Scotty SS

Examples of capital resources might include...

Buildings, equipment, tools, machines, and computers.

Entrepreneurship is...

the creativity, foresight, skill, and determination to risk starting a business to produce a good or service.

Trade is...

the voluntary exchange of goods and services among people and countries.

"High income" countries have a higher standard of living than "middle income countries" and "low income" countries.

"High income" countries often have many goods and services available to their citizens. "Middle income" and "low income" countries rely on farming and have a lower standard of living. These "middle income" and "low income" countries are often called "developing countries."

Think about natural resources this way...a country is best if it has an abundance of natural resources. For example, if a country has few trees, but it needs wood for buildings, it is forced to import the wood from other countries. This is very expensive.

A country with lots of trees can use the wood to export or sell to other countries. This can be very profitable.

The most common types of "trade barriers" are 1. tariffs 2. quotas.

A tariff is a tax on imports. A quota is a limit placed on the number of imports that may enter a country.

Which is an example of investing in physical capital by a country? A. Constructing a new factory B. Keeping old delivery trucks C. Training workers to do their jobs better D. Keeping old computers in order to save money

A. Constructing a new factory.

Which of the following is an example of a command economy? A. North Korea B. Russia C. Germany D. UK

A. North Korea.

Another kind of "trade barrier" is an embargo.

An embargo is a government order stopping trade with another country. An embargo might be used by the government to put pressure on another country to do something that they want them to do.

An entrepreneur is a person who provides the money to start and own a business. In other words, they risk their own time and money because they believe that their business will eventually be successful.

An entrepreneur must bring together human capital, physical capital, and natural resources to produce goods or services to be provided by their business.

In which type of economic system is the government most influential? A. Market B. Command C. Mixed D. Traditional

B. Command.

Which is an example of investing in human capital? A. Cash B. Education C. Factories D. Highways

B. Education.

What is the currency people use in much of the European Union called? A. Dollar B. Euro C. Pound D. Ruble

B. Euro

Which of the following is NOT an economic question that every country must answer? A. What to produce? B. When to produce? C. How to produce? D. For whom to produce?

B. When to produce.

Why is a country better off if it does not have to import natural resources?

Buying from other countries costs more money.

Which is an example of a natural resource? A. Automobiles B. Education C. Forests D. Highways

C. Forests

What is human capital? A. A country's standard of living B. The cash a business has to spend C. Investment in the workers of a business or country D. The buildings, equipment, and property owned by a business

C. Investment in the workers of a business or country.

Which of the following is NOT one of the three basic economic systems? A. Market B. Command C. Mixed D. Traditional

C. Mixed.

In order to help Russian farmers sell more food, some people want to put a tax on the food imported from other countries. This is an example of a(n)... A. Embargo B. Quota C. Tariff D. Voluntary exchange

C. Tariff

A country has all kinds of resources that can help its people produce goods and services. Human resources are the education and skills that people need to perform their job well. Capital resources are the buildings and technology that people need to do their job well.

Natural resources are like "gifts of nature." They include such things as lots of trees that can be used to make homes and furniture. It could also include fertile soil that would be needed to plant good crops. Water is also a natural resource that can be harnessed to produce hydroelectric energy.

Scarcity means...

Not enough of something to satisfy all that people want.

Remember that the GDP is the total value of all the goods and services produced in a country in one year. In order to increase the GDP, businesses must invest in human capital. They must also invest in physical capital.

Physical capital means the machines, technology, and buildings needed by businesses to operate. If you have a building that is falling apart, it probably isn't a great place for a factory.

Currency is the money people use to make trade easier. For example, in the United States, our currency is the US dollar. If we were in England, we could not use the US dollar to buy goods. Then, what do we do?

We go to a bank and exchange it. When you exchange money, the bank charges a fee. A business that exchanges a lot of money will pay a lot of fees. This discourages a business from wanting to exchange money.

How can a country increase the GDP? They must invest in human capital.

What does investing in the human capital mean? This means that we educate people so that they can go to college and get better jobs and be more productive people. We also make sure that the people are healthy, because a healthy worker is more productive.

