Chapter 3 Section 3 Economic Systems Economies 0

Chapter 3 Section 3 Economic Systems

Economies 0 A system in which people make, exchange, and use things that have value is called an economy 0 Producers make things 0 Consumers buy things 0 There are three basic questions in an economy: 1. What will be produced? 2. How will it be produced? 3. For whom will it be produced?

Private Ownership 0 Capitalism is the type of system in which people own their business and make all of the decisions about it themselves 0 Sometimes called a “free-market” economy 0 Business owners borrow money from banks or investors to make their business grow 0 Banks & investors then make interest off of the borrowed money

Government Ownership 0 Communism is a form of government in which the state or government owns all of the businesses and make all the decisions about the economy 0 This would be the complete opposite of a “free-market” economy! 0 Few countries still have this form of government, can you name one?

Mixed Ownership 0 Not too many countries in this world are either pure 100% capitalism or communism, most are mixed 0 Even in America where we have a “free -market” economy, the government runs schools, builds roads, and even owns businesses like Amtrak 0 In China the opposite is true where the economy is communist, but there is now some private ownership allowed by the government

Levels of Economic Development 0 The Industrial Revolution changed this world significantly! 0 Two types of economic development now exist: 1. Developed 2. Developing

Developed Nations 0 In developed nations, like the U. S. , most people live and work in cities 0 Machines do most of the work 0 We have plenty of food and water 0 Most people have an opportunity for education and health care 0 However, problems like pollution, unemployment, and other societal issues still exist

Developing nations 0 Most nations of the world are still developing 0 Africa, Asia, and Latin America 0 Lack wealth 0 Most people are still subsistence farmers 0 Many nations have issues with disease, food shortage, dirty water, poor education, poor health care, & political unrest 0 Becoming a developed nation is a slow process http: //www. pulsamerica. co. uk/wp-content/uploads/2014/03/favela. jpg

World Trade Patterns 0 Some nations are better at producing industrial or technology goods, while others are better at exporting cash crops, oil, or minerals 0 Saudi Arabia has tons of oil that they use in trade to get what they need 0 Switzerland makes incredibly precise watches and uses this as a trading tool 0 This means countries do not have to supply everything for themselves

Interdependence 0 With all of the trading that goes on between countries some countries need each other for their economy to work correctly 0 The U. S. needs oil from elsewhere to supply our demand other places want our computers and technology creations 0 We make finished products, but rely on raw materials of other nations to make those products

Trade Alliances 0 The U. S. , Canada, and Mexico have created NAFTA (North American Free Trade Alliance) to cut down on trade cost 0 Most European countries belong to the European Union for the same reason 0 These trade alliances increase pressure on businesses 0 Some workers have lost their jobs 0 Businesses do benefit from increased sales in other countries 0 Consumers pay less for products

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