1. 1. What is an economic system? 2. What causes scarcity in an economic system?

2. ECONOMICS DOES MONEY MAKE THE WORLD GO ROUND??

3. S TUDY OF HOW THE THINGS PEOPLE NEED AND WANT ARE MADE AND BROUGHT TO THEM. I T ALSO STUDIES HOW PEOPLE AND NATIONS CHOOSE THE THINGS THEY BUY FROM THE MANY THINGS THEY WANT. HOW GOODS AND SERVICES GET PRODUCED ( MADE ) AND HOW THEY ARE DIVIDED UP AND GIVEN TO PEOPLE. WHAT IS ECONOMICS?

4. E CONOMIC SYSTEM System of economic activity in a country, region or community. The way a nation/country uses its resources to satisfy people’s needs and wants. Goals: 1. economic freedom 2. efficiency 3. fairness 4. growth and stability How successful an economy is in achieving these goals affects the country’s ability to improve its citizen’s standards of living.

5. 3 B ASIC E CONOMIC Q UESTIONS 1. What to produce? 2. How to produce? 3. For whom to produce?

6. 4 TYPES OF ECONOMIC SYSTEMS Traditional System: Do it the same as their parents. People do things according to tradition. Things are done as they were in the past based on tradition, customs, and beliefs (religious). Examples: Certain areas in developing countries

7. Command System: Main decision maker is the government. The individual has little influence, the government will control all. They decide what resources to use, how much a business will produce, and what jobs people will obtain. Government controls ALL Examples: North Korea, Cuba

8. Market or Capitalist System: In this system the government does not intervene. Also called “free trade”. Individuals own the factors of production and they decide the answers of the basic economic questions. The market is the freely chosen activities between buyers and sellers of goods and services. Examples: the underground economy, 19th century Britain

9. Mixed Economic System: Many economists doubt that “pure” economic systems ever existed. Command + Market = A mixed economic system (may contains elements of traditional as well) Think of 2(or more) economies MIXED up together. Examples: United States and most countries

10. W HY DO COUNTRIES TRADE ?

11. Countries depend on other nations for good and services they can’t produce or don’t have within their own borders. Some countries trade with other nations for particular goods and services because they either lack the technology to produce the goods themselves or the other countries can do it cheaper.

12. Some nations trade as a way to have good relationships with other countries. A good trade treaty symbolizes a good relationship among countries.

13. Trade, or lack thereof, also can be used as a weapon to do harm to competing or belligerent countries. Powerful nations throughout history have used economic sanctions-- essentially blocking and prohibiting trade--with other nations in order to punish or force political or behavioral change. TRADE

14. T ARIFFS / Q UOTAS / FREE TRADE Nations restrict trade through tariffs and quotas Tariffs are taxes placed on goods one nation trades with another Quotas are limits put on the number of items allowed into a country. Free trade is trade with no taxes or tariffs (not every nation does this).

15. S URPLUS VS. DEFICIT Nations keep records of their financial dealings with other countries. If a country pays out more money than it receives, it has a deficit. If it receives more than it spends, it has a surplus. The United States suffers from huge trade deficits today because it hasn’t been able to sell as much as it needs to buy from other countries around the world.