What are factors of production?

What we need to produce goods and services.

A country that does not invest in human capital will have problems because...

Workers who are not educated, skilled, and healthy are less productive.

Examples of human resources might include...

Workers, such as farmers, truck drivers, and secretaries.

Which is a way that entrepreneurs help increase a country's GDP?

Working to increase the amount of goods and services bought by a country.

Which type of trade barrier involves a limit on goods brought into the country? A. Embargo B. Quota C. Tariff D. Voluntary exchange

B. Quota

This is a true statement: What, how, and for whom to produce are the basic economic questions that every society must answer.

All societies do not answer the 3 basic economic questions in the same way.

What is an example of an entrepreneur? A. People who operate a hospital B. A person who runs a government-owned coal mine C. Roofers who work for a business owned by an individual D. A person who uses his money to start a business selling cell phones

D. A person who uses his money to start a business selling cell phones

What is a problem with exchanging currency? A. People make more money by trading currency B. Most people want to use American dollars to trade C. Banks do not like to exchange their money for other currencies D. It costs more to do business because banks charge fees for exchange

D. It costs more to do business because banks charge fees for exchange.

Which natural resources have helped the Russian economy in the 21st century? A. Education and healthcare B. Highways and factories C. Machines and equipment D. Oil and natural gas

D. Oil and natural gas

What is the currency of Russia? A. Dollar B. Euro C. Pound D. Ruble

D. Ruble

Which might make an embargo against a country successful? A. Merchants are able to continue doing business B. People in the country aren't affected by the embargo C. The country does not need to trade D. The citizens in the country suffer because of the embargo and demand a change from their government

D. The citizens in the country suffer because of the embargo and demand a change from their government.

Which basic kind of economic system is characterized by the least amount of change? A. Market B. Command C. Mixed D. Traditional

D. Traditional.

Why are entrepreneurs important to the economy and the GDP?

Entrepreneurs create jobs. Those employed people create tax revenue for the government. They produce goods that can be traded with other countries, which increases the GDP.

Russia, Germany, and the United Kingdom have all helped their GDP by educating their people.

Even so, Russia has the most poverty of the three countries. Why is that? Well, in the former Soviet Union, everyone was assigned a job. Today, people must show that they are skilled in a certain area in order to keep their jobs. The Russian government is attempting to invest in their human capital so that the people will have better job opportunities.

Another problem with GDP is that although the GDP could be high, this doesn't mean that everyone is rich. There are still very poor people.

Finally, GDP can't measure how happy people are in a country.

A country's GDP is different than the per capita or "per person" GDP. In the per capita GDP, we determine the amount of GDP that is available for each person.

For example, in Country A, the GDP is $5000. In Country B, the GDP is $2000. You would think that it would be better to live in Country A, right? Wrong. It depends on how many people split the GDP. If Country A has 50 people, but Country B has only 10 people, the per capita GDP is $100 in Country A and is $200 in Country B!

Two countries trade because one country has a need for goods and services that are not produced in its own country. The other country produces it at a lower opportunity cost than that country.

For example, the United States has lots of trees, which can be milled for lumber. China doesn't have many trees, so it must trade with the United States in order to get the needed lumber to build homes, etc.

Examples of natural resources might include...

Minerals, water, trees, and land.

How do you measure a person's income? Is it by how much money that I have in the bank? Well, yes. A better way is to determine how many goods and services that I can buy with the money that I have made.

Gross domestic product measures the market value of all final goods and services produced in an economy in a year. How many picture frames, bed sheets, boxes of cereal, cans of Coke, Little Debbies, and other goods that were produced were all added up to help determine the GDP.

Mr. Clews can use his unlimited area of land either to grow corn or raise cattle. If he decides to raise cattle, what is the opportunity cost of his decision?

He can no longer grow corn.

In Europe, the European Union is a group of countries that have come together for the purpose of "free trade." This means that they use a common currency, called the "Euro."

