Political and Economic Analysis

1. Political and Economic Analysis

2. Economy – the organized way a nation provides for the needs and wants of its people Resources – all the things used in producing goods and services. Factors of production - Land, Labor, Capital, Entrepreneurship Land – everything contained in the earth or found in sea; these natural resources are used as the raw material in making goods and creating services that are marketed to customers. Labor- all the people who work Capital – money to start and operate a business. Includes the goods used in production process. Without capital marketers would not have the funds or resources to develop, advertise and transport goods. It also includes infrastructure ( physical development of a country such as roads, ports, sanitation, utilities, telecommunications. Entrepreneurship – skills of people who are willing to invest time and money to run a business. These are the employers of a population Scarcity – the difference between the wants and needs, and available resources

3. How does an economy work?? 3 basic questions have to be answered 1. Which goods and services should be produced? 2. How should the goods and services be produced? 3. For whom should the goods and services be produced? 3 types of economies Traditional- An underdeveloped economy in which communities use primitive tools and methods to harvest and hunt for food, often resulting in little economic growth. Traditional economies are often found in rural regions with high levels of subsistence farming. Countries that evolve their economies past the traditional level often develop into market economies or command economies. Market – A system of allocating resources based only on the interaction of market forces, such as supply and demand. A true market economy is free of governmental influence, collusion and other external interference.

4. Command- An economy where supply and price are regulated by the government rather than market forces. Government planners decide which goods and services are produced and how they are distributed. The former Soviet Union was an example of a command economy. Also called a centrally planned economy. Mixed Economies Economic system in which both the private enterprise and a degree of state monopoly (usually in public services, defense, infrastructure, and basic industries) coexist. All modern economies are mixed where means of production are shared between the private and public sectors. Also called dual economy. Capitalism- Economic system based (to a varying degree) on private ownership of the factors of production (capital, land, and labor) employed in generation of profits. It is the oldest and most common of all economic systems and, in general, is synonymous with free market system.

5. Communism –Economic and social system in which all (or nearly all) property and resources are collectively owned by a classless society and not by individual citizens. Based on the 1848 publication 'Communist Manifesto' by two German political philosophers, Karl Marx (1818-1883) and Friedrich Engels (1820-1895), it envisioned common ownership of all land and capital and withering away of the coercive power of the state. In such a society, social relations were regulated each according to his ability, to each according to his needs. Differences between manual and intellectual labor and between rural and urban life were to disappear, opening up the way for unlimited development of human potential. In view of the above, there has never been a truly communist state although the Soviet Union of the past and China, Cuba, and North Korea of today stake their claims. Socialism- Economic system which is based on cooperation rather than competition and which utilizes centralized planning and distribution. Socialism was originally based in the working class and has generally been opposed to capitalism. Socialists have advocated nationalization (government ownership and control) of natural resources, basic industries, banking and credit institutions, and public utilities. Although the ultimate aim of early socialists was a communist or classless society later socialists have increasingly concentrated on social reforms within capitalism.

6. Labor Productivity – output per worker hour that is measured over a defined period of time. Higher productivity improves profits GDP – output of goods and services produced by labor and property located within a country. Includes private investment, government spending, and personal spending, factor in trade surplus / deficit, factor in expanding / shrinking inventories. GNP – total dollar value of goods and services produced by a country, including goods and services produced abroad by companies and citizens. Standard of Living – measurement of amount and quality of goods and services that a nation’s people have. It reflects quality of life. Calculated by dividing GDP or GNP by population Inflation – refers to rising prices. Use CPI (Consumer Price Index) and PPI (Producer Price Index) as measures of inflation. Unemployment Rate – the number of people who are able to work but do not currently work

7. Class Project Find the Economic Measurements we just talked about for the US and Canada. They should all be in the last six months. Labor Productivity GDP GNP Inflation Rate Unemployment Rate