CMRC TUBE

1- How economic systems differ from one to another?

2- Economic goals & measurements.
3- The importance of GDP.
4- Types of economic systems.
5- What are advantages & disadvantages of planned economies?




1- How economic systems differ from one to another?

- Although all economics depend on the same factors of productions but hey are differ in quantity and quality. For example U.S & Canada are more fortunate than many countries. Because they are having a wealth of land & raw materials, well educated workforce, a strong capital base, and an abundance of entrepreneurs.
- Success in business depends on its productivity "on how efficiently a company uses its available factors of productions".

2- Economic goals & measurements.

- Each society's economic system reflects the country's history, traditions, aspirations, and politics. What works for one culture may not work for another. When measuring the success of different economic systems we should apply the standards that are valued by the people of that culture. Such as economic stability, job security, and equality of income & opportunity are given higher priority in some cultures than others.

- One of the traditional measures used in U.S is GNP "Gross National Product" that values of all final goods & services produced by an economy over given period of time; includes receipts from overseas operations of domestic companies, and excludes profits from foreign owned business within a nation's borders. Since 1991 U.S used another measure which called GDP "Gross Domestic Product" dollar value of all the final goods & services produced by an economy during a specified (period usually a year) includes profits from foreign owned businesses within nation's borders, and excludes receipts from overseas operations of domestic companies.

- In contrast to GNP, GDP includes income from- foreign-owned businesses within a nation's borders & excludes income from overseas operations of domestic companies.

3- The importance of GDP.

- GNP consider for responsible for the productions; GDP considers where the productions occurs. A rise in GDP is a sign of economic growth & higher level of productions. GDP used for compare two or more economics. By GDP figures we can adjust for inflations & currency rates. But they may be misleading because of different populations sizes. So economists calculate for per capita figures (GDP divided by the population). GDP cannot tell you whether people are happier or healthier, nor does it measure a country's ability to keep producing in the future. GDP don't reflect the underground economy "economic activity that isn't reported, even though it's generated by legal activities". Bartering (exchanging goods & services directly rather than through medium such as money) cannot easily be measured because we don't use money in these transactions.

4- Types of economic systems.

- The U.S economic system is Capitalism "economic system based on economic freedom & competition". Adam smith who advanced the theory of pure capitalism "capitalism in its ideal state; in which all resource allocations are controlled by the unfettered operation of the free market. The economic system of the united state may be called Mixed Capitalism "economic system in which operation of the free market is influenced to some degree by government involvement".

- Other countries with variations of this economic system include Canada, Japan, and Germany. Capitalism like these operate under free market system" in which the way people spend their money determines which products will be produced and what these products will cost", they are often called market economics " in which goals are achieved by the action of the free market, with a minimum of government intervention". The nature of the business conducted in free-market system called free enterprise.

- Communism "economic system in which all productive resources are owned & operated by the government, to the elimination of private property. These economics that they are frequently called planned economy "in which resource-allocation decisions are made by the central government" planned economies exists in North Korea & Cuba.

5- What are advantages & disadvantages of planned economies?

- Unemployment & inflation can be controlled more easily, on the other hand goods & services which people in the U.S take for granted are often difficult to obtain in planned economies. Many of the planned economies trying to shift in the direction of free market policies.

- Socialism lies some where between capitalism & communism. Socialism "economic system characterized by public ownership & operation of key industries combined with private ownership & operation of less vital industries"

- Although socialist systems have a mush better economic record than communist systems, they too have been hearing more in the direction of free-market economics.