Economy of Latin America 54 & 55 Review

How do command economies answer the three basic economic questions?

• The government answers the questions of what, how, and for whom to produce goods and services. The government will make all decisions.

• The past will guide producers in answering what, how, and for whom to produce goods and services.The past will guide all decisions.

• Supply and demand will answer the questions of what, how, and for whom to produce goods and services. Supply and demand will guide all decisions

• Supply and demand will answer the questions of what, how, and for whom to produce goods and services. The government will intervene to make sure that everything is fair.

Answer explanation

It has to be the government, because the government has all the power in a command economy.

Which is a benefit or advantage of a market economy?

• The market can change over time, allowing people to recover from economic depressions and market setbacks.

• The market will control the cost of labor and capital goods.

• The market will set high prices for all goods and services.

• The market will limit consumer choices to certain goods.

Answer explanation

A market economy is flexible because it adjusts to supply and demand.

Use the continuum to answer the question.

Which country in the diagram has the LEAST free economy?

• Cuba

• Mexico

• United States

• United Kingdom

Answer explanation

Cuba is clearly onthe command side! Come on, people!

Use the information and the continuum to answer the question.

Where would the country being described be placed on the continuum?

• Point A

• Point B

• Point C

• Point D

Use the information to answer the question:

Country C is close to the Arctic Circle and is often covered by ice. It has a short season for farming. The farmers cannot supply the population with enough food. However, they do have an abundant (very big) supply of fresh water from melted snow and many lakes that have fresh water also.

What is a solution for Country C’s food scarcity?

Scarcity = having very little of something, or even none

• Specialize in fresh water to trade for food

• Use their fresh water to help grow their crops

• Increase their growing season by clearing land

• Use trade barriers to protect their workers and goods

Answer explanation

If you had something a friend did not have but wanted, and he/she had something you did not have but wanted, trading would be a natural thing. Same thing for countries!

The U.S. banned all trade with Cuba after the Cuban Missile Crisis. The U.S. wanted to punish Cuba for becoming Communist and being allies with the Soviet Union. What kind of trade barrier was this?

• tariff

• quota

• embargo

• specialization

Answer explanation

If someone threatened you, would you just tax them or put a limit on trade with them! NO! you would STOP all trade with them immediately. EMBARGO! NO TRADE!

Use the information to answer the question.

Mariana lives in Mexico. She is planning her second trip to Brazil to visit her brother, who recently moved to Brazil for a new job. Once she arrives in Brazil, Mariana plans to take a city bus into downtown Rio de Janeiro from the airport to save money.

What must Mariana do to pay for public transportation (the city bus)?

• get a job so that she can pay for her trip to Brazil

• pay a tariff to the government in order to visit Brazil

• exchange her Mexican pesos for Brazilian reals

• pay a travel agent to plan her trip back to Mexico

Answer explanation

If you go to another country, they will not take your U.S. money when you want to buy something. You will have to change it to that country's money at the airport or a bank. That is called currency exchange.

What effect did the North American Free Trade Agreement (NAFTA) have on U.S.-Mexican relations?

• More jobs became available to Mexico's population, which led to an increase in trade.

• The U.S. sponsored Mexico to leave the United Nations

• The U.S. increased its tariffs on all Mexican products.

• The U.S. ordered the closing of Mexican factories close to the U.S. border that caused pollution.

Answer explanation

NAFTA increased jobs by getting rid of tariffs. Not paying tariffs saved Mexico a lot of money. With the money saved, it could build more factories and hire more workers to make more products. More workers --> more products --> more trade!

What do some believe is the consequence of increased industrialization and trade as a result of the North American Free Trade Agreement (NAFTA)?

Industrialization = a lot of factories producing/ manufacturing goods

• increased taxes

• increased tariffs

• increased inflation

• increased pollution

Answer explanation

What happens when you have more factories making things due to free trade (no taxes)? Of course, you have more pollution because factories use fossil fuels that cause pollution!

Which countries are closer to a pure market economy?

Hint: In a market economy, citizens actively participate in their country's economy by starting their own businesses. Which countries below provide the MOST personal freedoms?

• Cuba and Brazil

• Cuba and Mexico

• Brazil and Mexico

• Brazil, Cuba, and Mexico

Answer explanation

The order of how much economic freedom citizens have in each country has from left to right are Cuba, Brazil, and then Mexico. And Brazil and Mexico are democracies in which people have a lot of voting power, which also gives you a clue.