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Students research the economic systems of a communist country and a third-world country and compare them to the US, guided by questions and using information from the CIA World Factbook website.

KEY CONCEPTS

Economic Systems

STUDENTS WILL

  • Define market economies, command economies, and developing economies.
  • Compare one country with another by reference to factors associated with economic performance.

INTRODUCTION

What would life be like in the North Korean economy? How would things be different in the economy of Chad? In this lesson, you will have the opportunity to compare these two economies to the U.S. economy, and you’ll practice using some tools that can help you to study any economy in the world.

RESOURCES

  • CIA Factbook: The CIA updates its World Factbook website annually. Data are included for every country in the world, as well as several territories of other nations. Students will use this website to fill out their Comparative System Worksheets.
    www.cia.gov/library/publications/the-world-factbook/index.html
     
  • Comparative Systems Worksheet : Click on the link and print the chart, to fill in the information from each of the countries.
    Comparative Systems Worksheet

PROCESS

GermanyFirst we need to take a moment to look at how economists categorize economies. A market economy is characterized by private ownership of the means of production (for example, farms and factories), and supply and demand are responsible for the price and allocation decisions. The United States, Hong Kong, and Germany are considered market economies. A command economy is characterized by government (or central) control ownership of the means of production, and with a central authority setting prices of goods and services and for most allocation decisions. North Korea and Cuba are command, or more specifically communist, economies. A developing economy is one which is not yet industrialized, but is developing. Chad, Ecuador, and Bangladesh are considered developing nations.

In this lesson, you will compare several aspects of the economies of the United States (representing a market-oriented economy), North Korea (representing a command economy), and Chad (representing a developing economy). Print the Comparative Systems Worksheet. Go to the CIA World Factbook website to find the information needed to complete the chart.

Use the information from the worksheet to consider the following seven questions.

  1. How can the presence or absence of natural resources and arable land affect a nation’s economy, regardless of the type of economic system? [If a country has few natural resources and little land available for crops, it may not be able to produce enough food and products for the people.]
     
  2. How can life expectancy and literacy rates affect the quality of labor in the economy? [A shorter life expectancy may indicate poor medical care, and lower literacy rates may indicate poor education, both of which can have negative impacts on production.]
     
  3. How can fertility rates affect the use of scarce resources? [High fertility rates, especially in countries with few natural resources and lower GDPs, may indicate serious strains on scarce resources.]
     
  4. How can GDP per capita and poverty rates indicate standards of living in each system? [They can indicate standards of living in each system because GDP per capita is generally lower, and poverty rates are generally higher, in countries with lower standards of living.]
     
  5. How can the size of the industrial/service sector and the agriculture employment rate indicate the level of industrialization?[A larger industrial and service sector, and a larger number of people working outside of agriculture, can indicate a higher level of industrialization in the economy.]
     
  6. How can electricity, communication, and transportation facilities indicate the potential for industrial growth? [Greater electrical generation capacity, greater use of telephones and the Internet, and a greater availability of transportation via rail, highway, and airline can indicate a greater potential for increased industrialization.]
     
  7. Considering the lack of natural resources, the labor problems, and the lack of capital and little industrialization of developing countries, how can developing countries develop? (Hint: Look at Economy - Overview for Chad). [Developing countries can develop by infusion of funds and capital from other nations, the World Bank, the International Monetary Fund, and regional and humanitarian organizations.]

ASSESSMENT ACTIVITY

Now that you have studied the economic characteristics of these three countries, define the terms market-oriented, command, and developing economy in your own words. For each term, describe the specific characteristics of the countries you studied that would help to support your definition. [Market economies rely on private ownership of the means of production and supply and demand to determine prices and output. The US meets this definition, indicated by a lower amount of government and military spending as a percentage of GDP than North Korea does. Command economies feature government ownership of the means of production, and centralized planning of the economy. North Korea fits this definition with its high government and military spending as a percentage of GDP and its extensive use of government boards to determine economic production. Third world economies are not yet industrialized, but are developing. Chad is an example of this definition, characterized by low GDP, high poverty, little industrial employment, and poor energy, communication, and transportation systems.]

Try this same exercise, comparing the economic systems of nations large and small, industrialized and developing, well-known and little-known. Consider looking at the differences in the former Soviet republics and Eastern Europe, which are converting from command to socialist or market-oriented systems.

Prepare a grid similar to that on the Comparative Systems Worksheet, illustrating the most important points of comparison between the nations you have selected to study.

CONCLUSION

globalizationMarket-oriented and command nations tend to place different priorities on the role of government in the economy, with the government sector generally playing a larger role in command nations. Given their resources, market-oriented and command nations can choose to focus on increased industrialization and expansion into new markets. Developing nations, however, often lack resources necessary for industrialization and must seek aid or investment from industrialized economies in order to grow. With increased globalization, we are becoming more acutely aware of the interdependence of all nations in our world economy.

