Gross Domestic Product (GDP)
Measure of an economy’s ___________ and ______________ (monetary measure - $13.78 trillion in 2007)
Total value of all the ___________ goods and services produced in a country during a single year. (used cares are not
counted in GDP because second hand sales are not counted)
Used to measure ____________ of ___________ (quality of life based on the possession of ____________ and
____________ that make life easier) in a country.
Measures ___________ not quality.
Per Capita GDP – total GDP divided by the country’s population – U.S. was $45,800 in 2007
Compared yearly to check growth of the country.
____________ GDP from previous year = __________ economy.
_____________GDP from previous year = _________economy.
Economic Systems
Three major types
1.
2.
3.
What are 2 distinguishing factors of economic systems?
Traditional Economy
Economic decisions are made by ___________ handed down through generations.
Hunting, farming, and gathering
No Technology
Activities center around the __________
Men and women have ______________ social roles
Found in rural, non-industrialized areas. (Africa, S. America, Asia)
Command Economy
____________ makes all economic decisions. (China, N.Korea, Vietnam, Cuba, and the former Soviet Union).
No individual freedoms!
What are 2 advantages of a command economy?
What are 2 disadvantages of a command economy?
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Market Economy
Decisions are made by the principles of ____________ and ____________.
__________________________ - People buy, sell, and produce whatever they want. People can work where
they want.
Capitalism - __________ ____________ own most means of production.
What is Free Enterprise?
7 characteristics of a market economy
1. ___________ - exchanges here determine prices of goods and services. It’s the ______ and ______ exchange
of goods and services between buyers and sellers.
2. Consumer Sovereignty – The consumer is ‘_____’ of the market.
a. Why are the consumers ‘king’ of the market?
b. It exists only in _____________ based economies.
3. Economic Freedom – freedom of choice with _________________________.
a. Example – an entrepreneur starts a business and it fails. The gov’t usually will not help out.
4. ______________ ______________ ____________ - the freedom to own, use, or dispose of our property as
long as it doesn’t interfere with the rights of others.
5. Competition – struggle between buyers and sellers to get the best products at the lowest prices.
a. ________________ thrives on competition
b. Rewards the most ____________ producers.
6. Profit motive - the driving force that encourages individuals and organizations to improve their material wellbeing.
a. What is the purpose of a profit motive?
b. It is the reason for growth in a market system
7. Voluntary Exchange – the act of buyers and sellers ____________ and ____________ engaging in market
transactions.
a. Both buyers and sellers must feel a benefit.
Mixed Economy
Any combination of Economic systems
The United States is a mixed economy because ____________ and _____ ___________ exist with
government regulations.
What are some services the U.S. govt. provides?
Has some gov’t regulation
At certain times gov’t can take control of the means of production.
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Capitalism & Free Enterprise
The U.S economy is built on a ____________ economy, but government still plays a role.
Free Enterprise - ___________ gov’t interference
Capitalism - ___________ citizens own and use factors of production (_____________________________,
_____________, capital, & entrepreneurship) to make a profit.
The Rise of Capitalism
2 concepts developed
1.
2.
1200s trade routes opened between Europe and the East.
Silk roads, Marco Polo
Throughout hundreds of years trade increased
Developed ideas of wealth
________ __________
Scottish Economist
Wrote Wealth of Nations
Basic Principles of Economics
Individuals who seek profit benefit all of society
________-_________ - to leave alone
What are the 2 main concepts of Laissez-Faire economics?
1.
2.
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Socialism
What is the main belief of socialism?
______ ________
Wrote “The Communist Manifesto”
Socialist – believed industrialized nations divided into bourgeoisie (_____________) & proletariat (________)
Predicted revolution of the proletariat
Believed socialism would develop into ___________.
Communism
Communism – one class would evolve where property would be ____________________ held & there would be no
need for _________________________.
Built on the idea of ___________________.
Transitioning Economies
Former Soviet Union & the Soviet Bloc
Inefficiency of _____________________ economies led to no or very small growth
Transition of this type of economy let to the transition from ________________________ to
____________________.
Why do you think a transition from one economy to another would be difficult?
NAFTA
North American Free Trade Agreement (NAFTA) – agreement between, ____________, ______________, and the
_____________ where ___________________ were almost completely eliminated (“Free trade”)
Began on Jan. 1 1994
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