Economics and Government Test Study Guide

Study Guide for Economics and Government Test

Economics Test on 12/3

Types of Economic Systems

  • Definition: Economic systems are frameworks that dictate how resources are allocated and managed within a society.

    • Major Questions Addressed by Economic Systems:

    • What goods and services will be produced?

    • How will these goods and services be produced?

    • For whom will these goods and services be produced?

Types of Economic Systems:

  1. Command Economy:

    • Characterization: Government owns, controls, and operates the factors of production.

    • Determination: Government determines what is produced and the pricing of goods.

    • Example: North Korea, where the government decides production and pricing of goods.

  2. Traditional Economy:

    • Characteristics: Based on societal customs and traditions; primarily agricultural; relies on barter for goods.

    • Example: Indigenous communities such as Aborigines in Australia that depend on farming and traditional practices.

  3. Market Economy:

    • Characteristics: Guided by privately owned businesses; decisions on production and consumption are influenced by supply and demand.

    • Example: No country has a true market economy that adheres perfectly to this model.

  4. Mixed Economy:

    • Definition: Combines elements of both command and market economies.

    • Example: The U.S. and British economies are mixed; they feature government regulations alongside free-market policies.

Trade Barriers

  • Definition: Policies imposed by the government to regulate international trade.

  • Reasons for Trade Barriers:

    1. To regulate and control trades.

    2. Countries want to sell and produce their own goods and therefore restrict international competition.

Types of Trade Barriers:

  1. Tariffs:

    • Definition: Taxes imposed on imported goods, making them more expensive.

  2. Quotas:

    • Definition: Limits on the quantity of specific goods that can be imported into a country.

  3. Embargo:

    • Definition: A country refuses to trade with another country, often due to political reasons.

Factors of Production - Key Definitions

  1. Capital Resources or Capital Goods:

    • Definition: Resources needed to make a good or service; includes tools, machinery, and technology.

    • Example: Machinery in a factory that manufactures cars.

  2. Human Resources or Human Capital:

    • Definition: The workforce involved in the production process; includes both skilled and unskilled labor.

    • Example: Engineers and factory workers.

  3. Natural Resources:

    • Definition: Raw materials extracted from the environment used in production.

    • Examples: Water, minerals, and forests.

  4. Entrepreneurship:

    • Definition: Individuals willing to take risks and provide capital to create goods and services.

    • Example: A person who starts a new restaurant, effectively combining capital, labor, and natural resources.

  5. Gross Domestic Product (GDP):

    • Definition: The total market value of all final goods and services produced within a country in one year.

Goods and Services

  • Goods: Items we buy such as books, video games, notebooks, markers.

  • Services: Activities performed for us, e.g., waiting tables, cleaning hotel rooms, or IT consulting.

Opportunity Costs

  • Definition: The choice between two items, where the opportunity cost is the one not selected.

    • Example: If choosing between a shirt and a book, and buying the shirt, the opportunity cost is the book.

Literacy Rate and Standard of Living - Key Definitions

  • Life Expectancy: The average length of time a person is expected to live.

  • Literacy Rate: The percentage of people aged 15 and older who can read and write.

  • Per Capita GDP: The average value of goods and services available to individuals in a country in one year.

  • Standard of Living: The quantity and quality of goods and services available to people.

  • Unemployment Rate: The percentage of the labor force that is unemployed but actively seeking employment.

Government Terms - Key Definitions

  • Definition of Government: The authority to make laws and important decisions for people living in a specific area (state, federal, city governments, etc.).

  • Distribution of Government Power:

    1. Unitary: A centralized government where all power is held by a single authority.

      • Example: France.

    2. Confederation: An association of independent organizations that do not have authority over one another.

      • Examples: European Union (EU) and Organization of the Petroleum Exporting Countries (OPEC).

    3. Federal: A system where power is shared between the central and regional governments.

      • Examples: USA and Mexico.

Citizen Participation in Government

  • Types:

    1. Democracy: All citizens have the right to vote for leaders regardless of wealth or power.

    2. Autocracy: A single person possesses complete power, with no citizen participation.

    3. Oligarchy: A few citizens participate based on wealth, power, and connections to the ruling party.

Legislative Terms

  • Legislature: Members of a group that make laws.

Two Types of Democratic Governments

  1. Parliamentary Democracy:

    • Definition: People vote for the legislature, and legislators choose the Prime Minister.

    • Mechanism: If the Prime Minister loses support from the legislature, new elections are held.

  2. Presidential Democracy:

    • Definition: People vote for their leaders and the legislature separately.

    • Mechanism: The President is elected independently of the legislature.

Comparing Southwest Asian Governments

  • Israel: Parliamentary democracy.

  • Turkey: Presidential democracy.

  • Saudi Arabia: Autocracy (King).