Basic Economy

There are some pretty strong economies in the world today. But in some countries, their economies are weak and the countries are poor. These are the countries where families suffer.

To learn more about economics and to have fun while doing it, visit the Peanuts & Crackerjacks site. You'll learn about the economics of pro sports from the Federal Reserve Bank of Boston's site. You'll even get to play an interactive baseball game that tests your knowledge of economics and sports trivia. There's also a Sports Page that gives you fun facts about everything from supply and demand to salary.

There are two basic types of economies. One type of economy is a free market and the other is a command economy.

Economics is not a word that many kids understand. To put it simply, economics is the study of how goods and services get produced (made) and how they are divided up and given to people. By goods and services, economists mean anything that can be bought and sold. Economists study how the things people need and want are made and brought to them. They also study how people and countries choose the things they buy from the many things they want. Economists also study the economic relations between nations.

Countries depend on other nations for good and services. Economists study these relationships. They look for ways to increase trade and help poor countries improve their economic condition. Nations trade with each other because no nation has all the things it needs for its population. Nations are afraid to produce only the things they can naturally produce well. This is because they do not want to be dependent on other countries in case of war with the other countries. Then trade would be cut off.

Nations restrict trade through tariffs and quotas. Tariffs are taxes placed on goods one nation trades with another. Quotas are limits put on the number of items allowed into a country. Some nations engage in free trade. Free trade is trade with no taxes or tariffs.

Trade within a country is only with one type of money, but if you trade with other countries, you will have to use different types of money. When this happens, businesses use an international banking system to exchange the money. If you are paid in foreign money, it is called a foreign bill of exchange. You then have to take the money to a bank or money exchange dealer and convert the money into what you need.

Until the 1970's, countries decided what their money was worth. Countries would lower the value of their money to increase foreign sales. In the early 1970's, some nations adopted a system called a floating exchange. Under this system, a nation's money value is based on demand for it.

Nations keep records of their financial dealings with other countries. If a country pays out more money than it receives, it has a deficit. If it receives more than it spends, it has a surplus. The United States suffers from huge trade deficits today because it has been unable to sell as much as it needs to buy abroad.

Three fourths of the world's population live in developing countries. Africa, Asia and Latin America have some of the worst areas of poverty. Developing countries are poor, and the people barely have enough to eat. Many live in shacks and have very few possessions. They are usually farmers but do not have good equipment for farming. People in these countries lack many of the resources needed for a comfortable life. They generally use what they have just to survive. Be sure to visit our Children's Right page to learn more about these hardships.

Wealthier nations give to poor countries to help them improve their economies. For example, the United States gives billions of dollars to needy nations in the form of loans and gifts. They also offer technical assistance to help train and educate other people. Some nations have experienced fast economic growth through their own efforts. The economies of Brazil, South Korea, Mexico and Singapore are some of the fastest growing economies in the world.

Citations

Electronic Media

Aaron, Henry J. "Economics." World Book Online Reference Center. Feb. 2004. World Book, Inc. http://www.worldbookonline.com/ar?/na/ar/co/ar173340.htm (February, 2004).

Images

Images of airplane, money, and stack of bills from "Microsoft Office Online" <http://office.microsoft.com/clipart/default.aspx?cag=1> Images free for non-profit and personal use. (October-February, 2003-2004).