Economics in Europe

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SS6E5 The student will analyze different economic systems.
SS6E6 The student will analyze the benefits of and barriers to
voluntary trade in Europe.
SS6E7 The student will describe the factors that cause economic
growth and examine their presence or absence in Europe.
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Compare how traditional, command, and market economies answer the
economic questions of (1) what to produce, (2) how to produce, and (3)
for whom to produce.
Explain how most countries have a mixed economy located on a
continuum between pure market and pure command.
Compare and contrast the economic systems found in the United
Kingdom, Germany and Russia
Explain how specialization encourages trade between countries.
Compare and contrast different types of trade barriers, such as tariffs,
quotas, and embargos.
Explain why international trade requires a system for exchanging
currencies between nations.
Explain the relationship between investment in human capital (education
and training) and gross domestic product (GDP).
Explain the relationship between investment in capital (factories,
machinery, and technology) and gross domestic product (GDP).
Describe the role of natural resources in a country’s economy
Describe the role of entrepreneurship
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How do the three types of economic systems (traditional, command, and market
economies) answer the questions of what, how, and for whom to produce?
How do most countries strike a balance between having a pure market and pure
command economy?
What are the similarities and differences between the economic systems in the
United Kingdom, Germany and Russia?
How does specialization encourage trade between countries?
How do trade barriers (tariffs, quotas, and embargoes) hinder voluntary trade
from occurring between countries?
Why is it necessary to exchange currencies for nations to trade?
How does the European Union encourage voluntary trade among its members?
What is the relationship between capital, human capital investment, and Gross
Domestic Product (GDP)?
How does the unequal distribution of resources affect European countries?
What is an entrepreneur?
 Every society, whether a country,
state, city, town, has an economic
system
 An economic system is how a
society organizes the production,
consumption and distribution of
goods and services
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There are three main types of economic systems
Traditional
 Found mostly in societies that are based on farming
 People produce enough goods to survive
▪ Either by farming, gathering or hunting
 Make their own clothes and tools
 Anything extra is usually traded
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Command
 Government controls what is produced, how things are produced
 Government has all the resources and dictates what is to be made and who
gets the product
▪ Decisions made on wealth, class status or by position in a waiting line
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Market
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Based on what the consumers of the country want to buy and sell
Supply and demand determines what is produced and how it is produced
People may own their own businesses
Who gets a product determines how much they can afford to buy it
NORTH KOREA
PAKISTAN
UNITED STATES OF AMERICA
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Most countries in the
world have a mixed
economy
 Most are in between
command and market
economies
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Because of growing
populations, citizens
acquiring more rights,
the addition of resources
and government
changes, countries have
moved towards mixed
economies
 Examples of
countries with
mixed
economies
 United States
 England
 France
 South Africa
Economic System of the
United Kingdom
 The U.K. has a mixed
market economy and it
is the second largest
economy in the
European Union. The
U.K. has most of its
GDP come from
banking, insurance and
businesses under
private ownership. The
government still
controls medicine and
welfare, but the human
capital of the U.K. is
very high, thanks to
skilled workers in
technology, education
and entrepreneurship.
Economic System of Germany
 Germany
has a type
of mixed economy
called a social market
economy. The
government controls
some things, but
industry mainly brings
in money to Germany.
They have a social
welfare system for the
poor, and their human
capital is very high, as
education is stressed
greatly. Germany has
the strongest
economy in Europe
today.
Economic System of Russia
 Russia has a mixed
market economy,
and it is not a strong
one. Since
Communism ended,
the government has
given up businesses
to private owners,
and a lot of the
country’s businesses
are not functioning
due to lack of funds.
Russia gets money
from selling oil. Their
human capital is low
due to lack of proper
education in schools
and colleges.
 The act of concentrating on a
limited number of goods and
activities to trade
 Helps people and companies use
resources more efficiently
 Allows for increased production
and consumption of goods and
services
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Tariffs
 Taxes on imported goods
 Makes consumers pay a higher price for the item
 Increase in demand
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Quotas
 Restrictions on the amount of a good that can be
imported into a country
 Cause shortages that raise prices
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Embargos
 Forbids or disallows trade with other countries
Currency Exchange in
Europe
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Currency is the
type of money
used to exchange
or purchase goods
The system of
exchanging money
internationally is
called foreign
exchange
Most countries in
Europe use euros,
which allows for
easy exchange of
goods in almost all
countries in Europe
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Human Capital
 The knowledge and
skills that allow for
people to make goods
and services for society
 Factors
▪ Training and education
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Capital
 Things that are used to
make other goods
 Factors
▪ Factories, technology and
machines
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Gross Domestic
Product (GDP)
 The total market value
of the goods and
services produced by a
country’s economy
during a specific period
of time
 Used by economists to
determine how
healthy or unhealthy a
country is
 The relationship between human
capital and GDP is if a country has
good source of human capital, the GDP
tends to be higher
 The relationship between capital and
GDP is the more capital in a country,
the healthier the country is in the long
term
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Natural resources that drive Europe’s
economy include
 Oil
 Coal
 Natural Gas
 Iron
 Forestry
 Rivers
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An entrepreneur is someone who has an idea for
a good or service and takes risks to produce the
good or service
Entrepreneurs know of the risks before the
product is produced
Entrepreneurs help the economy to grow based
on borrowing funds, use capital and human
capital and natural resources
Europe as a whole does not have a lot of
entrepreneurship compared to other continents
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