1.4 How To Organize Economies: An Overview of Economic Systems

Vocabulary flashcards covering key economic systems, globalization, GDP, trade, regulations, and related concepts from the lecture notes.

Traditional economy

An economic system that follows customs and traditions to decide what to produce, how to produce, and for whom, with little economic progress; occupations stay in the family and production mirrors consumption.

Command economy

An economic system where the government decides what goods and services are produced, how they are produced, and at what prices; often centralized decision-making; examples include Ancient Egypt, Cuba, and North Korea.

Market economy

An economic system with decentralized decision-making based on private enterprise; resources are privately owned and production is driven by consumer demand and prices.

Mixed economy

An economy that combines elements of command, market, and traditional systems; most real-world economies, including the U.S., have varying levels of government involvement.

Private enterprise

Private individuals or groups own and operate the means of production (resources and businesses) in a market economy.

Means of production

The resources and businesses used to produce goods and services (e.g., land, labor, capital, entrepreneurship).

GDP (Gross Domestic Product)

The total value of all final goods and services produced within a country in a given period; used to measure the size of an economy; the exports/GDP ratio indicates how much of production is sold abroad.

Exports

Goods and services produced domestically and sold to other countries.

Imports

Goods and services produced abroad and purchased domestically.

Globalization

The increasing cultural, political, and economic connections across borders, measured by cross-border trade, investment, and information flows.

Economic freedom index (Heritage Foundation Index of Economic Freedom)

An index that ranks countries based on the extent of economic freedom across many categories; used to discuss how freely economies operate.

Regulations

Laws and rules that govern economic activity; define the 'rules of the game' and balance market freedom with government oversight.

Underground economy / black markets

Markets where buyers and sellers transact without government approval or regulation.

Decentralized decision-making

Decision-making spread across many individuals and firms in a market-based economy rather than concentrated in a central authority.

Division of labor / specialization / economies of scale

Breaking work into tasks, allowing people to specialize; increases efficiency and lowers costs through economies of scale.

New York Stock Exchange (NYSE)

A major market where buyers and sellers trade securities; symbol of a market-based economy.

Brexit

The 2016 vote by the United Kingdom to leave the European Union, cited as an example of pushback against globalization.

Informational context: pushback to globalization

Growing concern about job loss, sovereignty, and inequality that can arise with globalization, influencing political events and policy.