Economic Dictionary

Economic system The way in which a nation uses its resources to satisfy people’s needs and wants. The way in which a nation uses its resources to satisfy people’s needs and wants. What is the difference between a need and a want? What are examples of each?

Real World Example What resources do we have? What resources do we have? What will be produced? What will be produced? How will it be produced? How will it be produced? For whom will it be produced? For whom will it be produced?

Command Economy The government decides what goods will be produced, how they will be produced, and how they will be distributed The government decides what goods will be produced, how they will be produced, and how they will be distributed

Real World Example Example-communist countries like Cuba and N. Korea Example-communist countries like Cuba and N. Korea -Workers get same pay so poor quality of goods -Workers get same pay so poor quality of goods -little incentive for quality or workers -little incentive for quality or workers

Traditional Economy Economic system in which social roles (elders) and culture determine how goods are made, sold, and bought. Economic system in which social roles (elders) and culture determine how goods are made, sold, and bought. Resources are determined by inheritance, based on primitive methods and tools Resources are determined by inheritance, based on primitive methods and tools

Real World Example subsistence farming subsistence farming People produce most of what they need to survive People produce most of what they need to survive Underdeveloped countries; rural areas Underdeveloped countries; rural areas Carpet makers, hand made crafts Carpet makers, hand made crafts

Market Economy (capitalism) Based on individual choices and voluntary trade Based on individual choices and voluntary trade Free enterprise Free enterprise Individuals and business make economic decisions Individuals and business make economic decisions

Real World Example Skill, education and type of job determine salary Skill, education and type of job determine salary United States’ economy has a large portion of market economy United States’ economy has a large portion of market economy

Mixed Economy Economic system that has features of traditional, command, and market Economic system that has features of traditional, command, and market

Real World Example Most countries are mixed Most countries are mixed United States- examples: minimum wage (government determines), quilts made by the Amish (traditional) and private owned businesses (market) United States- examples: minimum wage (government determines), quilts made by the Amish (traditional) and private owned businesses (market)

Voluntary Trade People trade freely People trade freely Trade is the voluntary exchange of goods, services, or both. Trade is the voluntary exchange of goods, services, or both. goodsservices goodsservices

Real World Example One country (US) decides to trade with Japan One country (US) decides to trade with Japan Japan has products US citizens want-electronic, cars, technology Japan has products US citizens want-electronic, cars, technology

Trade Barriers Any law or practice that a government uses to limit free trade between countries. Physical features can be trade barriers too! Any law or practice that a government uses to limit free trade between countries. Physical features can be trade barriers too!

Real World Example Tariffs (taxes) and quotas Tariffs (taxes) and quotas Embargos (US against Cuba) Embargos (US against Cuba) Physical barriers could be war or landforms Physical barriers could be war or landforms

Exchange Currency/Rate Amount of one currency that can be purchased for a given unit of another Amount of one currency that can be purchased for a given unit of another

Real World Example Money is currency Money is currency Value of currency between countries changes -it affects the cost of goods between countries Value of currency between countries changes -it affects the cost of goods between countries Ex: A pair of jeans in Japan costs 17,880 yen…WOW! How much in US dollars? The cost is $180. Ex: A pair of jeans in Japan costs 17,880 yen…WOW! How much in US dollars? The cost is $180. Still a lot of money! Still a lot of money!

Currency Money in any form that is accepted as a medium of exchange, but specially paper money Money in any form that is accepted as a medium of exchange, but specially paper money

Real World Example Currency is name of a country’s money- it looks different and is valued different Currency is name of a country’s money- it looks different and is valued different Euro – the common currency of most of Europe Euro – the common currency of most of Europe Saudi Arabia-riyal Saudi Arabia-riyal Israel-shekel Israel-shekel Japan-yen Japan-yen

Entrepreneur Someone who brings together land, labor, and capital goods to produce goods and services Someone who brings together land, labor, and capital goods to produce goods and services

Real World Example Business owner who thrives on free enterprise Business owner who thrives on free enterprise Bill Gates –Microsoft Bill Gates –Microsoft Facebook, Google, real estate agents! Facebook, Google, real estate agents! Donald Trump Donald Trump Would an entrepreneur be allowed in an autocratic form of government? Why or Why not? Answer on your organizer

Human Capital Knowledge and skills that allow workers to produce goods and services and earn an income. Knowledge and skills that allow workers to produce goods and services and earn an income.

Real World Example College education is human capital College education is human capital Trained employees Trained employees Japan’s greatest resource is the skill of their people Japan’s greatest resource is the skill of their people How could a low literacy rate (the ability to read or write) affect the economic growth of a country? Answer on your organizer

GROSS DOMESTIC PRODUCT (GDP) Total market value of all goods and services produced in a country Total market value of all goods and services produced in a country

Real World Example United States-$13 trillion United States-$13 trillion Saudi Arabia-$366 billion Saudi Arabia-$366 billion Botswana-$17 billion Botswana-$17 billion Japan-$4 trillion Japan-$4 trillion South Africa-$587 billion South Africa-$587 billion What can the GDP tell you about a countries economic development? (Write your answer on your organizer)

CAPTIAL Resources that people use to make other goods Resources that people use to make other goods

Real World Example Factories Factories Machinery Machinery Tools Tools These are key for economic growth These are key for economic growth If you had a lemonade stand, what capital would you need for your business to be successful? (Answer on your organizer)

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