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Questions and Answers
What characterizes market capitalism in terms of resource allocation?
What characterizes market capitalism in terms of resource allocation?
Which of the following is NOT a characteristic of centrally planned socialism?
Which of the following is NOT a characteristic of centrally planned socialism?
What is a core component of the rankings of economic freedom?
What is a core component of the rankings of economic freedom?
Which country is ranked highest for 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?
In centrally planned socialism, how are goods and services provided to consumers?
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Demand typically exceeds supply in which economic system?
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?
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?
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?
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?
Which of the following is NOT considered a trade barrier?
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What is the main purpose of Preferential Trade Agreements (PTAs)?
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?
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?
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?
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?
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?
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?
What is characteristic of low-income countries?
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Which of the following countries is categorized as a lower-middle-income country?
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:
Upper-middle-income countries are characterized by all of the following except:
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High-income countries are also known as:
High-income countries are also known as:
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What is a defining feature of a trade deficit?
What is a defining feature of a trade deficit?
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Which characteristic does NOT apply to lower-middle-income countries?
Which characteristic does NOT apply to lower-middle-income countries?
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The BRICS nations consists of which of the following countries?
The BRICS nations consists of which of the following countries?
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What economic feature is commonly found in high-income countries?
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.
