THEME 5. Economic Systems

Common Economic Metrics

• _______ (Gross Domestic Product): Total value of goods, services, capital, and income produced in a country in a specific period.

• ____ GDP: Inflation-adjusted total economic output (removes inflation to show actual output).

• GDP ____ ______: Economic output per person; used to measure well-being/standard of living.

• _________ _______: Measures the rate prices rise and the purchasing value of money falls.
  ____________ _____: Percentage of the workforce that is jobless and actively seeking work.

• _______ __________: The difference between a country's exports and imports.

GDP, Real, per capita, Inflation rate, Unemployment rate, Trade Balance

Economic Systems

Free Market (Free Enterprise): "Laissez-faire" (leave it alone). Buyers/sellers seek best outcomes; "invisible hand" of competition rules; ___ _________ _______.

__________ (Socialist): Government controls capital and makes key decisions; political aims (equality) prioritized over profit.

________ Economy: Combines private enterprise with government intervention. Government plays a role to _____ power concentrations and address _______ problems.

no government intervention, Command, Mixed, limit, social

UK & US Economy Type & Government Role

Type: Both are _____ Economies.

US Govt Role: _________ business (economic and social regulation); manages _______ via ______ policy (spending/taxes) and monetary policy (Federal Reserve controlling money supply); protects ________.
UK Govt Role: Intervenes to manage economy/stimulate demand (since 1940s); provides public services (health, education); historically owned industries (___________) but moved toward ___________ since 1980s.

Mixed, Regulates, stability, fiscal, consumers, nationalization, privatization

Main Trade Partners

• UK:

  • Exports: US (___%), Germany, China, Netherlands, France. => The US is the UK’s top partner

  • Imports: Germany (___%), China, US, Netherlands, France. (_____ is the largest single trading partner).

• US: Top 5 (2018): China, Canada, Mexico, Germany, Japan. (The US has trade deficits with all five).

15, 13, EU

Important Sectors & Industries

UK:

• ________ (Main driver, ~80% of GDP; banking, insurance);

• ___________ (10% of output; high-tech);

• _________ (Coal, oil, gas - though reserves are declining).

US:

• ________ ("Post-industrial," >75% of GDP; finance, health, education);

• ___________ (~20% of GDP; chemicals, aerospace, high-tech);

• __________ (<1% GDP but world’s largest food producer/exporter).

Services, Manufacturing, Energy, Services, Manufacturing, Agriculture

First Industrial Revolution (UK)

When: _____ _______ century.

What happened: Shift from rural/agricultural to urban/____________ . ___________ in manufacturing; use of coal, iron, steam power. Development of ______ (canals, railways). Britain became a _________ military/economic power.

Late 18th, industrialized, Inventions, transport, dominant

American Industrial Revolution

When: Rapid ____________ between the ______ ______ (1861-1865) and ____ (1914-1918).

What happened: Expansion based on ________ ________ and steam/electric power. Inventions (telegraph, phone, assembly line). Growth of _____ ___________("trusts"). US became the world's ______ industrial nation.

=> becoming more competitive and eventually contributing to the relative decline of British dominance in world trade

industrialization, Civil War, WWI, natural resources, large corporations, richest,

Thatcherism:

Named after Margaret Thatcher (Prime Minister in the 1980s), this philosophy emphasized ____________ (selling state-owned companies to individuals), letting “market forces” rule, and restricting business freedom as ______ as possible.

privatization, little

The New Deal:

• Definition: Programs/_______ by US President Franklin D. Roosevelt (1933-1936).

• Purpose: Response to the ________ ____________ (recovering the economy).
  Key Contents:

  • ______ : Immediate action to halt the economy's deterioration and provide help to the millions of unemployed (provide jobs) and poor.

    • Civilian Conservation Corps (CCC) & Works Progress Administration (WPA) for more jobs

    • Social Security Act for old-age and survivors' pensions

  • __________: Temporary programs to restart the flow of consumer demand and "prime the pump" of the industrial and agricultural sectors.

