacts and Exchanges in Pre-Modern Times.

Oxford University Press, 1993.

Cameron, Rondo, et al.

A Concise Economic History of the World: From Paleolithic Times to the Present,

4

th

ed. Oxford University Press, 2002.Buchholz, Todd G., et al.

New Ideas from Dead Economists: An Introduction to Modern Economic Thought,

Plume Books, 1999.

Cozic, Charles P., ed.

Global Resources.

Greenhaven Press, 1998.

Downing, David.

Capitalism.

Heinemann, 2002.January, Brendan.

Globalize It! The Stories of the IMF, The World Bank, the WTO—and Those Who Protest.

Lerner, 2003.

Sold! The Origins of Money and Trade.

Runestone, 1994.

For the Student

Economics

Three Key Economic Questions

How do goodsand services getdistributed? Thequestion of whogets to consumewhich goods andservices lies at thevery heart of thedifferencesbetween economicsystems. Eachsociety answersthe question ofdistribution basedon its combinationof social valuesand goals.

Who consumesthe goods and

services?

Should weproduce food onlarge corporatefarms or on smallfamily farms?Should weproduce electricitywith oil, nuclearpower, coal, orsolar power?

How shouldgoods andservices beproduced?

How much of ourresources shouldwe devote tonational defense,education, publichealth, orconsumer goods?Which consumergoods shouldwe produce?

What goods andservices shouldbe produced?

Economic Goals

Making the most of resourcesFreedom from government intervention in the production anddistribution of goods and servicesAssurance that goods and services will be available, paymentswill be made on time, and a safety net will protect individualsin times of economic disasterFair distribution of wealthInnovation leads to economic growth, and economic growthleads to a higher standard of living.Societies pursue additional goals, such asenvironmental protection.

Economic efficiencyEconomic freedom

Economic securityand predictability

Economic equityEconomic growthand innovationOther goals

n every society throughout history, people have had access to resources, such as water, fertile land, and

human labor. Yet everywhere in the world, people’s resources are limited. Economics is the study of how people choose to use their limited resources to meet their wants and needs.

Until modern times, people focused largely on resources related to agriculture. They farmed the land to produce food, mainly for their own consumption. This traditional way of meeting basic needs still defines some economies today. However, modern societies have also developed other economic systems to deal with the complexities of expanding trade and industrialization. An economic system is the method used by a society to produce and distribute goods and services.

Basic Economic QuestionsThrough its economic system, society answers three key questions. How a society answers these questions depends on how much it values different economic goals. Four different economic systems have developed in response to these three questions.

In 1923, due to the collapse of German currency, it was cheaper to paper a wall with Deutsche marks than it was to buy wallpaper.

I

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Economics

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Solutions for All Learners

Analyzing the Visuals

■

Ask

Which economic system is the oldest?

(traditional)

Which economic system came about as a response to an existing system?

(centrally planned)

What was the existing system?

(market)

How do these two systems differ?

(In a market system, economic decisions are made in the marketplace, with little government interference. In a centrally planned system, central government planners make most economic decisions.)

■

Explain that the Grameen Bank offers small loans to poor, mostly rural women who use the money to start up small businesses. Ask

Which economic system is best represented in this picture?

(market)

What character traits should an entrepreneur have?

(Sample: perseverance, courage, imagination, thrift)

L4

Advanced Readers L4

Gifted and Talented

To extend students’ understanding of economic sys-tems, ask them to create a fictional modern economy. First, briefly review how a society answers the three economic questions based on its economic goals, and how its economic system reflects those answers. Then, have students pick one or more economic goals (mak-

ing sure they don’t conflict), write detailed answers to the three economic questions, and then choose the economic system that best suits their goals and answers. Students should be prepared to explain their results. Tell them that they can modify their goals and answers if needed for their choices to work together.

Economics

Modern Economic SystemsA society’s economic system reflects how that society answers the three key economic questions. Different systems produce differ-ent results in terms of productivity, the wel-fare of workers, and consumer choice. This table provides information about the main economic systems in the world today.

A Grameen Bank officer meets with loan recipients in India.

Modern Economic Systems

Description

People make economic decisionsbased on custom or habit. Theyproduce what they have alwaysproduced and just as much asthey need, using long-established methods.

Economic decisions are made in themarketplace, through interactionsbetween buyers and sellers,according to the laws of supplyand demand. Individual capitalistsown the means of production.Government regulates someeconomic activities and providessuch “public goods” as education.

Central government planners makemost economic decisions for thepeople. In theory, the workers ownthe means of production. In practice,the government does. Someprivate enterprise, butgovernment dominates.

A mix of socialism and freeenterprise in which the governmentplays a significant role in makingeconomic decisions.

Location TodayOrigin

Traditional

Market(Capitalist,Free-Enterprise)

Centrally Planned(Command, Socialist,Communist)

Mixed(Social Democratic,Liberal Socialist)

Accompanied the rise of agricultureand home crafts

Capitalism has existed since theearliest buying and selling of goodsin a market. The market economicsystem developed in response toAdam Smith’s ideas and the shiftfrom agriculture to industry inthe 1800s.

In the 1800s, criticism of capitalismby Karl Marx and others led to callsfor distributing wealth according toneed. After the 1917 RussianRevolution, the Soviet Uniondeveloped the firstcommand economy.

