Review: Economic Systems and Banking

Communism

An economic system where the government owns and controls all means of production and distribution of goods and services. There is no private property.

Socialism

An economic system where the government or the public owns key industries and resources, distributing wealth more equally among citizens while allowing some private ownership.

Free Market

An economic system where prices are determined by unrestricted competition between privately owned businesses. Supply and demand dictate the market.

Command Economy

An economic system where the government makes all decisions about the production and distribution of goods and services.

Traditional Economy

An economic system based on customs, traditions, and beliefs, where economic decisions are made according to these practices.

Capitalism

An economic system characterized by private ownership of the means of production and their operation for profit, with minimal government intervention.

Barter Economy

An economic system where goods and services are exchanged directly for other goods and services without using money.

Fiat Money

Currency that has no intrinsic value and is not backed by physical commodities, but is established as money by government regulation.

Assets

Resources owned by an individual or entity, which have economic value and can provide future benefits.

FDIC (Federal Deposit Insurance Corporation)

A U.S. government agency that protects depositors by insuring deposits in member banks, up to a certain limit.

Foreclosure

The legal process by which a lender takes possession of a property when the borrower fails to make mortgage payments.

Interest Rate

The percentage charged on borrowed money or paid on savings, typically expressed as an annual rate.

Mortgage

A loan specifically used to purchase real estate, where the property serves as collateral for the loan.

Credit Cards

Financial tools that allow individuals to borrow funds to pay for goods and services, with the obligation to pay back the borrowed amount plus interest.

Savings Account

A bank account that earns interest on deposits, providing a safe place to store money while allowing for withdrawals.

Economic System

The means by which countries and governments distribute resources and trade goods and services.

Economic Freedom

The ability of individuals to control their own economic resources, make their own economic decisions, and engage in voluntary exchanges.

Mixed Economy

An economic system that incorporates elements of both capitalism and socialism, allowing for both private enterprise and government intervention.

Medium of Exchange

An item that is widely accepted in exchange for goods and services, facilitating trade.

Unit of Account

A standard numerical monetary unit of measure that provides a consistent measure of value for goods and services.

Commodity

A basic good used in commerce that is interchangeable with other goods of the same type, such as oil, gold, or grain.

Defining Features of Economic Systems

Recognize the defining features of communism, socialism, capitalism, traditional economies, and command economies.

Effect of Economic Systems

Understand how each system affects individual freedoms, wealth distribution, and government involvement in the economy.

Role of Banks

Banks serve as financial intermediaries that facilitate transactions, provide loans, and offer savings accounts.

Functions of Money

Money acts as a medium of exchange, a unit of account, and a store of value, essential for economic activity.

Mortgage Concept

A mortgage is a specific type of loan for purchasing property, with the property itself serving as collateral.

Interest Rates Concept

Interest rates determine the cost of borrowing money and the return on savings; they can impact housing markets and consumer spending.

Credit Card Positives

Convenience, ability to build credit history, rewards programs, and fraud protection.

Credit Card Negatives

Risk of accumulating debt, high-interest rates if balances are not paid in full, and potential for overspending.

Communism Examples

Cuba, North Korea, Vietnam — economies controlled by the state with limited or no private enterprise.

Socialism Examples

Sweden, Norway, Venezuela — varying degrees of government ownership and social welfare systems.

Free Market Examples

United States, Singapore, Australia — economies driven by competition and private enterprise.

Command Economy Examples

North Korea, Cuba, Soviet Union (historical) — government-controlled production and distribution.

Traditional Economy Examples

Somalia, Amazonian tribes, Mongolia — economies based on customs, subsistence, and tradition.

Capitalism Examples

United States, Germany, Japan — private ownership and profit-oriented production.

Barter Economy Examples

Indigenous tribes, rural areas in developing countries, post-disaster zones — exchange of goods without money.

Fiat Money Examples

United States Dollar, Euro, Japanese Yen — government-backed currency with no intrinsic value.

Mixed Economy Examples

Canada, France, India — combines private and government involvement in economic activity.