Economic Understandings
Questions You Should Be Able To Answer From Presentations
General Questions
1. In a traditional economy, how are economic decisions made?
Custom and habit
2. What could be a problem for a country with a traditional economy?
People need things and are unable to barter to obtain them
3. In a command economy, how are economic decisions made?
Government planners
4. In a market economy, how are decisions made?
Consumers and the market
5. Who takes the financial risk in starting a new business in a market economy?
Individual business people
6. Why do most countries have a mixed economy?
Most economies have found they need a mix of free market and some government control to be
successful and protect consumers.
7. What is meant by “economic specialization”?
Producing those goods a country can make most easily so they can trade them for goods made
by others that cannot be produced locally
8. What does it mean to be “self-sufficient”?
Produce all the goods and services needed by a country
9. Why does specialization make trade between countries easier?
Countries can produce those things they make best and trade with others for what they need.
10. What is a tariff?
A tax placed on imports (goods coming into a country)
11. What is a quota?
A limit to the number of foreign-produced goods that are allowed into a country
12. What is an embargo?
A halt to trade with a particular country for economic or political reasons
13. What is meant by “human capital”?
Skills and education that workers have
14. What is Gross Domestic Product or GDP?
The value of all goods and services produced in a country in a year
15. If a country does not invest in its human capital, how might the GDP be affected?
GDP might go down because poorly trained workers will not be able to do their jobs as well
16. Why is it important for nations to have a system to convert form one currency to another?
Converting currency makes it possible to buy and sell goods between nations with different
types of money.
17. What are capital goods?
Factories and machines used to make the goods
18. What is meant by “natural resources”?
Something that is found in the environment that people need (water, wood, minerals, oil, etc)
19. Define “entrepreneur”.
Someone who is willing to take a risk to begin a new business
20. How does a high literacy rate usually affect a country’s economy?
A high literacy rate usually goes along with a high GDP
21. What is the economic system that is practiced most in Southern and Eastern Asian
countries?
Mixed
China
22. What type of economy does China have?
Mixed (with an emphasis on command)
23. What role does the Chinese government play in decisions about investing in human
capital?
The government involvement is important because China is still very much a command
economy (mixed with the emphasis on command)
24. After the communist revolution, the Chinese government tried to organize farmers into
what?
Collective farms
25. The Great Leap Forward and the Cultural Revolution were attempts by the government to
reorganize what?
The economy
26. What was the purpose of China’s setting up the four Special Economic Zones?
Increase trade with foreign countries- to act as trade centers for global trade
27. Which program was announced in the 1970s in an attempt to improve China’s economy?
Four Modernizations
28. How did the Four Modernizations affect Chinese agriculture?
Farmers were given better seed and equipment
29. How did the Four Modernizations affect Chinese industry?
Many factories began to increase the production of consumer goods that were easier to sell
30. What are at least half of China’s workers involved in today?
Agriculture
31. In which world markets has China been helped by its investment in capital goods?
Consumer goods
32. How has China’s attitude toward entrepreneurship changed in the past several decades?
The government has become more open to the idea of allowing some free enterprise.
India
33. What type of economy does India have?
Mixed
34. What was the Green Revolution?
India’s attempt to improve agriculture
35. What was one problem that arose from the Green Revolution?
Water pollution
36. How was the Green Revolution an investment in human capital?
Farmers were given training and new technology
37. What is one very successful part of India’s economy today?
Technology and electronics
38. What percentage of India’s population works in agriculture?
50%
39. How would you best describe the majority of farms in India?
Small, family-owned farms
40. How much of India’s GDP comes from farming?
25%
41. How does India rank in the world in terms of industrial production?
India is one of the world’s leading industrial countries (in the top 10)
42. India must invest in capital goods to help overcome which problems?
Overpopulations and poverty
43. What has been the role of the entrepreneur in India?
The country has all sorts of entrepreneurs, both wealthy and those with modest incomes
44. Who has benefitted from the micro-credit industry in India?
Smaller entrepreneurs
45. What is it called when many American companies hire Indian companies to do work that
used to be done in the U.S.?
Outsourcing
Japan
46. What type of economy does Japan have today?
Mixed
47. How would you describe the economy of Japan (weak, strong, industrial, technological,
agricultural, etc)?
One of the most technologically advanced in the world
48. The economy has to make up for the lack of what?
Natural resources
49. How did Japanese farmers make up for the lack of good farmland?
Digging terraces in the hillsides
50. What is the job of the Ministry of International Trade (MITI)?
Helping companies decide what products will sell in the global market
51. What is one of the most important ways that Japan has invested in human capital?
Education
52. What is one of the most important ways Japanese companies invest in human capital in
dealing with their workers?
Companies provide benefits like health care and recreational facilities
53. How does the Japanese government promote the country’s industrial growth and
development?
Working with industry to be sure they are keeping up with world markets and trends
54. What is the source of nearly all of Japan’s GDP?
Industry and services
55. Why is investment in capital goods important for a country like Japan?
Japan’s economy depends heavily on industry and must be modern to be competitive.
56. What is Japan’s attitude regarding entrepreneurship?
Japan’s economic development depends on the creative ideas of the country’s entrepreneurs.
57. Japan has a trade surplus. What does this mean?
Exports more than it imports
North Korea
58. Even though most economies are mixed, North Korea’s economy could best be described as
being what?
Command
59. Because of many poor decisions about farming, North Korea has had many years of what?
Starvation
60. Most economic decisions in North Korea are made by whom?
Specifically—Kim Jong-il
61. On what has Premier Kim Jong-il spent a great deal of North Korea’s money?
Military