CHAPTER 26 NOTES Factors of Production Economic systems around the - - PowerPoint PPT Presentation
CHAPTER 26 NOTES Factors of Production Economic systems around the world are a response to the basic challenge of scarcity the condition that exists because society does not have all the resources to produce all the goods and services
response to the basic challenge of scarcity—the condition that exists because society does not have all the resources to produce all the goods and services that everyone wants.
three major types: – In a traditional economy, habit and custom dictate the rules for all economic activity. – A command economy has a central authority—usually the government—that makes most of these economic decisions.
– A market economy allows buyers and sellers acting in their individual interests to determine what, how, and for whom goods and services are produced.
called factors of production. They include: – land – capital – labor – entrepreneurs—the risk-takers who
production to produce goods and services for profit
capitalism—represent the range of economic systems that determine how the factors of production are allocated.
following main characteristics: – private ownership – individual initiative – competition. A monopoly—when an industry includes only one seller—is the
– freedom of choice – profit or loss
amount of money that is used to operate a business and the amount of money the business takes in.
capitalism, but includes significant elements of a command economy.
economy following the Great Depression has caused it to become a mixed economy—or modified capitalism.
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Another term for modified capitalism is
that have had significant or rapid industrial growth in recent decades.
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Nations that have had significant or rapid industrial growth in recent decades are referred to as
nations.
nations have chosen to rely on free markets, trade, and contacts with the West to develop their economies.
capitalism.
nations have chosen socialism as a model for the economies.
be distributed as equally as possible, their policies are directed at making essential goods and basic social services available more or less equally to all.
welfare state to describe the benefits of socialism and claim that it weakens people’s work ethic.
all factors of production and takes a much more direct role in economic decisions.
nations have adopted socialist economic policies, believing that this is the route to economic progress.
nationalization of existing industries, redistribution of land or establishment of agricultural communes, and a welfare system.
Global Trade in Goods: Who Exports to Whom?
industry through a process called nationalization, in which the government pays private business owners that it takes
industries because of their colonial history and their reliance on foreign investment.
government has been both an economic policy as well as a gesture of anticolonialism.
African nations tried to develop economies that were based on one cash crop or one resource for trade.
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Socialist governments often take control of industry through a process called
developing world because several practical problems have caused socialism to fail to live up to its promises.
cautious when investing in developing nations, meaning emerging socialist economies may have trouble attracting capital.
meet the needs of the consumers in Eastern European nations raises concern about socialism’s ability to do so in other regions.
exercised influence and pressure in favor of a combination of free markets and democracy in developing nations.
because its Communist leaders could not keep the economy going.
attempting to build a free enterprise system that can compete effectively in the global economy.
government controlled about 98 percent of all farmland, and about two-thirds consisted of state farms—farms run like factories where workers are paid wages .
farms—farms where the government
their independence, effectively ending the Soviet Union.
Russian leaders have broken up the huge, state-owned industries, created a stock market, and initiated other reforms.
slow change of Russia, including: – resistance to reform by former Communist bureaucrats – Russian misunderstanding of democracy
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Farms that are run like factories where farmworkers are paid wages are called
Communist government created a planned economy.
economically with the market-based economies of its neighbors.
enjoyed much growth for several reasons: – China has a large labor pool. – Its government promotes manufacturing by giving foreign companies tax breaks and cheap land.
– Its government has spent billions on highways, ports, and fiber-optic communications to assist manufacturers.
move from a command to a market economy while maintaining the political control of the Communist Party.
American goods and new bases for American companies to expand.
– obtain goods and services that they cannot produce themselves – receive comparative advantage—the principle that says each country should produce goods it can make more efficiently and purchase those that other nations produce more efficiently
price in the domestic market.
foreign product that can be imported.
trade with a specific economy.
trade as an important measure of a nation’s overall performance in the global economy.
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The principle that says each country should produce goods it can make more efficiently and purchase those that other nations produce more efficiently is called
nations have created a number of
limiting unfair trade practices.
trade with each other without barriers such as tariffs.
the General Agreement on Tariffs and Trade (GATT) in an effort to reduce trade barriers.
regulatory body known as the World Trade Organization (WTO) to enforce the provisions of the treaty.
countries and has the authority to assess penalties against nations that violate the terms of the GATT treaty.
world’s most important regional economic group.
countries of Europe to achieve full economic integration.
concluded negotiations for another large trading bloc—the North American Free Trade Agreement (NAFTA).
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Groups of nations that trade with each other without barriers such as tariffs are
economic policy are free trade, fair trade, managed trade, and protectionism.
businesses in different nations could buy and sell goods with no tariffs or other limitations of any kind.
international agreements that outlaw unfair business practices or limit tariffs.
intervenes in a trade arrangement to achieve a specific result.
barriers to protect domestic industries from foreign competition and to prevent free trade.
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When the government intervenes in a trade arrangement to achieve a specific result it is called
Capitalist and Mixed Economies
traditional, market, and command.
individual initiative, competition, freedom of choice.
government regulation.
Major Economic Transitions
capitalism and democracy, but change has been slow.
develop a market economy but at the same time maintain an authoritarian political system.
Emerging Economies
nations rely on free markets, trade, and investment.
socialism is losing popularity.
Global Economy
free trade, fair trade, managed trade, and protectionism.
unfair trade practices.
European Union (EU), and North American Free Trade Agreement (NAFTA) encourage free trade.