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Economics Handbook Vocabulary Economic System • The way in which a nation uses its resources to satisfy people’s needs and wants. Scarcity • the economic problem of having unlimited human wants in a world of limited resources. Traditional Economic System • An economic system is which social roles and culture determine how goods are made, sold, and bought. Market Economic System • An economic system based on individual choices and voluntary trade. Command Economic System • An economic system is which the government owns some or all of the factors of production. Mixed Economy • An economy that has features of more than one of the economic systems. Trade Barrier • Any law or practice that a government uses to limit free trade between countries. Embargo • A type of trade barrier in which a government places restrictions on the import or export of certain goods. Embargoes often are backed by military force. Quota • A limit on the amount of a product that may be imported during a given period of time. Tariff • A fee charged for goods or services brought into a state or country from another state or country. Free Trade Zone • An exchange of goods without the use of tariffs or quotas within a certain boundary (European Union) Currency • Money in any form that is accepted as a medium of exchange, but especially paper money. Exchange Rate • The amount of one currency that can be purchased for a given unit of another. Physical Capital • Resources such as factories, machinery, and tools that people use to make other goods. Human Capital • The knowledge and skills that allow workers to produce goods and services and earn an income. Standard of Living • refers to the level of wealth, comfort, material goods and necessities available in a certain area. Literacy Rate • the ability to read and write at a specified age in a country. Gross Domestic Product (GDP) • is the monetary value of all the finished goods and services produced within a country's borders. Natural Resources • Raw materials that are used to support life and make goods. Entrepreneur • Someone who brings together land, labor, and capital goods to produce goods and services.