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Our Global Economy

2. CHAPTER. Our Global Economy. 2-1 Economics and Decision Making 2-2 Basics of Economics 2-3 Economic Systems 2-4 Achieving Economic Development 2-5 Resources Satisfy Needs. GOALS. Describe the basic economic problem. List the steps of the decision-making process.

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Our Global Economy

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  1. 2 CHAPTER Our Global Economy 2-1 Economics and Decision Making 2-2 Basics of Economics 2-3 Economic Systems 2-4 Achieving Economic Development 2-5 Resources Satisfy Needs

  2. GOALS Describe the basic economic problem. List the steps of the decision-making process. 2 LESSON 2-1Economics and Decision Making

  3. 2 The Basic Economic Problem • Scarcity refers to the limited resources available to satisfy the unlimited needs and wants of people. • Economics is the study of how people choose to use limited resources to satisfy their unlimited needs and wants.

  4. 2 Making Economic Decisions • Coping with scarcity • Making choices

  5. 2 The Decision-Making Process

  6. GOALS Describe how the market sets prices. Explain the causes of inflation. 2 LESSON 2-2Basics of Economics

  7. 2 Price-Setting Activities • Supply is the relationship between the amount of a good or service that businesses are willing and able to make available and the price. • Demand is the relationship between the amount of a good or service that consumers are willing and able to purchase and the price. • Market price is the point at which supply and demand cross.

  8. 2 Market Price Is Set by Supply and Demand

  9. 2 Changing Prices • Inflation • Demand-pull inflation • Cost-push inflation

  10. GOALS Name the three main factors of production. Understand how different countries make economic decisions. 2 LESSON 2-3Economic Systems

  11. 2 Economic Resources Satisfy Needs • Natural resources • Human resources • Capital resources

  12. 2 Natural Resources • Also known as land, these resources are the raw materials that come from the earth, from the water, and from the air. Iron ore, gold, silver, agricultural products, rivers, and oxygen are examples of natural resources. • These items are used in the production of goods and services consumed by individuals, businesses, and governments.

  13. 2 Human Resources • Also known as labor, these resources are the people who work to create goods and services. • While technology has changed or eliminated certain tasks previously performed by people, new types of work are continually being created.

  14. 2 Capital Resources • Also called capital, these resources include buildings, money, equipment, and factories used in the production process. • These items are expensive and are used over several years by business organizations.

  15. The economic choices of a country relate to three basic questions: 1. What goods and services are to be produced? 2. How should the goods and services be produced? 3. For whom should the goods and services be produced? 2 Economic System

  16. 2 Types of Economic Systems • Command Economies • Market Economies • Private property • Profit motive • Free, competitive marketplace • Mixed Economies

  17. GOALS Describe the factors that affect economic development. Identify the different levels of economic development. 2 LESSON 2-4Achieving Economic Development

  18. 2 Development Factors • Literacy level • Technology • Agricultural dependency

  19. 2 Types of Development • Industrialized countries • Less-developed countries • Developing countries

  20. 2 Levels of Economic Development Less-Developed Country Developing Country Industrialized Country • Low literacy • Limited technology • Agricultural or mining economy • Improving literacy • Improving technology • Decreasing dependence on agriculture or mining • High literacy • Modern technology • Industrial economy

  21. GOALS Discuss economic principles that explain the need for international trade. Identify various measures of economic progress and development. 2 LESSON 2-5Resources Satisfy Needs

  22. 2 The Economics of Foreign Trade • Absolute advantage exists when a country can produce a good or service at a lower cost than other countries. • Comparative advantage exists when a country can produce a good or service with more efficiency than other countries.

  23. 2 Measuring Economic Progress • Measure of Production • Gross domestic product (GDP) • Gross national product (GNP) • International Trade Activity • Balance of trade • Foreign exchange rate • Foreign debt • Other Economic Measurements • Consumer price index (CPI) • Unemployment rate

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