Canada Economics SS6E1a,b,c; SS6E5; SS6E8 What to produce? How to produce? For whom to produce?

Economic Systems Traditional: people usually produce what they need to survive; usually in an agricultural society; They trade/barter goods Command: government CONTROLS what is produced and how it is produced Market: based on what the country’s people want to buy and sell; allows for private ownership of businesses and entrepreneurs

Mixed Economies Today, most countries are a mixed economy – each has some government control (command) and some consumer control (market). On the economics continuum – some mixed economies are more market and less command (Canada); while others are more command and less market (Cuba). Market Canada Command Cuba Canada has a mixed economy (more market, very little command). The government controls areas such as health care and the postal service.

Specialization (SS6E2) Specialization encourages and increases trade; a country can obtain (get) what it needs at a lower cost when it is produced by the country who specializes in producing that item. Countries will specialize in what they do best (examples: oil production, cars, blue jeans)

Opportunity Cost When a country decides to specialize, they have to consider opportunity cost. Definition of opportunity cost: when a country specializes, it is the value of what they give up when choices are made about what product(s) in which to specialize. Canada specializes in paper products that they sell to the USA.

Trade Barriers (restricting trade because a country wants to sell and produce their own goods) These can be natural geographic features such as mountains or oceans, or they can be man-made/political ( tariffs). tariffs: TAXES placed on imported goods quotas: RESTRICTIONS on the amount of goods that can be imported into a country trade embargoes: FORBID trade with another country Trade Corridors allows trade to flow freely between countries. This can be a treaty to remove tariffs (NAFTA) or a man-made system such as the St. Lawrence Seaway.

NAFTA (North American Free Trade Agreement) In order to increase trade in North America, the USA, Canada, and Mexico signed an agreement called NAFTA. NAFTA created a free trade zone in North America. This agreement eliminated (removed) tariffs on goods shipped between the USA, Canada, and Mexico.

NAFTA: USA, Canada, Mexico

Exchanging Currencies (money) All countries do not use the same type of currency (money). International trade must have a system for exchanging currencies between countries. Foreign exchange: In order to pay for goods in another country, you must convert your currency (money) into the currency of another country. (example: USA dollar to Mexican peso)

Economic Growth Factors Factors that influence economic growth are: human capital = human workers and the investments in the welfare (healthcare) and training of those people who perform labor (work) Education Capital = (factories and/or machinery) Natural resources = things that come from the land (examples: minerals, water, trees, oil) Entrepreneurship = people who are willing to take a risk to own a private business

Gross Domestic Product (GDP) GDP = total market value of the services and goods that a country produces during a specific year A country’s economic “health” is determined by the GDP (in other words…how rich or poor is the country?) Countries with a strong economy = high GDP; weak economy = low GDP

Relationship between investment in human capital (education and training) & investment in capital (factories, machinery, & technology) and GDP (Gross Domestic Product). Human Capital: Investment in skills training (improve your job skills) and education directly affects a country’s GDP; healthy employees are more productive…make more money…raise GDP). Capital: goods used to produce things (factories, machinery, computers, technology, etc.); provides workers with the best and newest tools so they can produce more (make more money for the country’s economy…raise GDP).

Entrepreneurs Entrepreneurs are extremely important to any country’s economy. Remember…they are people who have new ideas and they risk their own money to create a business and bring the goods/services to the marketplace. Once their goods/services are brought to the consumer…they are making money…and raising the country’s GDP!!