Economic System

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Economic System
A country’s economic system consists of the structure and processes that it uses to allocate it’s resources and conduct it’s commercial activities.

Types of Economic Systems
- Centrally planned economy
- Mixed economy
- Market economy

Centrally planned economy
System in which a nation’s resources are owned by the government.

Origins: the ideology that the welfare of the group is more important than individual well being. (Karl Marx).
Decline: In the 80’s nations began to dismantle communist central planning in favor of market based economy.
Failures -economic value ,Provide incentives, Achieve rapid growth, Satisfy Consumer needs.

Mixed economy
Economic system in which resources are more equally divide between private and government ownership.
Origins: the idea that a successful system must be not only efficient and innovative but should also protect society.
Decline: mixed economies are converting to market system. (Privatization).

Market Economy
The majority of nations resources are privately owned. Economic decisions are determined by supply and demand.

• Origins: the belief that individual concerns should be placed above group concerns.
• Features: free choice, free enterprise and price flexibility.
• Governments role: enforcing antitrust laws, preserving property rights, providing a stable fiscal and monetary environment and preserving political stability.

Development of nations
The economic development is a measure of gauging the economic well being of one nation's people as compared with that of another nation’s people.

National development indicators:
- national production
- purchasing power parity
- human development

National Production
Gross national product: value of all goods and services produced by country during a one year period, including income generated by both domestic and international activities.
Gross domestic product: value of all goods and services produced by a country’s domestic economy over one year period.
GDP or GNP per capita: nation’s GDP or GNP divided by it’s population.

Purchasing Power Parity
Purchasing power: the value of all goods and services that can be purchased with one unit of a country's currency.

Purchasing power parity: is the relative ability of two countries’ currencies to buy the same “basket” of goods in those two countries.

Human Development
Human development index:
The measure of the extent to which a peoples needs (healthy life, education, decent standard of living) are satisfied and the extent to which this needs are addressed equally across a nation’s entire population.

Classifying countries
Developed: highly industrialized and efficient countries that have a high quality of life.
-USA,France, Italy, Canada..

Newly industrialized: recently increased the portion of it’s national production and exports from industrial operations ( emerging markets: developed + newly industrialized).

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