Latin America economics

Latin American Government and Economics Study Guide Answer Key

Latin American Government

1. What is a democracy?

  • A democracy is a type of government that allows citizen participation, specifically, people are allowed to vote.

2. What are the 2 types of democracies?

  • Parliamentary Democracy:

    • A parliamentary democracy has a Prime Minister/Chancellor (e.g., the UK is an example).

    • The legislative branch members (Members of Parliament) are elected by the citizens.

    • This type of government often has a Head of State (King or Queen) who has ceremonial duties to fulfill.

  • Presidential Democracy:

    • A presidential democracy has a president who usually serves for only one or two terms.

    • The president also serves as the head of state.

    • In this system, the president is not part of the legislative branch (he/she cannot make laws).

    • The president is elected separately by the citizens, demonstrating the principle of Separation of Powers.

3. What is an autocratic government?

  • An autocratic government is one where one person with complete and total power rules the country.

  • People are not allowed to choose their leaders and often have very little personal freedom.

  • Example: Cuba is an example of an autocratic government.

  • A leader in an autocratic government typically comes to power through bloodline or force.

4. What type of government does Brazil have?

  • Brazil has a Presidential Democracy, which is very similar on paper to the government of the US.

  • Unusual Fact: People aged 18 to 70 years are legally required to vote in Brazil, and there are punishments for non-compliance.

Latin American Economics

1. Write 1-2 sentences about traditional, command, and market economies.

  • Traditional Economies:

    • Based on customs and habits of the past, where each person in the community has a specific job handed down from previous generations.

  • Command Economies:

    • Positioned on the far left of the economic continuum.

    • The government makes all significant economic decisions, assigning quotas for production (e.g., cigars in Cuba).

  • Market (Free Market, Free Enterprise) Economies:

    • Characterized by minimal government involvement.

    • Entrepreneurs can start their own businesses easily, contributing jobs and paying taxes.

2. Give examples of traditional, market, and command economies.

  • Traditional Economy:

    • The Yanomamo Native Peoples Tribe of South America is an example.

  • Command Economy:

    • Cuba is an example of a command-leaning economy.

  • Mixed-Market Economies:

    • The US, Brazil, and Mexico exemplify mixed-market economies.

3. What are capitalism and communism?

  • Capitalism:

    • An economic system where major economic decisions are made by citizens and business owners in the marketplace.

    • Pricing is determined by the Law of Supply and Demand, with the government having limited control.

    • Citizens can buy products based on affordability.

  • Communism:

    • An economic and government system where the government makes all significant economic decisions.

    • People are assigned jobs and quotas, with what they buy determined by needs rather than wants.

4. Draw the economics continuum with the following labels:

  • Market - Command - Mixed

  • Cuba - Brazil - Mexico - Canada

  • __

  • Cuba

  • Brazil

  • Mexico

  • Canada

5. List 3 facts about mixed economies:

  • A. Some countries with mixed economies lean towards command on the economic continuum (e.g., Cuba).

  • B. Other countries lean towards market on the continuum (e.g., US and Mexico); Brazil is almost exactly in the middle.

  • C. All modern economic systems are classified as mixed economies.

6. What countries are “Mixed”?

  • All modern countries exhibit some version of mixed economies.

7. Why is Brazil farther to the left on the economic continuum than the US and Mexico?

  • Brazil is further left on the continuum due to a substantial portion of its larger industries (for example, coal, oil, natural gas) being owned and operated by the government.

  • The more control the government has over the economy, the further left it is on the continuum, indicating a closer alignment with command economy characteristics.

8. Why is Cuba so far to the left on the economic continuum?

  • Cuba is positioned far left due to being a communist or socialist country, where the government makes nearly all significant economic decisions.

9. Describe the role of entrepreneurs in a country. Why are entrepreneurs important?

  • Entrepreneurs invest their own capital or borrowed funds to start a business.

  • Businesses, in turn, create jobs and contribute taxes to the government, which are vital for economic health.

10. What is “Specialization”?

  • Specialization occurs when a country, company, or individual focuses on efficiently producing one product or service.

11. Give a real-world example of specialization:

  • Examples include:

    • Mexico specializes in oil production and sales.

    • Dunkin' Donuts specializes in coffee and donuts.

    • Derek Jeter specialized in baseball.

12. How do natural resources help countries become specialized?

  • Countries often do not produce everything they need; therefore, specializing allows them to trade products they excel in for those they do not produce.

13. Why do countries need to trade?

  • Countries engage in trade to acquire products and resources they do not produce domestically, catering to the needs and wants of their citizens.

14. Why might countries need to slow or stop trade with others?

  • Countries may need to protect their domestic workers, factories, and economies against foreign products that are cheaper.

  • Tariffs:

    • Taxes on imports that increase the price of foreign goods, promoting domestic purchases.

  • Quotas:

    • Limits on imported goods that similarly raise prices and encourage local buying.

  • Embargo:

    • A complete halt of trade between countries, often used as a political tool (e.g., the US embargo on Cuba for over 50 years).

15. What is the trade barrier called a “quota”?

  • Quotas are restrictions on the quantity of imported goods, which also raises prices, incentivizing consumers to purchase domestically produced items.

16. What countries were involved in NAFTA? Why was it created? Is the USMCA the same as NAFTA? What is a key difference?

  • Countries Involved in NAFTA: The United States, Canada, and Mexico.

  • Purpose: NAFTA was established to remove trade barriers and create a Free Trade Zone, facilitating cheaper and easier trade among these countries.

  • USMCA vs. NAFTA:

    • While similar, USMCA is not identical to NAFTA; for instance, it mandates that 75% of a vehicle's parts must be manufactured within the three member countries (US, Canada, Mexico).

17. What do travelers need to do in order to spend money abroad?

  • Travelers must exchange currency (e.g., converting dollars to pesos) to spend locally in foreign countries.

18. Define Human Capital:

  • Human capital refers to the education, training, and healthcare that enhance the capacity and performance of workers in their jobs.

19. How does Human Capital help a country’s GDP?

  • A well-educated and trained workforce, alongside access to proper healthcare, leads to higher productivity among workers, consequently raising the country’s GDP.

20. What is Physical Capital and give examples?

  • Physical capital encompasses the tools and equipment that enhance the efficiency of human labor.

  • Examples: Computers, tools, and factories that assist workers in enhancing productivity and efficiency.

21. What is GDP, and what does it indicate about a country?

  • GDP (Gross Domestic Product) is the total value of all goods and services produced by a country over a specific period (typically one year).

  • GDP serves as a robust indicator of a country's economic health.