1. Unit 3 Economy Study Guide Who or what makes the decisions of what to produce, how to produce, and for whom to produce in a traditional economy? Customs handed down from generation to generation Who or what makes the decisions of what to produce, how to produce, and for whom to produce in a market economy? People. The rule of supply and demand usually guides the production of goods. Who or what makes the decisions of what to produce, how to produce, and for whom to produce in a command economy? government What kind of economy do most countries of the world have? Mixed economies Why are the economies considered to be mixed? Every economy has a certain amount of governmental control and certain amounts of personal freedom within the economy. What country has the greatest amount of economic freedom between Canada, Cuba, and Brazil? Canada What country between Canada, Cuba, and Brazil has the government make the decisions of what to produce, how to produce, and for whom to produce goods? Cuba What is the word that means a country does one or two things very well? Specialization What economic activity is encouraged by specialization in countries? Trade What does specialization require countries to be? Interdependent What is the term that means a tax on imported goods? Tariff What is the term that means a limit on the amount of a product that can be imported? Quota What is the term that means a total ban on trade? Embargo What is the name of the trade agreement between the U.S., Canada, and Mexico that was meant to remove all trade barriers such as tariffs, quotas, and embargos? North American Free Trade Agreement or NAFTA Why do countries need to exchange currencies when trade occurs? Most countries have different currencies

2. What happens to a country’s GDP as a result of investing in human capital and capital goods ? It increases the Gross Domestic Product. What are some examples of investing in human capital? Education and health care (insurance) What are some examples of investment in capital goods? Technology, machinery, buildings, stock, or any other things needed to operate a business What is the importance of natural resources to a country’s economy? It is very important and often dictates the types of economic activities practiced. What term stands for a person that takes a risk to start a business? Entrepreneur What term means a person borrows money to purchase a product? Credit What term stands for a financial plan that a person follows? Budget What term stands for putting money aside that one doesn’t spend? Savings What term means to put money into stocks or other areas in hopes of a return because their money gains interest? Investment Which country has the most economic freedom between the United Kingdom, Germany, and Russia? United Kingdom Which country has the least amount of economic freedom between the United Kingdom, Germany, and Russia? Russia What kind of economy is found in Australia? Market. They have one of the freest economies in the world. What is the name of the currency in most Latin American countries? Peso What is the currency of Canada? Canadian dollar or loony What is the currency of the United Kingdom? Pound What is the currency of most countries in the European Union? Euro What is the currency of Russia? Ruble What type of economy is found in Cuba? command