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Questions and Answers
What characterizes market capitalism in terms of resource allocation?
Which of the following is NOT a characteristic of centrally planned socialism?
What is a core component of the rankings of economic freedom?
Which country is ranked highest for economic freedom?
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In centrally planned socialism, how are goods and services provided to consumers?
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Demand typically exceeds supply in which economic system?
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Which of the following factors is least likely to influence a country's economic freedom ranking?
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Which of the following countries is associated with lower economic freedom based on the given rankings?
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What term is used to describe a negative balance of trade?
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Which of the following is NOT considered a trade barrier?
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What is the main purpose of Preferential Trade Agreements (PTAs)?
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What do Common Markets allow that Free Trade Areas do not?
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Which of the following organizations is focused on easing trade restrictions globally?
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What significant change did the Maastricht Treaty introduce to the European Union?
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Which of the following describes the characteristics of an Economic Union?
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What was one of the main goals of the Gulf Cooperation Council established in 1981?
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What is characteristic of low-income countries?
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Which of the following countries is categorized as a lower-middle-income country?
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Upper-middle-income countries are characterized by all of the following except:
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High-income countries are also known as:
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What is a defining feature of a trade deficit?
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Which characteristic does NOT apply to lower-middle-income countries?
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The BRICS nations consists of which of the following countries?
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What economic feature is commonly found in high-income countries?
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Study Notes
Economic Systems
- Market capitalism is a system where individuals and firms allocate resources, production resources are privately owned, and the government promotes competition and consumer protection.
- Centrally planned socialism is the opposite of market capitalism, where the state holds broad powers and decides on production and distribution.
- Economic Freedom is a measure of how free a country's economy is: free, mostly free, mostly unfree, repressed. Variables considered include trade policy, taxation, capital flows, banking, wage/price controls, property rights, and black markets.
Stages of Market Development
- Low-income countries are characterized by limited industrialization, high agricultural populations, high birth rates, low literacy rates, heavy reliance on foreign aid, and political instability.
- Lower-middle-income countries are characterized by rapidly expanding consumer markets, cheap labor, and mature labor-intensive industries such as footwear, textiles, and toys.
- Upper-middle income countries are characterized by rapid industrialization, decreasing agricultural employment, increasing urbanization, rising wages, advanced education, lower wages than advanced countries.
- High-income countries are characterized by sustained economic growth through disciplined innovation, high ownership levels of basic products.
Trade Deficit
- A trade deficit occurs when a country imports more than it exports.
Protectionism
- Countries use protectionism to ward off foreign investments and imports.
- Protectionist barriers include tariffs and exchange barriers.
Trade Barriers
- Non-tariff barriers include quotas, import licenses, boycotts, embargoes, monetary barriers, and anti-dumping penalties.
Easing Trade Restrictions
- The WTO, IMF, and UN are trying to ease trade restrictions.
Preferential Trade Agreements
- These agreements give special treatment to partner countries and discriminate against others.
- Over 300 PTAs have been notified to the WTO.
Hierarchy of PTAs
- Preferential Trade Agreements are organized hierarchically.
- Free Trade Area: Two or more countries agree to abolish tariffs/ barriers to trade amongst themselves, but countries continue to have independent trade policies with countries outside the agreement.
- Customs Union: Includes elimination of internal barriers (like FTA) and the establishment of common external tariffs (CETs) to trade.
- Common Market: Includes elimination of internal barriers (like FTA), common external tariffs (like Customs Union), and allows for the free movement of factors of production like labor, capital, and information.
- Economic Union: Includes elimination of internal barriers (like FTA), CETs (like Customs Union), free movement of factors of production (like Common Market), and coordination/harmonization of economic and social policy within the union.
The European Union (EU)
- The EU began with the 1958 Treaty of Rome.
- The goal of the EU is to harmonize national laws and regulations for free flow of goods, services, people, and money.
- The 1991 Maastricht Treaty set the stage for an economic union with central banking and a single currency (the Euro).
Gulf Cooperation Council (GCC)
- Established In 1981 by 6 countries with 45% of the world's oil and 18% of oil production.
- The GCC attempts to diversify industries.
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Description
Explore the concepts of economic systems, including market capitalism and centrally planned socialism. Understand the stages of market development from low-income to lower-middle-income countries, focusing on their characteristics and challenges. This quiz will test your knowledge on how economies operate and their classifications.
