retest 11-17-2017 Beaufort and Elphingstone Economy Review retest 11-17-2017 Beaufort and Elphingstone

Euro – The official currency of the European Union’s (EU) member states.

The European Union (EU) was established to set up free trade among countries in Europe. Today, the EU is a powerful trade bloc, making one-fifth of the world’s trade. Products produced in Europe can Now move freely, without tariffs, to other EU member nations. This free trade leads to tremendous cost savings for European consumers and businesses.

Because every country does not use the same type of money, international trade requires a system for exchanging currencies between nations. Money from one country must be converted into the currency of another country to pay for goods in that country. This system is called foreign exchange. The exchange rate is how much one currency is worth in terms of the other. AS OF 11-10-17 1 US Dollar = 0.86 Euro (America pays $1.16USD for every $1.00 Euro)

Trade barrier Countries sometimes set up trade barriers to restrict trade because they want to sell their own goods to their own people. Trade barriers include: Tariffs – a tax added to a import/export Quotas – a limit of a product Embargos – an official ban on trade Protective tariff – a tax to protect a product of the country/or a particular crop.

Natural Resources = gifts of nature such as forests, water, and fertile soil A country with lots of natural resources can trade them to other countries to get things they need A country with few natural resources must import the things they need, adding to the cost of goods & services The more natural resources = the higher the standard of living

Gross Domestic Product: Gross = total of all goods and services Domestic = produced within the borders of a country Product = final goods and services produced within one year

The higher the GDP, the higher the standard of living Must invest in human capital & physical capital to increase GDP Human = education, training, healthcare Physical = factories, machinery, technology, buildings, etc.

The 4 major economic systems are: Traditional – based from customs Command – Government controls or tell you what you must do Market – People/Producers decide what to do Mixed – a mixture of systems

CAPITAL INVESTMENT Investment to help the business improve. Example: a building or newer machinery that will help the business be productive for many years.

HUMAN INVESTMENTS Skills, knowledge of individuals who work. Example: Education, it pays off in terms of higher productivity

The workforce of a company/business HUMAN RESOURCES The workforce of a company/business

Entrepreneur = person who starts his own business usually with his own money Entrepreneurs hire workers, pay taxes, and encourage trade within the country & with other countries (creating more jobs!)

Every nation must answer three questions about goods and services Every nation must answer three questions about goods and services. We call these questions the 3 basic questions of economics. The questions are: What to produce? How to produce? For whom to produce?