53 terms

Economics

6th Grade Social Studies - Economics Unit
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Command Economy
Government makes all the economic decisions and owns most of the property. Governmental planning groups determine such things as the prices of goods/services, and the wages of workers. This system has not been very successful and more countries are abandoning it. Examples: Cuba, Former Soviet Union, and North Korea. *Germany and Russia have moved away from a command economy since 1991 and now have a mixed economy.
Mixed Economy
Market + Command. There are no pure command or market economies. To some degree, all modern economies exhibit characteristics of both systems and are often referred to as mixed economies. Most economies are closer to one type of economic system than another. Businesses own most resources and determine what and how to produce, but the government regulates certain industries. Examples: Most democratic countries have this type of economy. Brazil, Mexico, Canada, and United Kingdom
Market Economy
An economic system in which economic decisions are guided by the changes in prices that occur as individual buyers and sellers interact in the market place. Most of the resources are owned by private citizens. Economic decisions are based on free enterprise (competition between companies). Important economic questions are not answered by government, but by individuals. Government does not tell a business what goods to produce or what price to charge. Example: There are no truly pure market economies, but the United States is close.
Traditional Economy
An economic system in which economic decisions are based on customs and beliefs. People will make what they always have made and will do the same work their parents did. Exchange of goods is done through bartering (trading without using money). Least likely to be found in Europe. Examples: Villages in Africa and South America. Inuit tribes in Canada.
Command Economies
The government owns and controls the means of production. Most businesses and property belong to the state rather than private businesses or individuals. The government decides what will be produced and in what amount. It also sets worker wages and prices for goods. The goal of command economies is economic equality. They are designed to keep a few people from becoming rich while the rest of society struggles or winds up in poverty. Unfortunately, command economies are often just as susceptible to greed and corruption as other economies.
Capital Goods/Resources
Things people use to improve their quality of life.
Human Capital/Resources
Workers and their labor.
How to invest in Human Capital
Through education, training, and healthcare.
Entrepreneur
Someone who takes a risk to start a business.
Providing Jobs
Important contribution entrepreneurs make to the economy.
Scarcity
Limited resources and therefore, people must make choices. Forces countries to trade.
How does a wooden pencil require interdependence?
Countries from all over the world must work together and trade to get the necessary resources for the pencil.
Standard of Living
Describes the quality of life within a country as high or low.
Improves your economy (increases GDP)
The one benefit to investing in human capital and capital goods.
Voluntary Exchange
When countries trade to get goods and services they need.
Quota
This trade barrier limits the number of imports into a country.
Tariffs
Taxes on imports.
Benefits to Trade Barriers
Protect domestic businesses and protect domestic workers.
Two negatives of trade barriers
Limit choices and Increase prices of foreign goods
Euro
Most countries of EU have replaced their own currencies with this one. Countries gave up their own currency and replaced it with this to increase trade and cooperation among member nations.
European Union
Created to solve common problems and increase trade among member nations. Trade amount member nations increases the standard of living of its citizens.
Exchange Currency
Done when you want to buy goods and services in a country that uses a different currency than your country.
What do UK, Germany, and Russia all have in common?
High literacy rates
1 Difference among UK, Germany, and Russia
Russia has a lower standard of living.
Why does Russia have a lower standard of living.
It has a harsh climate and transition from a command economy.
Economic System
Describes how a country's economy is organized. Because of the problem of scarcity, every country needs a system to determine how to use its productive resources.
Three Questions an Economic System Must Answer
What to produce. How to produce. For whom to produce.
Four Types of Economic Systems
Traditional Economy. Command Economy. Market Economy. Mixed Economy (Market + Command)
Free Enterprise
Competition between companies. Synonyms: Capitalism and Free Market
Best Economic System
Market System, because it promotes the goals of growth, freedom, and efficiency. Citizens are free to own their own property and use it in the most efficient and profitable way. Command and traditional systems sometimes offer more security but are not nearly as strong in efficiency, growth, freedom, and environmental quality.
Bartering
Trading without using money.
Embargo
Refusal to allow any type of trade with an entire country.
Economics
Study of the making, buying, and selling of goods or services.
What 4 things are needed to survive?
Food. Water. Clothing. Shelter.
Want
Everything beyond our four basic needs.
Service
Any kind of work performed for others.
Good
Something you can feel or any kind of merchandise.
Supply
The amount or quantity of a good.
Demand
Things that are wanted.
Consumers
Anyone who buys a good or a service.
Producer
Anyone who makes or grows a good or performs a service.
Opportunity Cost
The process of choosing one good or service over another. The item that you don't pick.
Profit
The money made off a sale.
Loss
Money lost by selling a good or service for less than it cost to make or provide.
Specialization
When an individual or company specializes in doing one part of a task, and relies on others to complete the other parts.
Interdependence
When people depend upon one another. Specialization results in this.
Taxes
Money the government collects from individuals and businesses to pay for public goods and services.
Physical Trade Barriers
Barriers to trade that are geographical in nature. They include such physical features as Mountains, Deserts, or if a country is land-locked.
Political Trade Barriers
Barriers to trade that government put in place that block or inhibit international trade between countries.
Sanctions
The limiting of trade between countries or companies.
Protectionism
A policy of high barriers to trade. This benefits domestic firms by allowing them to charge higher prices to consumers. An implicit subsidy to the protected firms, paid for by consumers.
Trade Barriers
Restrictions to trade. Although this may save the jobs of some domestic workers, it destroys jobs in another, probably more efficient industries.
Supply and Demand
Control the prices and production of goods.
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