Download Chapter 04

Chapter 4 – World Economies
Objectives 4.1
What is an economy – it is how the nation will use its resources to produce and distribute
goods and services.
Identify factors of production – they are labor, capitol and land.
List three basic economic questions that must be answered by all economics – what
goods and services should be produced, how should the goods and services be produced
and for whom should the goods and services be produced?
Terms 4.1
 Economy – how the nation uses resources to produce and distribute goods and
services.
 Resources – all the things used in producing goods and services.
 Capitol – money and goods used in the production process.
 Entrepreneurship – people who willing to risk their time and money to run a
business.
 Factors of production – they are labor, capitol and land.
 Infrastructure – physical development of a country.
 Scarcity – difference between wants and needs on one hand and available
resources on the other.
Objectives 4.2
Three basic market economy questions – consumers purchasing for their needs and wants
decides what should be produced in the market. Production is left up to the businesses.
People who make more money are able to buy more goods and services.
Three basic command economy questions – dictators or governments decide what
products are needed. Government owns all means of production. Government decides
who will get what is produced.
Explain why all economies are mixed – elements of both market and command
economies can be found in both.
Compare and contrast the economic approaches of capitalist, socialist and communist
societies – Capitalist (democracy) Model is an economic system characterized by private
ownership of businesses and marketplace competition. Socialists Model has democratic
political institutions but has a high amount of government involvement in people’s lives
and in the economy. Communists Model has a totalitarian form of government that runs
everything.
Terms 4.2
Market Economy – has no government involvement in economic decisions.
Command Economy – all economic decisions are made by the government.
Capitalism – see above
Socialist – see above
Communist – see above
Privatization – refers to a process of selling government- owned businesses to private
individuals.
Chapter 4 – continued
Objectives 4.3
List goals of any economy – increase productivity, decrease unemployment and maintain
stable prices.
Identify measurements used to analyze economy – productivity, gross domestic product
(GDP), standard of living, inflation and consumer price index (CPI).
4 phases of business cycle are – prosperity, recession, depression, recovery.
Terms 4.3
 Productivity – is output per worker hour.
 (GDP) Gross Domestic Product – is a measure of the goods and services produced
using labor and property located in this country.
 (GNP) Gross National Product – is goods and services produced by Americans
both here and abroad. Note: It’s who’s producing not where.
 Standard of Living – is a measurement of the amount of goods and services that a
nation’s people have. It reflects quality of life.
 Inflation rate – refers to rising prices. Low rate of 1-5% is stable.
 (CPI) Consumer Price Index – measures the change in price over time of some
400 specific goods and services used by the average urban household.
 Business Cycle – the recurring growth (expansion) and slow down (contraction)
of the economy.
 Prosperity – is economic growth, increased output of goods and services and high
consumer spending.
 Recession – is economic slowdown, rising unemployment with fewer goods and
services produced and consumer spending decreases.
 Depression – is a period of prolonged and deep recession, consumer spending is
very low, unemployment is very high and production of goods and services is
down significantly.
 Recovery – is a period of renewed economic growth following a recession or
depression, reducing unemployment, increased consumer spending and moderate
expansion by businesses.