The Great Depression of the 1930sended laissez-faire capitalism inmost countries. People insisted thatgovernment take a stronger role infixing economic problems. The fallof communism in Eastern Europe inthe 1990s ended central planning inmost countries. People insisted onfreer markets.

Mainly in rural areas withindeveloping nations

Canada, Germany, Japan,United States, and a handful ofother nations

Communist countries, includingChina, Cuba, North Korea,and Vietnam

Most nations, including Brazil,France, India, Italy, Poland, Russia,Sweden, and the United Kingdom

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Concept Connector Handbooks

History Background

Analyzing the Visualsn

Direct students’ attention to the two-page map of trade organizations. Ask

Which trade organization includes countries from southern and eastern South America?

(Mercosur)

Which organizations are in Asia?

(OPEC and ASEAN)

Tell students that trade organizations move to eliminate tariffs and trade barriers among member countries.

What is the advantage of joining a regional trade organization?

(Lower trade barriers and the absence of taxes on imported goods encourage trade within the organization by giving member countries access to more markets, which should strengthen their economies.)

n

Point out the illustration of NAFTA on this page. Ask

What three countries make up NAFTA?

(the United States, Canada, and Mexico)

Why is this puzzle an effective way of representing NAFTA?

(Sample: The puzzle pieces fit together to make a whole, just as NAFTA brings together the economies of North America. Each country has goods and services needed by the other countries.)

Developed and Developing Economies

Developed economies, also known as advanced econo-mies or the First World, have thoroughly industrialized. Their citizens enjoy the highest income levels in the world. The remaining countries have developing econo-mies, which means that they are in the process of indus-trializing. The developing economies with the lowest per capita incomes are also known as the least developed

countries or the Third World. They chiefly export primary goods—such as crops or raw minerals—and import fin-ished products. Many people there live in poverty. A third category encompasses the countries of Eastern Europe and the former Soviet Union. These have been called countries in transition or the Second World, and their people’s income levels lie somewhere between those in developed and developing countries.

SOUTHAMERICA

N O R T H

A M E R I C A

120°W150°W 60°W90°W

0°

60°N

30°N

P a c i f i cO c e a n

CARICOM

CACM

Mercosur

NAFTA

Association of Southeast Asian Nations (ASEAN)Caribbean Community and Common Market (CARICOM)Central American Common Market (CACM)Economic Community of West African States (ECOWAS)European Union (EU)North American Free Trade Agreement (NAFTA)Organization of Petroleum Exporting Countries (OPEC)Southern African Development Community (SADC)Southern Common Market (Mercosur)

Economics

Glossary of Economic Termsbarter

the direct exchange of one set of goods or services for another

budgeta plan for income and spending

capitalany human-made resource that is used to create other goods or services

communisma political system characterized by a centrally planned economy with all eco-nomic and political power resting in the hands of the central government

currencycoins and paper bills used as money

depressiona recession that is especially long and severe

developed nationindustrialized country with a higher average level of material well-being

developing nationcountry with limited industrialization and a lower average level of material well-being

economic systemthe method used by a society to produceand distribute goods and services

entrepreneurambitious leader who combines land, labor, and capital to create and market new goods or services

exporta good that is sent to another country for sale

free enterprisean economic system that permits the conduct of business with minimal gov-ernment intervention

goodsphysical objects such as clothes or shoes

importa good that is brought in from another country for sale

industrializationthe extensive organization of an econ-omy for the purpose of manufacturing

This illustration represents the cooperation among nations involved in NAFTA.

Major Trade OrganizationsThis map shows the major regional trade associations in the world today. In addition, 147 countries belong to the World Trade Organization (WTO). The WTO works to encourage trade by reducing tariffs, promot-ing international agreements, and mediat-ing trade disputes among member nations.

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Solutions for All Learners

L1

Special Needs L2

Less Proficient Readers L2

English Language Learners

Have students read each term and definition in the glossary and then offer an example of each. They might act out the example (such as

barter

), draw an

example (such as

budget

), point to an example in the classroom (such as

goods

or

currency

), or give an example from experience or from their textbook.

A F R I C A

A N TA R C T I C A

A S I AE U RO P E

AU S T R A L I A

30° W 0° 60°E 90°E30° E 120°E 150°E

A t l a n t i cO c e a n

A r c t i c O c e a n

I n d i a nO c e a n

P a c i f i c O c e a n

10000 2000 mi

10000 2000 km

Robinson Projection

N

S

EW

SADC

ASEAN

ECOWAS

EU

OPEC

Economics

inflationa general increase in prices

law of demandeconomic law that states that con-sumers buy more of a good when its price decreases and less when its priceincreases

law of supplytendency of suppliers to offer more of a good at a higher price

marketan arrangement that allows buyers and sellers to exchange things

market economyeconomic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets

mixed economyeconomic system that combines tradi-tion and the free market with limited government involvement

opportunity costthe most desirable alternative given up as the result of a decision

recessiona prolonged economic contraction

scarcitylimited quantities of resources to meet unlimited wants

socialisma social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society.

tariffa tax on imported goods

taxa required payment to a government

traditional economyeconomic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services

welfaregovernment aid to the poor

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