Download What is an Economic System?

SS6E1 The student will analyze different economic systems.
SS6E2The student will give examples of how voluntary trade
benefits buyers and sellers in Latin America and the Caribbean
SS6E3 The student will describe the factors that influence
economic growth and examine their presence or absence in
Latin America.
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Compare how traditional, command, and market economies answer the
economic questions of (1) what to produce, (2) how to produce, and (3)
for whom to produce.
Explain how most countries have a mixed economy located on a
continuum between pure market and pure command.
Compare and contrast the economic systems found in Brazil and Cuba
Explain how specialization encourages trade between countries.
Compare and contrast different types of trade barriers, such as tariffs,
quotas, and embargos.
Explain the functions of the North American Free Trade Agreement
(NAFTA)
Explain why international trade requires a system for exchanging
currencies between nations.
Explain the relationship between investment in human capital (education
and training) and gross domestic product (GDP).
Explain the relationship between investment in capital (factories,
machinery, and technology) and gross domestic product (GDP).
Describe the role of natural resources in a country’s economy
Describe the role of entrepreneurship
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How do governments impose trade barriers?
How do the trade agreements made between countries in Latin America
and the
Caribbean (i.e. NAFTA) overcome trade barriers and encourage voluntary
trade in the region?
How do trade barriers (tariffs, quotas, and embargoes) prevent
international trade from occurring between countries?
Why is it necessary to exchange currencies for nations to trade?
Why are the benefits of voluntary trade important for buyers and sellers?
What are the factors that promote economic growth in countries?
How are these factors present or absent in the countries of Latin
America and the Caribbean? (Cuba and Brazil)
How does having or not having these factors of production affect the
countries of Latin America and the Caribbean? (Cuba and Brazil)
What is the role of entrepreneurship in Latin America?
 Every society, whether a country,
state, city, town, has an economic
system
 An economic system is how a
society organizes the production,
consumption and distribution of
goods and services
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There are three main types of economic systems
Traditional
 Found mostly in societies that are based on farming
 People produce enough goods to survive
▪ Either by farming, gathering or hunting
 Make their own clothes and tools
 Anything extra is usually traded
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Command
 Government controls what is produced, how things are produced
 Government has all the resources and dictates what is to be made and who
gets the product
▪ Decisions made on wealth, class status or by position in a waiting line
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Market
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Based on what the consumers of the country want to buy and sell
Supply and demand determines what is produced and how it is produced
People may own their own businesses
Who gets a product determines how much they can afford to buy it
NORTH KOREA
PAKISTAN
UNITED STATES OF AMERICA
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Most countries in the
world have a mixed
economy
 Most are in between
command and market
economies
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Because of growing
populations, citizens
acquiring more rights,
the addition of resources
and government
changes, countries have
moved towards mixed
economies
 Examples of
countries with
mixed
economies
 United States
 England
 France
 South Africa
Economic System of Cuba
 Cuba
has a command
economy, and the
government owns all
resources, property
and also decides who
gets the products and
how products are
made. Cuba’s overall
economy has
decreased due to the
Soviet Union’s collapse
and the U.S. blockade.
People in Cuba are not
allowed to own
businesses or make
products without
permission
Economic System of Brazil
 Brazil has a mixed
market economy, and
is the strongest
economy of all the
countries in South
America. Brazil makes
money through
agriculture, mining,
manufacturing and
services. The
government controls
the post office and
health care. People in
Brazil are free to own
businesses and to buy
what they please.
 The act of concentrating on a
limited number of goods and
activities to trade
 Helps people and companies use
resources more efficiently
 Allows for increased production
and consumption of goods and
services
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Tariffs
 Taxes on imported goods
 Makes consumers pay a higher price for the item
 Increase in demand
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Quotas
 Restrictions on the amount of a good that can be
imported into a country
 Cause shortages that raise prices
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Embargos
 Forbids or disallows trade with other countries
Currency
Exchange in Latin
America
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Currency is the
type of money
used to exchange
or purchase goods
Types of money in
Latin America and
the Caribbean:
 Mexico – Peso
 Brazil – Real
 Venezuela –
Bolivar
 Haiti – Gourde
 Jamaica –
Jamaican Dollar
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The North American Free Trade Agreement, or
NAFTA, is a trade agreement signed by Mexico,
the U.S. and Canada in 1994
NAFTA allowed for no trade barriers between
the three countries so trade can move freely
The functions of NAFTA are:
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Eliminate Tariffs
Remove Quotas
Remove barricades
Establish strict regulations in industries
Improve working conditions
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Human Capital
 The knowledge and
skills that allow for
people to make goods
and services for society
 Factors
▪ Training and education
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Capital
 Things that are used to
make other goods
 Factors
▪ Factories, technology and
machines
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Gross Domestic
Product (GDP)
 The total market value
of the goods and
services produced by a
country’s economy
during a specific period
of time
 Used by economists to
determine how
healthy or unhealthy a
country is
 The relationship between human
capital and GDP is if a country has
good source of human capital, the GDP
tends to be higher
 The relationship between capital and
GDP is the more capital in a country,
the healthier the country is in the long
term
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Natural resources that drive Latin America’s
economy include
 Iron ore
 Lumber
 Oil
 Rivers
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An entrepreneur is someone who has an idea
for a good or service and takes risks to
produce the good or service
Entrepreneurs know of the risks before the
product is produced
Entrepreneurs help the economy to grow
based on borrowing funds, use capital and
human capital and natural resources
Latin America’s entrepreneurship rate is
growing but it is hard to start businesses