CRCT Economics Review Sheet
Command Economy: All major decisions related to the production, distribution, & types of goods and services are all made by the government or central authority.
Market Economy: In a market economy, buyers and sellers make economic decisions by spending money on goods and services they want.
Traditional Economy: Things are done as they have been done in the past.
Economy Type
Command
Market
What to produce?
Whatever the government says to
produce
Whatever consumers say to produce
How to produce?
However the government tells you to
produce
However the consumers tell you to produce
For whom to produce?
For whomever the government tells you to
produce (ideally the entire society)
For whomever the consumers tell you to produce
Traditional
Whatever ritual, habit or custom dictates
However ritual, habit or custom dictate
For whomever ritual, habit or custom dictate
No country has a pure command or pure market economic system.
Most economies combine market and command economic systems (MIXED)
Country
Cuba
Place on
Continuum 5%
What to produce?
controlled by the government; some
small farms owned by individuals
How to produce?
controlled by the government; some small
farms owned by individuals
For whom to produce?
controlled by the government; some small farms
owned by individuals
Russia
Place on
Continuum 30%
Government owns large industries but
there are some private businesses
Government owns large industries but there
are some private businesses
Government owns large industries but there are
some private businesses
Brazil
Place on
Continuum 64%
Germany
Place on
Continuum 65%
United Kingdom
Place on
Continuum 78%
Canada
Place on
Continuum 85%
Australia
Place on
Continuum 95%
Mostly decided by private businesses,
but some government control of large
industries
Mostly decided by private businesses,
but some government control
Mostly decided by private businesses, but
some government control of large industries
Hard to start a business
Mostly decided by private businesses, but
some government control
Mostly decided by private businesses, but some
government control of large industries
decided by private businesses
decided by private businesses
decided by private businesses
decided by private businesses
decided by private businesses
decided by private businesses
decided by private businesses
easy to start a business
decided by private businesses
easy to start a business
decided by private businesses
easy to start a business
Mostly decided by private businesses, but some
government control
Specialization - When one nation can produce a good or service at a lower cost than another nation. Specialization encourages trade. For example, if a country
specializes in oil, they can trade oil for a certain food that another country specializes in so that both countries benefit. “Do what you do best; trade for the rest.”
Tariff – A tariff is a tax placed on goods that one nation imports from another. Many nations use tariffs to protect their industries from foreign competition.
Tariffs provide protection by acting to raise the price of imported goods.
Quota – A quota sets a limit on the amount of certain goods that can be imported into a country.
Embargo - An embargo is an order designed to stop the movement of goods. No trading!!
NAFTA North American Free Trade Agreement: An agreement among Canada, Mexico, and the U.S. to trade without tariffs
Exchange Rates - provide a way to determine the value of one country’s currency in terms of another country’s currency. Without a system for exchanging
currencies, it would be hard for countries to trade with each other.
There are four factors that most influence economic growth in a nation. These are:
1.) Land - Land provides the basic raw materials (natural resources)--plants, animals, minerals, fossil fuels--that are used in the production of goods.
2.) Labor – Work – by machines and people.
3.) Capital (2 kinds; human and physical – defined below)
4.) Entrepreneurship – when people take a risk to start a business
Human Capital - education and training of workers
Gross Domestic Product – The total value of all goods and services produced within a country in a year. When countries increase capital/human capital, their GDP will
also increase.
Capital (Physical)- tools, equipment, buildings, and vehicles used in production.
The higher the literacy rate of a country the higher the citizens’ standard of living will be. If a country improves its literacy rate, it will also usually
improve the standard of living.
.
.
Cuba 5%
Pure Command
Russia 30%
Brazil 64%
United Kingdom 78%
Continuum
Germany 65%
Canada 85% Australia 95%
Pure Market