Cornell Notes Topic/Objective: Name: Economic Systems Class

Cornell Notes
Economic Systems
Essential Question: What are the main types of economy systems?
What are the different types of Trade Barriers?
Economic System
Every country develops an economic system to determine how to use its limited
resources to answer 3 basic economic questions: 1) What goods and services will be
produced? 2) How will goods and services be produced? 3) Who will consume the
goods and services?
Scarcity is a limited supply of something.
Supply and Demand is the availability, or "supply," of goods or services is a key
consideration in determining the price at which those goods or services can be
Command Economy
Specialization is being an expert or good at producing, manufacturing, or working with
something in particular.
Trade- the voluntary exchange of goods and services among people
Trade barriers: Tariff-a tax on imports
Quota- specific limit placed on the number of imports that may enter
the country
Embargo-a government order stopping trade with another country
Government planning groups make the basic economic decisions. They determine
which goods and services to produce, the prices, and wage rates. The government
owns the business and farms.
Market Economy
(Also known as Free Enterprise, Capitalism, and Laissez-Faire). Decisions are guided
by changes in prices that occur between individual buyers and sellers in the market
place. Individuals and corporations generally own businesses and farms. Each
business or farms decides what it wants to produce.
In a free economy-business do not have too many rules from the government.
Mixed Economy
Most modern economies are mixed. Business freedoms are reduced, but it helps to
protect consumers and workers.
Traditional Economy
Customs and habits of the past are used to decide what and how goods will be
produced, distributed, and consumed. People are depended upon to fulfill their
traditional roles.
Trade Barriers
Free Trade Zone
North American Free
Trade Agreement
International Trade and
Gross Domestic Product
and Human & Physical
A free trade zone is when there are no tariffs between countries (example would be if
you are a member of the European Union
In 1994, the governments of the United States, Canada, and Mexico signed an
agreement called NAFTA, which took away all tariffs on goods traded among the three
countries. In doing so, this helped to increase trade among the countries (Free Trade
Zone) which leads to higher standard of living for all three countries.
Currency is the money people use. Most European Union countries use the Euro
which makes trade easier. If a country has its own currency, it must exchange it to the
type of currency where the goods and services are purchased.
Gross Domestic Product (GDP) of a country is the total value of all the goods and
services produced in one year. The GDP tells how rich or poor a country is. The GDP
can also tell if a country’s economy is getting better or worse. To increase GDP,
countries must invest in human capital (education, training, skills, and health of
workers). High literacy rates helps increase standard of living (economic level).
To increase GDP countries must also invest in physical capital. This includes
factories, machines, technologies, buildings, anything that helps keep workers safe
and machines running properly so people can do their jobs.
Don’t forget summary (4-8 sentences)