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How does political ideology influence economic systems?
- group welfare
- individual well-being
- ownership of factors of production (land, labor, capital)
favors group welfare over individual well-being; government owns factors of production
communism (centrally planned economy)
ownership of factors of production is split between public and private sectors depending on social, political, and/or economic objectives
socialism (mixed economy)
individual well-being will achieve group welfare; ownership of factors of production should be majorly owned by individuals with some owned by the government
capitalism (free market economy)
move of socialism away from its more communist beliefs more toward free market economic beliefs
What are the means to measure economic development?
What is the classical view of economic development?
focuses on a healthy increase of GDP per capita from year to year
What is the modern view of economic development?
a complex process of positive advances/changes in all sectors of life in an economy
Why is GDP not an accurate measurement of economic development?
- uncounted transactions (cash, black market, etc)
- question of growth
- problem of average
- pitfalls of comparison
an adjustment in GDP per capita to reflect difference in the cost of living between different countries
measurement of the extent of a government to provide health, education, and standard of living
What are the categories for a country based on economic development?
- developed countries
- newly industrialized countries (NICs)
- developing countries
What are the characteristics of developing countries?
- GDP/capita of less than $6,000
- unequal distribution of income
- technological dualism (haves and have nots)
- regional dualism (haves and have nots)
- majority of population works in agricultural sector (low income)
- disguised unemployment (a job for one is split for many)
- high population growth rate
- high rates of illiteracy, child mortality
- widespread malnutrition and health problems
- political instability
- inhospitable topography
- export economy in minerals and agriculture
- poor infrastructure
- low savings rates and inadequate financial infrastructure
What is the classical theory of economic development?
- economic growth (GDP) achieves economic development
- investments in capital assets
- balanced economic growth
- import substitution (domestic manufacturing)
What is the modern theory of economic development?
- complex change processes in all aspects of life
- investments in human assets (education and health)
- trickle-down growth (success of one aspect brought together the other sectors; almost domino effect)
- export promotion (produce quality products at competitive prices so that we earn money)
national _____ can have a strong impact on a nation's economic development and vice versa
The economy of _____ cultures tend to provide incentive and rewards for an individual's business initiative
The economy in ____ cultures tend to offer fewer incentives and rewards
____ is the structure and processes that a country uses to allocate its resources and conduct its commercial activities
No nation is completely individualist or collectivist in its _______.
____ is a system in which a nation's land, factories, and other economic resources are owned by the government
centrally planned economy
______ agencies specify production goals for factories and even decide prices
central planning agencies
What is the ultimate goal of a centrally planned economy?
to achieve a wide range of political, social, and economic objectives through production and distribution of resources
Central planning is rooted inn the ideology that the ____ is more important than _____. (Karl Marx)
- group's welfare
- individual well-being
In the late 80s, centrally planned economy became unpopular for several reasons such as failure to create ____, _____, _____, & _______.
- economic value
- rapid growth
- satisfying consumer needs
Centrally planned economies failed because they hampered the _____ and ____ of products, failed to encourage thinking that promotes _____, _____, and _____.
- economic value
- the development of new technologies
- production methods
What about China, an emerging market, is attracting huge sums of investments?
- the immense population
- rising incomes
- expanding opportunities
______ were larger entities responsible for planning agricultural production quotas and industrial production schedules
______ is now an accepted concept which encourage Chinese companies to invest in innovation.
a term referring to "personal relationships"; one of the most important factors in forming a successful venture in China
What does guanxi entail?
- contacts > contracts
- pleasure > business
- business partners = family members too
- cultural sensitivity matters
____ and _____ pose threats to China's future economic performance
- political problems
- social problems
Intensified competition and the entry of international companies into China are placing greater emphasis on ____ and the cutting of ______.
- payrolls in some industries
Unhappiness with economic progress in the countryside is a serious potential source of _____
____ is a system in which land, factories, and other economic resources are rather equally split between private and government ownership
In a mixed economy, the government tends to control the economic sectors that it considers important to _____ & _______
- national security
- long-term stability
Many mixed economies maintain generous welfare systems to support ____ and provide _____
- healthcare for the general population
The governments of countries with mixed economies influence economic activity by _____ like ______.
- special incentives
- hefty subsidies
What is the goal of a mixed economy?
- low unemployment
- low poverty
- steady economic growth
- equitable distribution of wealth by means of most effective policies
Many mixed economies are remodeling to look more like _______
free market economies
Many government owned businesses in mixed economies need _____ to survive which raises _______ and _____ for goods and services
- large infusions of taxpayer money
- taxes & prices
the selling of government owned economic resources to private operators is called _______; what does it help eliminate?
- subsidized materials, labor, and capital
What is the overall aim of privatization?
- to increase economic efficiency
- boost productivity
- raise living standards
In a ____ the majority of a nation's land, factories, and other economic resources are privately owned by individuals or businesses
free market economy
Who produces what and the prices of products, labor, and capital in a market economy are determined by two factors
supply and demand
the quantity of a good or service that produces are willing to provide at a specific selling price
the quantity of a good or service that buyers are willing to purchase at a specific selling price
As supply and demand change to a good or service so does its ______
The ____ a product's price, the greater the demand will be; the ____ the product's price, the lower its demand.
The lower a product's price the _____ the quantity that producers will supply; the higher the price, the _____ the quantity.
What are two forces that can affect prices for many products?
- market forces
- uncontrollable natural forces
What is the overall belief of the free market system?
Individual concerns should be placed above group concerns
structure an processes that a country uses to allocate its resources and conduct its commercial activities
economic system in which a nation's land, factories, and other economic resources are owned by the government, which plans nearly all economic activity
centrally planned economy
economic system in which land, factories, and other economic resources are rather equally split between private and government ownership
policy of selling government-owned economic resources to private operators
economic system in which the majority of a nation's land, factories, and other economic resources are privately owned either by individuals or businesses
quantity of a good or service that producers are willing to provide at a specific selling price
quantity of a good or service that buyers are willing to purchase at a specific price
Who is the Father of Capitalism?
What are the features of a free market economy?
- free choice
- free enterprise
- price flexibility
When a company is able to control a product's supply and therefore its price, it is considered a _____.
How do governments prevent monopolies?
Enforcing antitrust laws
What are the roles of the government in a free market economy?
- enforcing antitrust laws
- preserving property rights
- providing a stable fiscal and monetary environment
- preserving political stability
Countries with the greatest economic freedom tend to have the ______ standards of living; but greater economic freedom does not guarantee a high per capita income.
measure for gauging the economic well-being of one nation's people as compared with that of another nation's people
_____ is a key factor that drives economic growth and rising living standards.
What are some activities that are not included in a nation's GDP?
- volunteer work
- unpaid household work
- illegal activities (gambling, black market)
- unreported transactions conducted in cash
value of goods and services that can be purchased with one unit of a country's currency
relative ability of two countries' currencies to buy the same "basket" of goods in those two countries
purchasing power parity (PPP)
measure of the extent to which a government equitably provides its people with a long and healthy life, and education, and a decent standard of living.
human development index (HDI)
country that is highly industrialized and highly efficient, and whose people enjoy a high quality of life
country that has recently increased the portion of its national production and exports derived from industrial operations
newly industrialized country