  • ________: Permanent programs and laws to prevent another depression and protect citizens against economic disasters.

reforms, Great Depression, Relief, Recovery, Reform

When did the global financial crisis happen? What have been some of the symptoms/ consequences of the global financial crisis?

Global Financial Crisis ( _____ – ______ )

• Symptoms:

  • Hard hit to the __________ _______,

  • _____ home prices,

  • high consumer _____ , and

  • a global economic ___________.

• Consequences:

  • It led to a

    • "_____ ______," (khủng hoảng tín dụng)

    • bank _______ - các gói cứu trợ ngân hàng (like Northern Rock),

    • deep __________,

    • burgeoning public _____ (thâm hụt ngân sách công), and

    • the implementation of _________ programs (cuts in public spending).

2007, 2010, financial sector, falling, debt, slowdown, credit crunch, bailouts, recessions, deficits, austerity

What are the key challenges facing the UK economy nowadays? the US economy?

• UK:

  • ________ : High inflation and prices (ranked as a top issue in 2023).

  • Poverty and _________ (wealthiest 10% hold 43% of wealth),

  • Regional Disparities: Northern regions are less optimistic and face more economic challenges than the south.

  • _______ (trade barriers and currency volatility),

  • the long-term impact of the COVID-19 pandemic => a high budget ______ (5.4% of GDP),

  • a large ____ burden (over 100% of GDP), and

  • the _______ of traditional manufacturing.

  • Workforce Issues: High youth unemployment and a rise in low-paid, "zero hours" contract jobs.

• US:

  • T_____ _____ : The US has had a trade deficit since 1980, importing more than it exports, which is a concern for some economists.

  • Inequality: There is a wide _______ between the rich and the poor; in 2010, the poorest fifth of households received only 3.3% of total income.

  • ________ Workforce: Workforce growth is slowing due to an aging population, which could lower the labor force participation rate.

  • ______ ________: The workforce lags behind other developed countries in math, science, and reading skills, which affects readiness for potential employers.

Inflation, inequality, Brexit, deficit, debt, decline, Trade Deficit, gap, Aging, Skills Gap

Which statement accurately describes the status of "the economy" before the 1940s?

A. Economic activity did not exist until the middle of the twentieth century.

B. People regularly discussed their nation's collective material production using metrics like GDP.

C. The concept of "the economy" as a measurable entity characterized by specific metrics like GDP did not exist.

D. The basic contours of GDP and unemployment were not formed until after World War II.

C

Which event led the US government, under President Franklin D. Roosevelt, to substantially intervene in the economy for the first time?

A. The start of World War II

B. The growth of large business corporations like trusts

C. The Wall Street Crash of 1929 and the subsequent Great Depression,

D. The Civil War and the abolition of the slave-labor system

C

In the United States, which category of government regulation promotes objectives that are not primarily economic, such as a cleaner environment or safer workplaces?

A. Economic regulation

B. Fiscal policy

C. Monetary policy

D. Social regulation

D

Thatcherism, a major philosophy of the UK Conservative government in the 1980s, was characterized by which policy?

A. Nationalizing major industries like energy and transport

B. Expanding the welfare system and increasing trade union power

C. Privatization, which involved selling off state-owned companies to individual shareholders.,

D. Implementing measures to stimulate the economy and stabilize financial markets after the Global Financial Crisis.

C

Which two institutions, created at the same time as the UN, had an "insatiable hunger for statistics," contributing to the global spread of economic indicators?

A. The Federal Reserve System and the Bank of England

B. The World Bank and the International Monetary Fund

C. The London Stock Exchange and the New York Stock Exchange

D. The House of Lords and the House of Commons

B

Which economic measure tracks the rate at which prices for goods and services are increasing, corresponding to a fall in the purchasing power of money?

A. Real GDP

B. GDP per Capita

C. Trade Deficit

D. Inflation Rate

D

Which of the following BEST defines Gross Domestic Product (GDP)?

