1. European Economic Systems
United Kingdom
Germany
Russia

2. Review . . . Types of Economies
TYPES OF ECONOMIC SYSTEMS
Definition
Associated Terms
Examples in Practice
1) Market economy
An economic system in which individuals own and operate the factors of production.
Free enterprise Capitalism
2) Command economy
An economic system in which the government owns and operates the factors of production.
Socialism Communism
Cuba China Laos
3) Traditional economy
An economic system based upon customs and traditions. Economy is based upon agriculture and hunting.
Non-Industrialized Agrarian societies
Chad Haiti Rwanda
4) Mixed economy
An economic system that has features of both market and command economies.
United States Great Britain Japan

3. Economic Continuum No system has a pure command or market economy.
All economies combine aspects of both of the command and market economic systems – to different degrees.
USA has some government owned businesses – schools, public colleges, postal services – in addition to the privately owned businesses.

4. United Kingdom What to produce? How to produce? For whom to produce?
Similar to the USA . . .
Largely a service based economy
Extremely efficient agricultural sector
How to produce?
Industries have much freedom
Nationalize some industries – banking
For whom to produce?
Private sector provides goods and services for domestic and international markets
Where are they on the continuum?
Far to the market side

5. Germany What to produce? How to produce? For whom to produce?
Export based economy
Focused on manufacturing and commodities
How to produce?
Businesses are largely privately owned and independent
Increasing involvement of government in financial sectors.
Still trying to improve the East German economy to match the West German economy.
For whom to produce?
Exports are the primary focus
Billions of dollars are transferred to East German states to help modernize and update factories
Where are they on the continuum?
Market side But not as far as the UK Closer to a command economy.

6. Russia What to produce? How to produce? For whom to produce?
Government is still largely involved in the economy
Must approve any investments larger than 50 million rubles.
How to produce?
Large scale production changes are difficult due to the immense bureaucracy.
Some movement towards modernizing factories and agricultural equipment.
For whom to produce?
Low tax rates to improve domestic purchases
Trying to allow for market interactions
High tariffs and minimal protection of private property make this difficult.
Where are they on the continuum?
Roughly dead center on the continuum

7. The Continuum
These 3 systems are all mixed economies Leaning mostly towards a market system.
They do have some elements of a command economy.

8. Review . . . Key Concepts Tariff – tax Embargo Quota
A trade barrier that is used to discourage trade with foreign companies
This type of barrier would restrict trade
Created to increase the prices of imported goods and protect a country’s own industries from foreign competition
Embargo
Forbidden trade with another country
This type of barrier would STOP the importing of an item
Can be put in place for safety reasons Unsanitary conditions – lead paint
Also used for political reasons Countries that violate human rights
Quota
Restrictions on the amount of a good that can be imported into a country
This type of barrier can create shortages and an increase in price.
EU placed a quota on Chinese imports of clothing when France and Italy, with strong textile industries, complained about cheap import prices.

9. Summarizing Activity Is it a QUOTA, EMBARGO or TARIFF . . . .
Only 3,000 pairs of American blue jeans can enter France.
The USA charges an extra 10 cents per pound on bananas from Costa Rica.
No Brazilian beef can be sold in Spain.
Only 10,000barrels of oil can be delivered from Saudi Arabia to Italy this month.
The EU will not accept any products from an African nation because its government will not allow free speech or freedom of religion.

10. Economic Growth How is economic growth measured?
4 factors for economic growth
Land
Capital
Factories, machines, etc.
Labor
Human capital
Entrepreneurship
Ideas, innovation and risk involved in starting a business
How is economic growth measured?
Gross Domestic Product (GDP)
Total market value of the goods and services produced by a country’s economy in a specific year.
Used to determine the health of a country’s economy and compare it to other countries.

11. How does a country raise its GDP?
Invest in human capital
Education and skills training
Smarter people leads to a more productive workforce
Increase economic growth.
Literacy rate is used to determine the educational level of people . . .
Higher the literacy rate Higher the GDP
Invest in capital resources
Provides workers with the most current and updated tools.
Increases productivity and economic growth
Examples . . .
Germany High GDP
Invested in education and vocational schools
Russia and Ukraine Low GDP
Rebuilding economies after gaining their independence in 1990’s
Ukraine had little money for schools and teacher salaries.
Russia had outdate machines and technology in their manufacturing plants.

12. What role does natural resource play in the success of a country’s economy?
Fuel for a country’s industries.
Source of income when exported.
Examples
United Kingdom
Coal, oil, gas
Germany
Rivers, forests, large deposits of coal and iron ore
Russia
Located in remote areas
Hard to develop due to climate and transportation

13. What role do entrepreneurs play in the success of a country’s economy?
Generate new ideas
Invest in human, capital and natural resources
Willing to take risks
Help countries adapt to changing trends
Do not have as much entrepreneurship activity as the USA or developing countries . . .
Due to high taxes, lots of regulations and job security.
The EU is trying to change this through reducing taxes and regulations on small businesses.

14. Let’s Practice . . .
GDP chart worksheet. . .