EDUCATOR REVIEWS

  • “This lesson was excellent! I am currently doing a chapter in my Intro to Business class on the different types of economies, and this made it real for the students. It was also a great activity for partners to get the students working together to find information.”

    Sara W.   POSTED ON September 20, 2004

  • “This lesson is great for introducing or reviewing principles of comparative economies. My classes have covered the economic system already but this was a great way for them to have technology incorporated into their review. Thanks for the great lesson.”

    John Beard, OH   POSTED ON September 17, 2005

  • “This is an excellent activity!”

    Racquel Smith, Baltimore, MD   POSTED ON May 1, 2007

  • “So it seems my teacher simply prints her stuff off the internet! Here I thought SHE was writing these things. This is an excellent lesson nonetheless.”

    Gabe A.   POSTED ON September 5, 2007

  • “Neat lesson!”

    Julie Bowen, Wayzata, MN   POSTED ON November 12, 2007

  • “This an amazing site and I love this lesson. It not only talks about the different economic systems, but also about GDP, which is another topic I cover. Thanks!”

    Tess, WI   POSTED ON November 14, 2007

  • “One problem with this lesson is the fact that you compare the US with some extreme economic systems. Comparing the US with North Korea and Chad makes the US look very good in comparison. Comparing the US with less extreme economies like Norway, Germany, Canada, and Brazil would show a more middle ground. Also, many of these social democratic countries have different economic values that students can learn from. I plan to use the idea for this lesson but add two more countries to provide balance and perspective as well as provide a row for "Provides health care for all citizens."”

    Barbara S., Los Angeles, CA   POSTED ON December 26, 2007

  • “To make this lesson more realistic, you could include social democracies in this rather than just an underdeveloped and a Stalinist communist nation. For example, Sweden and Germany are countries that provide paid time off for new mothers and fathers and four to six weeks vacation a year.”

    Barbara S., Los Angeles, CA   POSTED ON January 24, 2008

  • “I love this site, I have used it for two semesters in consumer economics.”

    Jane S., Indiana   POSTED ON February 12, 2008

  • “An excellent site which helps to develop thinking skills among students. Good for teaching and learning.”

    Manorama S., Dubai UAE, MD   POSTED ON October 8, 2008

  • “Barbara Stam, you are obviously leaning in your lessons. Worrying about how to dull the shine of American prosperity should not be of concern, and providing health care for all citizens is obviously a socialistic ideal that you are trying to incorporate and subconsciously affiliate its need with capitalism. I have found this to bring up several discussions in my class that can often be distracting. I encourage open thinking and allow for some discussion, but it can mainly turn into a debate over America's health care system. Remember, we are teaching economics, not our personal opinions of how to improve America. These discussion items are very good, but I it find not necessary to put on a worksheet so all students must acknowledge that area.”

    Anonymous, San Francisco, CA   POSTED ON December 12, 2008

  • “Fabulous lesson! I really like how it incorporates the CIA World Factbook.”

    Lucy F., Norfolk, VA   POSTED ON January 9, 2009

  • “Students were excited and very engaged in the learning process.”

    Alvinia B., Chapel Hill, NC   POSTED ON March 17, 2009

  • “I love this lesson!”

    Mr. Begley, Mason, NV   POSTED ON March 25, 2009

  • “I agree with Barbara Stam and Barbara S. that more countries and economic systems need to be offered so students can truly know the options. Anonymous, who criticizes Barbara Stam, says she/he supports open thinking but appears to limit it to a narrow set of economic ideas. Like every other economic system, the U.S. system has positives and negatives, and it's important for students to look for both in evaluating our system, any other economic system, or anything else for that matter.”

    Larry D., Monroe, ME   POSTED ON March 25, 2009

  • “A great Internet activity! I use this lesson in my business Organizations and Operations class. It gives students exposure to the three primary economic systems of the world. Also, the CIA Factbook is an additional resource that provides a snapshot of a specific country's infrastructure. Thank you!”

    Kassandra D., Fresno, CA   POSTED ON May 14, 2009

  • “I must agree that comparing extreme cases in teaching is not a very good idea. Students should see both advantages and disadvantages of all the economic systems. To teach economics is not just about the concepts, students can also be taught how to balance the equation by finding alternatives from various solution.”

    Ms. Estelita, Boston, MA   POSTED ON July 19, 2009

  • “Wow, this is a great lesson!”

    Anonymous, toronto, MN   POSTED ON February 19, 2010

  • “I could really use this system for a class project for my students. I really like the way it's set up.”

    Cody K., Meadville, PA   POSTED ON March 21, 2011

  • “This is a great! I really like this!”

    Anthoney V., Hunstville, AL   POSTED ON September 9, 2011

  • “I teach at a private school where I'll be doing a middle school economics class next year. I'm so excited about using some of these resources!”

    BARRETT R., Austin, TX   POSTED ON May 16, 2012

  • “The students really enjoyed this lesson. You could see the light bulbs going on all over the room as they compared answers.”

    Jodie H., Hinsdale, NH   POSTED ON September 20, 2014

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