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Canada Economics SS6E1a,b,c; SS6E5; SS6E8 What to produce? How to produce? For whom to produce? Economic Systems • Traditional: people usually produce what they need to survive; usually in an agricultural society; They trade/barter goods • Command: government CONTROLS what is produced and how it is produced • Market: based on what the country’s people want to buy and sell; allows for private ownership of businesses and entrepreneurs Mixed Economies • Today, most countries are a mixed economy – each has some government control (command) and some consumer control (market). • On the economics continuum – some mixed economies are more market and less command (Canada); while others are more command and less market (Cuba). Market Command Canada has a mixed economy (more market, very little command). The government controls areas such as health care and the postal service. Specialization (SS6E2) • Specialization encourages and increases trade; a country can obtain (get) what it needs at a lower cost when it is produced by the country who specializes in producing that item. • Countries will specialize in what they do best (examples: oil production, cars, blue jeans) Opportunity Cost • When a country decides to specialize, they have to consider opportunity cost. • Definition of opportunity cost: when a country specializes, it is the value of what they give up when choices are made about what product(s) in which to specialize. • Canada specializes in paper products that they sell to the USA. Trade Barriers (restricting trade because a country wants to sell and produce their own goods) These can be natural geographic features such as mountains or oceans, or they can be man-made/political ( tariffs). • tariffs: TAXES placed on imported goods • quotas: RESTRICTIONS on the amount of goods that can be imported into a country • trade embargoes: FORBID trade with another country • Trade Corridors allows trade to flow freely between countries. This can be a treaty to remove tariffs (NAFTA) or a man-made system such as the St. Lawrence Seaway. NAFTA (North American Free Trade Agreement) • In order to increase trade in North America, the USA, Canada, and Mexico signed an agreement called NAFTA. • NAFTA created a free trade zone in North America. • This agreement eliminated (removed) tariffs on goods shipped between the USA, Canada, and Mexico. NAFTA: USA, Canada, Mexico Exchanging Currencies (money) • All countries do not use the same type of currency (money). • International trade must have a system for exchanging currencies between countries. Foreign exchange: In order to pay for goods in another country, you must convert your currency (money) into the currency of another country. (example: USA dollar to Mexican peso) Economic Growth Factors • Factors that influence economic growth are: – human capital = human workers and the investments in the welfare (healthcare) and training of those people who perform labor (work) Education – Capital = (factories and/or machinery) – Natural resources = things that come from the land (examples: minerals, water, trees, oil) – Entrepreneurship = people who are willing to take a risk to own a private business Gross Domestic Product (GDP) • GDP = total market value of the services and goods that a country produces during a specific year • A country’s economic “health” is determined by the GDP (in other words…how rich or poor is the country?) • Countries with a strong economy = high GDP; weak economy = low GDP Relationship between investment in human capital (education and training) & investment in capital (factories, machinery, & technology) and GDP (Gross Domestic Product). • Human Capital: Investment in skills training (improve your job skills) and education directly affects a country’s GDP; healthy employees are more productive…make more money…raise GDP). • Capital: goods used to produce things (factories, machinery, computers, technology, etc.); provides workers with the best and newest tools so they can produce more (make more money for the country’s economy…raise GDP). Entrepreneurs • Entrepreneurs are extremely important to any country’s economy. Remember…they are people who have new ideas and they risk their own money to create a business and bring the goods/services to the marketplace. • Once their goods/services are brought to the consumer…they are making money…and raising the country’s GDP!!