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Economy
 A social system that produces, distributes, and
consumes goods and services in a society
What role do citizens play in the
economy?
 Citizens make money and spend money!!!
 Their jobs might produce things that are sold and
increase the country’s wealth.
 Their jobs might provide some type of service needed
in the country.
 People buy goods and pay for services which increases
the country’s wealth.
Income
 Earned money
Poverty
 Poor
 People living on less than $2 a day are said to be
living in poverty
How can people make themselves
more valuable so that employers
will pay them more???
 More education
 More training
 More experience
Human Capital
 The knowledge, skills, and experience that make a
person more valuable to employers
Citizens also save money, too!
 Believe it or not when an individual saves money that
can help the economy as well.
How is a country’s economy
measured? How do we determine
if it’s successful?
 How much money do they make? (GDP and GNP)
 Is the country modern?
 Do they have a lot factories and jobs? (Developed or
developing)
 Is there money worth a lot?
 Do they sell a lot of stuff?
 Do the people there have a nice lifestyle? (standard of
living)
Gross Domestic Product (GDP)
 The value of all goods and services produced
within a country in a year
Gross National Product (GNP)
 The value of all goods and services produced by a
country within and outside of the country in a year
 Includes factories and businesses in other
countries
GDP per capita
 How much money there is per person
 GDP divided by total population
GDP per capita
If a country has a GDP of
$1,000,000 and 1,000
people, what is its GDP
per capita?
Does $1,000 sound like a lot of
money for one person for an
entire year?
USA
 Per capita GDP in 2008 was $46,900
 We have a high standard of living
 In regard to possessions, what is life like in the
USA?
Standard of living
Quality of life based on the
possession of necessities and
luxuries that make life easier
We can also use other statistics to
evaluate standard of living
 Health care (death rate, life expectancy, infant deaths,
etc.)
 Literacy rate (how many adults can read or write)
Country
GDP per
capita
Life
Literacy Rate
Expectancy
Afghanistan
$1,000
45 years
28%
China
$7,400
74 years
92%
Japan
$34,200
82 years
99%
How does a country and its citizens
make money?
 Agriculture: Farming
 Industry: Manufacturing (factories that
produce goods)
 Services (service industries or service jobs):
Jobs that provide services rather than
produce goods
Economic Development
 Developed Countries: Countries that have a great deal
of manufacturing and service industries and have high
incomes (Examples: US, France, Japan)
 Newly Industrialized Countries: Countries that are
becoming more industrialized by creating new
businesses and are moving away from agriculture
(Examples: South Korea, Thailand, Singapore)
 Developing Countries: Countries where most people
work in agriculture, there are low incomes, and
poverty is an issue (Examples: Sierra Leone,
Cambodia, Guatemala)
Developed, Newly Industrialized, or
Developing???
 The United Kingdom
 GDP per capita $34,800
 Breakdown of workers:
 Agriculture .7%
 Industry 21.8%
 Service Industries 77.5%
Developed, Newly Industrialized, or
Developing???
 Togo (West Africa)
 GDP per capita $900
 Breakdown of workers:
 Agriculture 46.6%
 Industry 23.4%
 Service Industries 30%
Developed, Newly Industrialized, or
Developing???
 China
 GDP per capita $7,600
 Breakdown of workers:
 Agriculture 10%
 Industry 46.9%
 Service Industries 43.1%
Who helps developing countries?
The World Bank
 An international organization that works to reduce
poverty and increase development.
 The World Bank makes loans to countries to help
them become developed
 Loans for schools
 Loans for health care
 Loans for infrastructure
Is industrialization a good thing or
a bad thing?
Harmful Spillovers
 The negative effects of a country’s economic
development
 Pollution
Helpful spillover
 The positive effects of a country’s economic growth
 Countries that are more industrialized, have more
money to provide people with things like health
care and education.
What helps a country become
industrialized?
 Infrastructure: Services and facilities necessary for an
economy to function (transportation systems, water
and sewage, communication systems, etc.)