If someone in Greece wants to do business with someone in England, they don't have to exchange money because they all use the same currency, the "Euro." Also, there are no taxes between countries in the European Union. So if the man in England wants to buy olives from the man in Greece, there is no tariff placed on the olives.

What is the impact of scarcity on price?

If something is hard to come by or scarce, people are willing to pay more for it. Therefore, the price will rise.

Russia produces a lot of steel. Steelmakers in the European Union worry that if too much Russian steel comes into the European Union, the price of steel will decrease.

If the price of steel goes down, the companies in the European Union that produce steel will lose money. So, the European Union might decide that they will only import just so much steel, which means that they will put a quota on steel imports. This would help the steel prices to be stable.

Countries sometimes try to limit trade with other countries by creating "trade barriers."

In years past, the US has created "trade barriers" with Iran due to problems that they have had with the Iranian government. This meant that they would not allow the import of Iranian products such as rugs, pistachios, and caviar.

Why might using the best technology be important to a business?

It could help a business produce more goods for a lower cost.

Opportunity cost is what you have given up by not pursuing the next best alternative. Let's look at that further...

Let's say you have a large piece of land. You can either sell it or you can grow corn on it. If you chose to sell it, then the opportunity cost is that you can no longer grow corn on it.

In Europe, Russian laws have made it easier for people to own their own businesses. Also, Russia's natural resources and skilled labor make it a good place to have a business.

Russia is not perfect. They still need to change some of their laws to become more protective of businesses.

What is a problem faced by entrepreneurs in Russia?

Russian courts don't protect property rights.

Measuring GDP is not perfect-it fails to take into account other measures of productivity, such as mowing lawns, plumbing done on houses-none of these produces anything that can be traded.

Similarly, a family that farms and eats all of their food, while very productive, produces nothing that can be traded. Therefore, none of this human productivity is measurable in the GDP.

Free trade is a policy by which a government does not discriminate against imports or interfere with exports by applying tariffs, quotas, or embargos. It is trade without restrictions, rules, or regulations.

Such free trade policies permit all trading partners to benefit from the trading of goods and services. Under a free trade policy, prices are determined by the law of supply and demand.

The Gross Domestic Product or "GDP" of a country is the total value of all the goods and services produced in a country in one year. We use the GDP to tell how rich or poor a country is.

We can also use the GDP to tell if the economy of a country is getting better or worse. An increase in the GDP usually means that the people will have a higher standard of living...better houses, better cars.

Many natural resources can run out. For example, Russia has lots of oil and natural gas. They sell the oil and natural gas to other countries who need it, and in doing so, they make alot of money.

The problem is that eventually, the oil and natural gas will run out...then the Russians will be poor again.

Remember that I said that despite an investment in human capital, Russia still has a lower GDP?

The reason that they have a lower GDP is because they didn't invest in the physical capital. They had highways and buildings that badly needed repair. Their technology was poor.

Let me give you an example of tariffs and what they mean. In Russia, there are tariffs on many imports. This means that goods that are sold in Russia from other countries are highly taxed.

These high taxes make goods from other countries more expensive, making it better and cheaper for the Russians to buy goods produced in their own country.

The European Union is a large "free-trade zone."

This means that there are no tariffs, or taxes, between the countries in the zone. Ultimately, this means that goods can be bought for a lower price.

A tariff is a tax that adds to the cost of imported goods. Let me give you an example: let's say that in China, they can produce TV's at a very cheap cost. A c in the company in the United States has to pay more for labor, so although they can produce the same TV's, they are more expensive to produce. This makes them more expensive to buy.

To combat that, the United States puts a tax on the TV's coming in from China. This makes them just as expensive as the TV's produced in the United States. This helps the company that makes the TV's because otherwise, people will buy the cheaper product.

The Soviet Union did not invest in capital improvements so Russian workers today...

are not as productive as workers in other countries.

In the end, trade should...

benefit both parties. Both parties should be better off after the trade than they were before.

Trade occurs when...

buyers and sellers engage in market transactions, like buying and selling to each other. It is purely voluntary, meaning that they aren't forced to buy or sell something that they don't want to buy or sell.