• Economy: a system of producing and distributing goods and services

• Subsistence economy: an economy which is not based on money, and which relies on barter between communities instead → earliest human groups, hunting and gathering societies had this economy Industrial societies: the birth of the machine, the steam engine was invented in 1765, and influenced industrial societies. → societies powered by fuels, these societies created a surplus → this stimulated trade among nations and brought even greater social inequality

• The post-industrial societies brought by the birth of the information age

This society included:

1. a service sector so large that most people work in it,

2. a vast surplus of goods

3. more intensive trade among nations

4. a wider variety and quantity of goods available to the average person

5. information explosion

6. interconnected global village-that is, world’s nations are linked by fast communications, transportation, and trade.

• Biotech Societies: the merger of biology and economics

→ Technological advancements in this society allow us to lead longer and healthier lives

→ Effect on inequality is likely to be spotty

• Mediums of Exchange: The Earliest medium of exchange is recorded with hunting and gathering societies, pastoral, and horticultural societies as they produced little surplus, people bartered and directly exchanged one item for another

1. Medium of exchange in Agricultural societies: bartering continued, however, people started using money (in the form of sea shells to gold) as currency

→ Deposit Receipts: transferred ownership of a specific amount of gold, silver, or grain.

• These receipts were deposited in a warehouse or bank

• Towards the end of the agricultural period, deposit receipts became formalised into currency (paper money)

• Currency and deposit receipts represented stored value → gold and silver coins continued to circulate along deposit receipts and currency

2. Medium of exchange in Industrial Societies: People stopped bartering

• Gold standard: Gold was replaced by paper currency

• Fiat money: is a currency issues by a government that is not backed by stored value → with no stored value, dollars can be printed in any amount a government desires

→ Fiat money caused coins made of precious metals to disappear from circulation. Gold coins disappeared first, then silver ones.

→Governments still have a limit as to how much money they can print. Prices increase if a government issues currency at a rate higher than the growth of (GDP)

• GDP: gross domestic product, the total goods and services that a country produces

The industrial period also led to the invention of credit cards

• Credit cards: a device that allows someone who has approved a specific amount of credit to purchase goods without an immediate exchange of money

3. Medium of exchange in post-industrial societies: during the early Post-industrial society (information age), a new development, debit cards, were invented.

• Debit cards: a device that electronically withdraws the cost of an item from the card holder’s bank account

• E-cash: money stored on a company’s computer that can be transferred over the internet to anyone who has an account with that company.

→ Governments dislike the development of e-cash, as the transactions bypass banks, making it difficult to monitor the financial activities of their citizens.

World Economic Systems:

• Capitalism: An economic system built around the private ownership of the means of production, the pursuit of profit, and market competition

Features of capitalism:

• Private ownership of means of production

• Market competition (competing with one another, owners decide what to produce and set prices for their products)

• Pursuit of profit (owners to sell their products for more than they cost)

State Capitalism:

• Pure capitalism laissez-faire capitalism “hands-off”, means that government doesn't interfere in the market

• Private citizens own the means of production however they must abide by laws which protect the population and ensure that the government can collect taxes

→John Rockefeller: achieved the capitalist's dream, a monopoly, the control of an entire industry by a single company

→ Socialism: an economic system built around the public ownership of the means of production, central planning, and the distribution of goods without a profit motive

Components of Socialism:

• Public ownership of means of production

• Central planning: central committees plan production and set prices with no competition

→ In a socialist economy, the government owns the means of production (not just factories- but land, railroads, oil wells, and gold mines

→ In a capitalist economy, the market forces supply and demand which determines what will be produced and price changes