Name ______Date ______Period ______
African Economic Understandings
1. How are decisions made in a traditional economy? Custom and habit
2. What would be a problem for a community with a traditional economy? People in the country begin to want or need products that cannot be made or traded locally.
3. In a command economy, how are economic decisions made? Government planners
4. Which would be a problem in a command economy? A worker trying to start a new business on his or her own would need permission.
5. In a market economy, how are economic decisions made? Consumers and the market
6. Who takes the financial risk in starting a new business in a market economy? Individual business people (entrepreneurs)
7.Why are most modern economies referred to as mixed economies? Most countries have aspects of all three economic types at work in their economies.
8. Why do most economies in the world today operate somewhere in between a market economy and a command economy? Most economies have found they need a mix of free market and some government control to be successful and protect consumers
9. The economies of the two countries on this chart can best be described as being of what type? mixed
10. What is South Africa’s main export? Gold and diamonds
11. Which country has the largest per capita GDP?
12. Why was Nigeria formerly under a command economic system?
The country was under military dictatorship rule
13. What does the chart indicate that might be a concern about the economy of South Africa? The country has a high unemployment rate.
14. How does voluntary trade help the economy? It encourages specialization and usually means more profit.
15. Why is specialization so valuable in international trade today? Specialization allows people to do a more efficient job at producing what they make best and trade for the things they want.
*** Can you figure out why specialization might be hurting U.S. businesses in light of the tragedy in Japan?
16. In what does South Africa specialize? Gold and diamond mining
17. In what does Nigeria specialize? Oil
18. What percentage of our oil comes from Nigeria? Almost 15%
19. How has Nigeria’s concentration on oil hurt that country’s overall economy? Agriculture has suffered and Nigeria now has to import food.
20. For Uganda and Kenya, what areas of specialization could be combined in order to bring more economic success to each country? Cotton production and textile manufacturing
21. What is a tariff? Tax placed on goods coming into one country from another
22. What is a quota? Limit on the amount of foreign goods allowed into a country
23. What is an embargo? A halt to trade with a particular country for economic or political reasons
24. How could a high tariff on imported grain help the people in the country charging the tariff? Local farmers would be able to sell their grain since it would be cheaper than the imported grain.
25. Why did a number of the countries of the United Nations have an embargo on South Africa? They wanted South Africa to end their system of apartheid.
26. Why is a system of currency exchange necessary for international trade? There must be a way to pay for goods purchased from countries with different types of currencies.
27. The CFA Franc is used in what two parts of Africa? In West and Central Africa
28. What is meant by human capital? Skills and knowledge workers have
29. Why has the country of South Africa made a big investment in human capital? Some of the country’s most important industries need educated, skilled workers.
30. What accounts for the high unemployment rate in South Africa? Unemployed black workers are still feeling the effects of the apartheid system.
31. Define gross domestic product (GDP). Total value of goods and services produced by a county in a year
32. If a country does not invest in its human capital, how can it affect the country’s GDP? (and why)
GDP may go down because poorly trained workers will not be able to do their jobs as well.
33. What are capital goods? Factories and machines used to make goods
34. In what type of industry has South Africa invested heavily in capital goods? Mining and heavy industry
35. Nigeria has invested heavily in capital goods for what industry? Oil production and refining
36. How has Nigeria’s decision about investing heavily in capital goods affected many of those who live in Nigeria? Concentration on the oil industry has left Nigerians without proper food and housing.
37. What becomes of much of the money earned from the sale of African gold and diamonds? The country enjoys benefits from the gold and diamond industry.
38. What are some of the commercial uses of uranium? Nuclear power plants and nuclear weapons
39. Although almost 80% of Nigerians are involved in agriculture at some level, Nigeria depends on imported food to feed its people. Why? The government focuses on the oil industry instead of making improvements in agriculture.
40. Which African country has 40% of the world’s gold supply? South Africa
41. How are profits from diamonds being used today in many African countries? Profits fund military supplies for civil wars.
42. What are “conflict diamonds”? Diamonds that are mined and then put on the market to fund armed conflicts.
43. Define “entrepreneur”. Someone who is willing to take a risk to begin a new business
44. Define “income”. Money you earn for working or get from investing
45. Define “savings”. Money left over after buying what is needed and wanted.
46. What do we call a plan for savings and spending? Budget
47. What is it called when an individual invests money in bank accounts, certificates of deposit or mutual funds? Financial investment
48. What is it called when firms invest in equipment, factories, or real estate? (not looking for capital goods for this question) real investment or physical capital investment
49. What is the ability to borrow money called? Credit
50. When does credit become a problem? A person cannot find the money to pay their monthly bills.