SOUTHERN AND EASTERN ASIA

Economic Understandings

SS7E8 – a. Compare how traditional, command, and market economies answer the questions of (1) what to produce, (2) how to

produce, and (3) for whom to produce.

• Traditional Economy– Decisions based on custom and past decisions– Tradition means things that have been passed

down from one generation to the next– Typical in farming, herding, simple crafts and

trades– Very little money ever exchanges hands– Examples: only find in rural India and rural China

SS7E8 – a. Compare how traditional, command, and market economies answer the questions of (1) what to produce, (2) how to

produce, and (3) for whom to produce.

SS7E8 – a. Compare how traditional, command, and market economies answer the questions of (1) what to produce, (2) how to

produce, and (3) for whom to produce.

• Command Economy– Centralized economy where government makes

most decisions– Government decides for the what, how, who– Example: North Korea, China is still command but

has begun to move from total government control

SS7E8 – a. Compare how traditional, command, and market economies answer the questions of (1) what to produce, (2) how to

produce, and (3) for whom to produce.

• Market Economy– Society’s economic decisions are made by

individuals– A.K.A.: capitalism, free enterprise, or laissez-faire– Laissez-faire: to allow them to do as they please– Examples: Japan and South Korea

• Mixed Economy– Today, no countries in the world have economic

systems that are purely traditional, purely command, or purely market systems.

– At least some free market and free enterprise as well as some government planning and control

– Examples: India

SS7E8 – b. Explain how most countries have a mixed economy located on a continuum between pure market and pure command.

Market Command

SS7E8 – b. Explain how most countries have a mixed economy located on a continuum between pure market and pure command.

• China– Originally designed as command system– 1970’s farmers and factories were able to make

more decisions– Chinese government still has final authority in

most matters

SS7E8 – c. Compare and contrast the economic systems in China, India, Japan, and North Korea.

• India– ½ of population works in agriculture– Green Revolution of 1960’s led to modernized

farming, but also led to pollution of water due to fertilizer and pesticides

– Huge technology and service industry helping develop middle class.

SS7E8 – b. Compare and contrast the economic systems in China, India, Japan, and North Korea.

• Japan– One of the most technologically advanced

economies in the world– Very little farmland and few natural resources– Fishing is large industry– One of most highly educated populations in the

world

SS7E8 – b. Compare and contrast the economic systems in China, India, Japan, and North Korea.

• North Korea– Least open and most government-directed

economies in the world today– Government owns all land, factories, and jobs– Rich mineral resources have allowed for industry

to grow, but is strictly controlled by government

SS7E8 – b. Compare and contrast the economic systems in China, India, Japan, and North Korea.

SS7E9 – a. Explain how specialization encourages trade between countries.

• Not every country can produce all they need• Specialization creates goods most efficiently– Trade for goods not made locally

SS7E9 – b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.

• Trade Barriers– Anything that slows down or prevents one country

from exchanging goods with another– Made to protect local industries– Also created due to political problems between

countries

SS7E9 – b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.

• Tariff– Tax placed on goods when they are brought

(imported) into one country from another country– Purpose is to make imported good more

expensive to protect local industry

SS7E9 – b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.

SS7E9 – b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.

• Quota– Sets a specific amount or number of a particular

product that can be imported or acquired in a given period• Example: only 1500 cars can come from Japan in a

given year

– Again, to protect local industry

SS7E9 – b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.

SS7E9 – b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.

• Embargo– One country announces that it will no longer trade

with another country in order to isolate the country and cause problems with that country’s economy

– Usually when 2 countries are having political disputes

SS7E9 – b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.

SS7E9 – c. Explain why international trade requires a system of exchanging currencies between nations.

• Currency: type of money used in a country• Exchange rate: system of changing from one

type of currency to another in order for countries with different currency to trade

• In order for them to trade with each other, they have to be able to figure out what goods cost in each currency

SS7E9 – c. Explain why international trade requires a system of exchanging currencies between nations.

SS7E10 – a. Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP).

• Human capital: knowledge and skills that make it possible for workers to earn a living producing goods or services

• GDP: total value of all goods and services produced by a country in a single year

• Companies and countries that invest in human capital are most likely to have profitable businesses and satisfied workers.

• India– Rural India uses traditional economy to farm• 25% of GDP

– One of the worlds top ten industrial nations– Stressed education during past decades– Leading software producer in the world

SS7E10 – a. Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP).

• China– Heavy investment in human capital– Four Modernizations program (1970’s)

1. Farming2. Military3. Industry4. Scientific and technical research

– Economy continues to grow as a result

SS7E10 – a. Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP).

• Japan– One of the most powerful industrial nations in the

world– Among most highly educated in the world– Solid work ethic– Ministry of International Trade and Industry

(MITI): brings government leaders and business leaders together to keep track of how Japanese economy is responding to changes in world market

SS7E10 – a. Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP).

SS7E10 – b. Explain the relationship between the investment in capital (factories, machinery, and technology) and gross domestic product (GDP).

• Capital goods: factories, machines, and technology that people use to make products

• Very important to economic growth• More efficiency leads to higher GDP

VS

SS7E10 – c. Describe the role of natural resources in a country’s economy.

• Natural resource: something that is found in the environment that people need (water, trees, rich soil, minerals)

• India and China– Good supplies of coal

• Japan– Very few natural resources

SS7E10 – d. Describe the role of entrepreneurship.

• Entrepreneurs: creative, original thinkers who are willing to take risks to create new businesses and products.

• India– Some of world’s largest companies started by

Indian entrepreneurs• China– Relatively new– Government decided to let entrepreneurs lead the

way• Japan– Land of entrepreneurs

SS7E10 – d. Describe the role of entrepreneurship.