A. The total income earned by citizens living abroad

B. The total value of goods and services produced within a country in a given period

C. The total amount of money held by the government

D. The total value of exports minus imports

B

Real GDP differs from nominal GDP because real GDP __________.
A. includes income earned overseas
B. excludes government spending
C. adjusts for inflation
D. measures income per person

C

Which economic system is characterized by the principle of “laissez-faire”?
A. Command economy
B. Socialist economy
C. Mixed economy
D. Free market economy

C

Both the UK and the US are classified as __________.
A. command economies
B. socialist economies
C. mixed economies
D. free enterprise economies with no government role

C

In the United States, which institution is primarily responsible for controlling the money supply?
A. Congress
B. The Treasury Department
C. The Supreme Court
D. The Federal Reserve

D

Decide whether these statements are TRUE or FALSE (1 point)

• Today, almost all indicators used to measure economic success are based on the idea that an economy is a closed system defined by the physical boundaries of a nation-state.

• By the early twentieth century, the USA had become the world's richest country and leading industrial nation, largely due to rapid industrialization between the Civil War and World War I.

T, T

Decide whether these statements are TRUE or FALSE

• The UK's service sector accounts for approximately 50% of its gross domestic product (GDP), while manufacturing remains the single largest sector.

• The Bank of England is no longer dependent on the government and has the vital role of controlling inflation by setting interest rates.

F, T

Fill in each blank with NO MORE THAN THREE words

The deliberate decision by a country to lower its exchange rate in a fixed or semi-fixed exchange rate system is called a ____________________.

devaluation

 Fill in each blank with NO MORE THAN THREE words

The US economy has shifted over the past half-century into a ____________________ society, where service industries dominate and account for more than three-quarters of GDP.

post-industrial

 Decide whether the following statements are TRUE or FALSE

GDP per capita is commonly used as an indicator of living standards.

T

 Decide whether the following statements are TRUE or FALSE

In a command economy, market competition determines prices and production

F

 Decide whether the following statements are TRUE or FALSE

Since the 1980s, the UK government has moved away from nationalization toward privatization.

T

 Decide whether the following statements are TRUE or FALSE

Agriculture contributes a large share of GDP in the United States.

F

Fill in each blank with NO MORE THAN THREE words

In the US, the ____________________ (The Fed) is managed by a board of governors and influences financial markets by adjusting interest rates and controlling the money supply.

Federal Reserve System

 Fill in each blank with NO MORE THAN THREE words

The ____________________ was defined by its aim to let ‘market forces’ rule, restricting the freedom of business as little as possible.

laissez faire

Briefly answer the following questions in ONE or TWO sentences

16. Describe the "invisible hand" principle introduced by Adam Smith.

The "invisible hand" principle suggests that an economy performs best when buyers and sellers independently seek the best outcome for themselves. The sum of these self-interested transactions results in the most efficient use of a nation's resources.

Briefly answer the following questions in ONE or TWO sentences

According to the sources, why did the value of the Pound Sterling fall by 15% after the Brexit vote of 2016?

The value of the Pound Sterling fell because investors downgraded the long-term economic outlook of the UK following the political uncertainty sparked by the Brexit vote.

Fill in each blank with NO MORE THAN THREE words

• The economic system that combines private enterprise with government intervention is called a ____________________.
  

• The economic policy of selling state-owned companies to private investors is known as ____________________.
  

mixed economy, privatization

Fill in each blank with NO MORE THAN THREE words

The American Industrial Revolution took place mainly between the Civil War and ____________________.

World War I

Briefly answer the following questions in ONE or TWO sentences

What is the main purpose of the New Deal introduced by President Franklin D. Roosevelt?

The New Deal was introduced to respond to the Great Depression by increasing government intervention, providing relief for the unemployed, and balancing the public and private sectors.

Briefly answer the following questions in ONE or TWO sentences

Why is the service sector considered the backbone of the UK economy today?

The service sector dominates the UK economy because it accounts for about 80% of GDP, especially in areas such as banking and insurance.