European Economic Growth

Factors

Standards

. S6E8 Analyze the benefits of and barriers to voluntary trade in Europe

a. Explain how specialization encourages trade between countries.

b. Compare and contrast different types of trade barriers such as tariffs,

quotas, and embargoes.

c. Explain why international trade requires a system for exchanging

currencies between nations.

d. Describe the purpose of the European Union and the relationship

between member nations.

Standards

• SS6E9 Describe factors that influence economic growth and examine their

presence or absence in the United Kingdom, Germany, and Russia.

• a. Evaluate how literacy rates affect the standard of living.

• b. Explain the relationship between investment in human capital goods

(education and training) and gross domestic product (GDP per capita).

• c. Explain the relationship between investment in capital (factories,

machinery, and technology) and gross domestic product (GDP per capita).

d. Describe the role of natural resources in a country’s economy.

• e. Describe the role of entrepreneurship

European Economic Growth

Factors

Essential Question: What factors influence

a country's economic growth?

Economic Check Point

• Economics is the study of how a market

makes, distributes, and consumes

products and services.

• What are the 3 basic economic questions:

– What to produce?

– How to produce?

– For whom to produce?

So then, How do you think the

growth of an economy is

measured?

With a seat partner, answer the following

questions:

1. How do you measure your height?

2. How do you measure the amount of

drink you have in your cup?

3. How do you measure the

temperature outside?

How is Economic Growth

Measured?

Economic growth in a country is

measured by the country’s Gross

Domestic Product (GDP) in one

year. It allows for the measuring of

one country to another.

Gross Domestic Product (GDP)

• The total value of all the goods and

services produced in a country in a year.

• Use to tell how rich/poor a country is.

• Often an indicator of Standard of Living

(just like the literacy rate)

– …it’s like a big (imaginary) calculator that

keeps track of all the money spent in a

country in a year.

GDP per capita

• When you take the GDP and divide it by

the population of that country.

• Is a more accurate picture of how much $$

a country has compared to the GDP

– Why is GDP per Capita a better measurement

of how rich or poor a country is, or its

standard of living, then just GDP?

Economic GrowthThere are 4 main factors that influence

economic growth within a country:

Investment in Human Capital

Investment in Physical Capital

Land [natural resources] available

Entrepreneurship

The presence or absence of these 4

factors determine the country’s Gross

Domestic Product for the year

InvestmentWhat do you think investment

means? Turn to a seat partner

and share your thoughts.

Investment is when money, resources,

or opportunities are provided in order

to gain profitable returns in the future

Who makes the investment???

Private vs. Public Businesses

• Public means it is owned by the

government

• Private means it is owned by citizens

Entrepreneur/Entrepreneurship

• Entrepreneurs are individuals who take

risks in an economy by starting new

businesses.

– Entrepreneurs help increase GDP.

Why do you think it is more difficult for

entrepreneurs to act in a command

economy?

How Do Entrepreneurs Increase GDP?

Human Capital/Resource

• The skills that humans have to build

things or perform services.

• Examples:

– Education

– Training

– Health of Workers

• Investment in Human Capital increases

Literacy rate and Increases Standard of

Living.

• When investing in Human Capital a

countries GDP Increases.

Capital Good/Resource

• The things needed to make other goods

– When Countries invest in Capital

goods/resources GDP goes up.

• Examples:• Machines

– Ice machine

– Coin press

• Factories

– A car manufacturing plant

• Technology

– Computers

– Software

Natural Resources

• the natural wealth of a country, materials

or substances such as minerals, forests,

water, and fertile land that occur in nature

and can be used for economic gain.– Natural Resources is not on your graphic organizer so make sure you

write it down somewhere else.

International Trade

• The sale of goods or services across

country borders

• Trade between different countries

Trade Barrier

• Barrier=wall

• Something that prevents trade

• Examples:

– Tariff

– Quota

– Embargo

– Geography (geography that prevents

easy trade, like mountains, oceans, etc.)

Embargo

• A government order prohibiting the

movement of merchant

ships/planes/trading into or out of its ports.

• A government restriction on trade with a

foreign nation.

Quota

• The amount of something that is

allowed or admitted

• Examples:– A restriction on the quantity (number) of a good that

can be imported during a specific time period would

be called an “import quota”.

– If the United States government only allows 50 tons

of corn to be imported into the US each year, this

would also be called an “import quota”.

– If your teacher has given you 20 minutes to work on

an assignment, your “time quota” is 20 minutes.

More QUOTA examples

• Money Quota: Your parents give you $20

a week to spend. Once you spend all

$20, you have met your “money quota”.

You will not receive any more money until

next week.

• Paper Quota: Your job only allows you to

use 1,000 sheets of paper per year. If

you use all 1,000 sheets, then you have

met your “paper quota”. You will not

receive any more paper until next year.

Tariff

• a tax that the government puts on

imported or exported goods.

Voluntary Trade

• Same as international trade, but the

countries both benefit from trade and they

voluntarily decide to trade with one

another

Currency Exchange

• Exchange rate of two currencies is the

rate at which one currency will be

exchanged for another. It is also regarded

as the value of one country's currency in

relation to another currency• Without a method to convert monetary values

between disparate currencies, international trade

would be impossible. – Currency Exchange is not on your graphic organizer so make

sure you write it down somewhere else.

Currencies of Europe

• Something you exchange for goods or

services

• The money in circulation in any country

Currencies of Europe

• France, Italy, and Greece use the Euro.

• The Euro has pictures representing each of it’s member nations, much like our quarters for each state, here in the U.S.A.

• Below are Euro coins.

All coins have the same front design

These are some of the back designs for the 1euro piece representing

different EU nations.

France Italy Germany

Currencies of Europe

SS6E6d

• Here are pictures of the Euro paper

currency.5 euro 20 euro10 euro 50 euro

200 euro

100 euro

500 euro

The Euro was created so that member countries of the European Union could

trade more Easily.

Currencies of Europe

• Russia’s currency is the Ruble.

Unofficial Ruble Symbol

Original Ruble Symbol

1 Ruble5 Rubles 50 Rubles

Currencies of Europe

• Poland’s currency is the zloty.

10 zloty 20 zloty 100 zloty 200 zloty

5 zloty

Zloty Symbol

In economics, the term specialization refers

to people or companies focusing on

providing a single good or service, instead of

a range of different goods.

Specialization

Specialization Encourages Trade

Comparative Advantage

If a company is able to produce one good at a faster or cheaper rate then other companies, then they have a comparative advantage and producing another type of good would lower

their productivity.

Trade

By producing a single good or service, companies can then trade with others who have their own unique specialization. This creates more goods overall and benefits

everyone.

Labor

By training workers to complete only one task, they can perfect it and increase the

production efficiency.

Productivity

Being able to create more goods at a lower cost increases the overall productivity of a

company. This, in turn, benefits the economy as a whole.

Specialization Encourages Trade

• OPEC- organization to influence price of oil – Saudi Arabia, Iran, Iraq, Venezuela, Kuwait,… Nigeria, Indonesia…

• Cuba = tobacco and sugar cane

• Brazil = coffee, oranges, soybeans, etc.

• Venezuela = oil & natural gas

• Mexico = oil & silver

Examples

• Each person or country makes money from something they are really good at.

• They specialize in what they do well

which creates a division of labor.

• Dividing the work into different parts is

more efficient and cost-effective. Less

equipment is needed, time is saved,

and generally better products are

produced.

Summary