Tolenesia is a very small island country in the Pacific
Ocean with a population of only 53 people. Tolenesia
produced $10,000 worth of pineapples, $25,000 worth
of crab meat, and $18,000 worth of grass skirts in its
country in a single year. Tolenesia’s people realized
that their dream was to sell grass skirts throughout the
world. Tolenesia expanded its grass skirt business by
building factories in neighboring island countries.
Now, Tolenesia produces $7,000 worth of grass skirts in
the neighboring country of Velthousenville, $9,000
worth in Parseystan, and $5,000 worth in Lottland.
Country/
Region
Life
expectancy
Literacy rate
$900
Infant deaths
(per 1,000
births)
88
39 years
81%
Chad
$1,900
93
47 years
47.5%
Sudan
$2,100
63
59 years
61%
Mexico
$10,000
21
75 years
92%
Japan
$30,400
3.26
81 years
99%
United States
$41,800
6.5
77 years
97%
The World
$9,300
50
64 years
82%
Zambia
GDP per
capita
Country
% of GDP % of GDP
from
from
Agriculture Industry
% of GDP
from
Services
GDP per
capita
Liberia
76.9%
5.4%
17.7%
$500
Australia
3.9%
25.6%
70.5%
$41,000
In recent decades, Indonesia has been trying to improve its
economy. Indonesia has increased trade with its
neighbors, developed a huge palm oil industry, and exports
or sells over 400,000 barrels of oil a day. While palm oil has
helped Indonesia’s economic growth, it has led to vast
deforestation. Many of Indonesia’s rainforests have been
cut down to make room for palm oil plantations. Indonesia
has been trying to ensure that its economy continues to
grow by investing in education. In the early 1980’s,
Indonesia’s leader decided to set aside a portion of money
made from oil each year to build schools and improve
education. Today, only 2% of Indonesia’s people ages 15-24
cannot read and the overall adult literacy rate is 90%.
Economic System
 System that sets rules for deciding what goods and
services to produce, how to produce them, and who
will receive them
 What to produce? How to produce? For whom to
produce?
Economic
System
Market
Economy
(capitalism or
free market)
Command
Economy
(communism)
Traditional
Economy
Decisions are Examples of
based on…
countries
Business
owners and
USA
consumers
(supply and
demand)
North Korea
Government
and
Cuba
Native groups
Traditions
that live in
and customs rural areas
(Inuit and
Mbuti)
 A MIXED Economy has elements of different
economic systems mixed together. (Example: China)
 China used to be a strictly command economy, but in
recent decades China has added free market to its
economy. Now, in China businesses and people have
more choices.
Communism vs. Capitalism
 Capitalism: You have two cows. You sell one and buy a
bull.
 Communism: You have two cows. The government
takes them both and provides you with milk, but it
may not be very much milk.
An important part of a region’s economy and trade
Natural Resources
Renewable Resources
Nonrenewable Resources
 Resources that can be
 Resources that cannot be
replaced over time
 Sun, wind, water, forests, etc.
replaced or take a very long
time to be replaced
 Oil (petroleum)
 Coal
 Minerals (gold, silver, iron,
diamonds)
Which resources probably play
the biggest role in the world’s
economy today?
World’s Top Producers
Legend
Diamonds
Gold
Petroleum
Coal
Terms to know
 Interdependence: Condition that exists when
countries rely on each other for ideas, goods, services,
and markets
 Globalization: The development of a worldwide
culture with an interdependent economy
What is Free Trade?
 Free Trade: removal of trade restrictions so that goods
flow freely between countries
 Examples of free trade agreements: NAFTA (North
America Free Trade Agreement) and AFTA (ASEAN
Free Trade Area)
Necessary for world trade and travel
Exchange Rates 2006
 Are most currencies worth more or less than the US
dollar?????
MCVeggie Burger Combo MEAL
 206 Indian Rupees
Xbox 360
 1,454 Chinese Yuan
iPhone 5 in Japan
 45,049Japanese Yen
 McVeggie burger meal in India $5.22
 Xbox 360 in China $199
 iPhone 5 in Japan $399
 Today $1 equals 80 Japanese Yen--- The value of the US
dollar has gone down, while the value of the Yen has
gone up.