Economic systems, political systems, the business cycle, role of government in IB, Trade agreements and organization

Question 1

What are the types of economic systems?

Answer 1

Market economy, centrally-planned economy, mixed economy

Question 2

What is a market economy and its characteristics?

Answer 2

A market economy is also known as capitalism or private enterprise. Businesses, consumers, and government act independently of each other.
It is characteristic for having private property (people and corporations owning property), profit (belongs to owners of businesses), and competition.

No true market economy in the world - the US is the closest.

Question 3

What is a centrally-planned economy and its characteristics?

Answer 3

A centrally-planned economy is also known as communism or command economy. Decisions are made by the government.
It is characteristic of having limited ownership of property, profit belonging to the government, and limited competition due to the government determining the price, quality, style and the amounts of goods and services.

North Korea, Cuba

Question 4

What is a mixed economy and its characteristics?

Answer 4

A mixed economy between market and centrally-planned economies. Also known as a modified free enterprise system.
Private property is owned by individuals, corporations, or government. Profit is encouraged, but is taxed to support government projects. Strong competition amoungst corporations exist, but the government may also be a competitor (ex. fedex vs Canada Post)

Question 5

What are the most prevalent forms of government?

Answer 5

Democracy and autocracy

Question 6

What is a democracy and its characteristics?

Answer 6

Characterized by free and fair elections, the rule of law, free speech, the right to assemble, a free press, and freedom of religion.

Question 7

What is an autocracy and its characteristics?

Answer 7

Ruled by a single individual or a small group of people. One consistent government. Proponents of autocracy believes that decisions will be rational and in the interest for the entire country rather than special groups, and have a long-term focus.

Question 8

What are the four stages of the business cycle?

Answer 8

Recession/Contraction
Trough
Expansion
Peak

image: http://financeandcareer.com/wp-content/uploads/2014/03/business-cycle-graph.jpeg or page 105

Question 9

What ways do governments affect international trade and business?

Answer 9

• Establishing import/export laws
• Setting tariffs
• Maintaining membership in trade organizations and negotiating trade agreements
• Establishing immigration laws
• Determining monetary policy (including currency exchange rates)
• Determining fiscal policy, including taxation laws
• Signing tax treaties with foreign governments
• Education
• Military systems
• Establishing environmental policies
• Building infrastructure, such as roads and sewer systems
• Ordering embargoes

Question 10

What did The North American Free Trade Agreement (NAFTA) do for trade? Pros and cons?

Answer 10

Established in January 1994
Involves Canada, the US, and Mexico
Eliminated tariffs and other trade barriers, promotes fair competition among the three countries. Intellectual property rights are protected.

Question 11

NAFTA’s pros and cons?

Answer 11

Pros

• increased prosperity for North American citizens
• many higher-paying jobs have been created in Canada in the education, engineering, and banking sectors
• market competition has grow, improving choices for consumers
• freer flow of goods and services across North American borders

Cons

• Many manufacturing jobs have been lost to Mexico due to cheaper labour costs
• wages had to be limited for manufacturers to stay in Canada/US
• wage gap has gotten bigger in the US
• tarrifs on corn, beans, sugar, and milk have resulted in higher amounts of competition against small farmers in Mexico
• Loss of Canadian culture
• more US companies opened in Mexico, and workers have little health protection, earn low wages, and work many hours a day

Question 12

The European Union is a trade agreement encompassing ______________________ countries in Europe and a population of almost half a ____________ people. It was first signed ______________, _______.

Answer 12

twenty-seven, billion, November 1, 1993

Question 13

The EU countries are:

Answer 13

Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK.

Question 14

The EU implemented the euro for:

Answer 14

Decreasing the risk of exchange-rate fluctuations
Price transparency
Elimination of transaction cost
Easy billing
Increased markets
Economic stability
Enhanced labour movement

Question 15

Disadvantages of the euro?

Answer 15

Initial costs
Lack of national control (Greece economy)
loss of tradition

Question 16

What does the World Trade Organization (WTO) do?

Answer 16

promotes trade liberalization throughout the world. It focuses on economic prosperity and social development, and has 153 member countries. The three main purposes are to provide:
A forum for negotiations
A set of rules
Dispute settlement

Question 17

Benefits of the WTO?

Answer 17

• Promotes peace by ensuring nations can trade fairly
• Lowers costs and raises standard of living worldwide by encouraging governments to act fairly and limit protectionist policies
• helps Canada because trade is vital to Canada’s success

Question 18

Criticisms of the WTO?

Answer 18

• Destabilizes markets
• Drains resources from developing countries (because they encourage countries to produce what they can most efficiently, forcing farmers/producers to switch)

Question 19

What is the Asia-Pacific Economic Co-operation (APEC)?

Answer 19

Trade organization that unites many of the countries compromise 40.5 percent of the globe’s population, 54 percent of its GDP, and approximately 43 percent of international trade. It was created in 1989 (~Taylor Swift~).

APEC’s goals are to foster open and free trade among its members, increase prosperity and economic growth, and develop the Asia-Pacific community.

Question 20

What is the Organization for Economic Co-operation and Development (OECD)?

Answer 20

A trade organization for advancement of democracy and market economies. Established in 1961, their mission is to:

promote economic growth
expand employment
improve standard of living
sustain financial stability
help countries' economic development
enhance world trade

Question 21

What is The World Bank?

Answer 21

An organization of 186 members that provides monetary and technical support for developing countries.

Question 22

What do critics of The World Bank say?

Answer 22

-their policies have caused many countries to suffer because of the rules it imposes in order to receive a loan (page 147)

Question 23

What is the International Monetary Fund (IMF)?

Answer 23

an organization that tracks economic trends, analyzes countries’ financial performances, warms governments of potential financial problems, provides expertise to governments, and provides a forum for discussion.

It accomplishes this through three activities:
encouraging countries to adopt responsible economic policies
lending money to emerging and developing countries
providing technical training in areas such as banking regulations and exchange rate policies