YEARS 18 DOING OUR BEST, SO YOU CAN DO YOURS ® the World Scholar’ s Cup® ECONOM

YEARS 18 DOING OUR BEST, SO YOU CAN DO YOURS ® the World Scholar’ s Cup® ECONOMICS POWER GUIDE ECONOMICS 2 0 1 2 2 0 1 3 EDITION Post-Soviet Communist Recovery EDITOR Christina Minich ALPACA-IN-CHIEF Daniel Berdichevsky DemiDec, The World Scholar’s Cup, Power Guide, and Cram Kit are registered trademarks of the DemiDec Corporation. Academic Decathlon and USAD are registered trademarks of the United States Academic Decathlon Association. . ECONOMICS POWER GUIDE ® AUTHOR’S WELCOME ...................................................................................................................................... 1 CURRICULUM OVERVIEW ............................................................................................................................... 2 FUNDAMENTAL ECONOMIC CONCEPTS ......................................................................................................... 3 MICROECONOMICS ........................................................................................................................................ 14 MACROECONOMICS ....................................................................................................................................... 56 COMMUNIST ECONOMIC SYSTEMS .............................................................................................................. 98 REFORM UNDER MIKHAIL GORBACHEV ...................................................................................................... 103 REFORM UNDER BORIS YELTSIN .................................................................................................................. 109 VLADIMIR PUTIN & DMITRI MEDVEDEV ..................................................................................................... 115 SECTION I - III SUMMARIES .......................................................................................................................... 119 SECTION IV SUMMARY ................................................................................................................................ 123 PRACTICE TEST ANALYSIS ........................................................................................................................... 150 ABOUT THE AUTHOR ................................................................................................................................... 152 BY CATHERINE TRAN UNIVERSITY OF TEXAS: AUSTIN SEVEN LAKES HIGH SCHOOL EDITED BY ROBB DOOLING ROCHESTER INSTITUTE OF TECHNOLOGY OMAHA BURKE HIGH SCHOOL DEDICATED TO MR. IRISH, MR. MARZEN, AND THE 2011 SEVEN LAKES ACDEC TEAM © 2012 DEMIDEC Economics Power Guide | 1 AUTHOR’S WELCOME You hold the Economics Power Guide in your hands. This may look like a pile of paper with some words and numbers on it, but this pile of paper came into your hands through hundreds of individual decisions. Every step of the way, someone performed a cost-benefit analysis and with stars in their eyes said this is worth it. And you, my starry-eyed friend, will too. I promise you. So love it. Cherish it. My name is Catherine Tran, but you can call me Cat. I joined the Academic Decathlon at Seven Lakes High School in search of a challenge, and I found a surplus of challenge in the Economics event. Mastering Economics requires the ability to harmonize concepts and facts. If you study right, everything should click together and just make sense. The Power Guide helps you achieve this goal by organizing all these concepts and facts in a logical way. Critical words, names, numbers, and other testable terms are bolded throughout the guide. You can find definitions for these terms in the Power Lists at the end of the guide, broken up into understandable and manageable sub-lists. In addition, Power Tables synthesize related information for efficient studying sans1 page flipping. Here, I will integrate all bolded Russian reforms into a table and all bolded events and years into a timeline. See that little number one in the previous paragraph? Prepare to see many more of these floating, little numbers. This guide includes three kinds of footnotes. First, enrichment footnotes (such as the first footnote) provide information that will not be tested but help increase your understanding of the material. Second, Demi footnotes include my signed comments on the material. They serve as presumed comic relief and desperate pleas for attention2. You will also see some signed comments from last year’s authors and past and present beta testers. Last, I use unsigned miscellaneous footnotes for instructional comments about the curriculum and guide. A high score in economics demands commitment. Fortunately, this guide will supply you with a lot to commit yourself to learning. To minimize the costs and maximize the benefits of your study time, I suggest you first read through the entire guide once. Then focus on really understanding the models. Being able to sketch out and manipulate models is the most powerful tool to use on economics tests. Quizzing yourself on the terms in the Power Lists will also help. The investment you put into internalizing this guide will bring you great rewards in the future. You are entering a planned economy in which your target output is a 1000 on economics. 1 “Sans” means “without” in French 2 Love me! – Cat Economics Power Guide | 2 CURRICULUM OVERVIEW Section I: Fundamentals of Economics = 10% (5 questions) Section I discusses the study of economics as a whole. This section covers basic assumptions about human behavior. These core ideas form the basis for the study of both microeconomics and macroeconomics. Section II: Microeconomics = 40% (20 questions) Section II narrows in on microeconomics, which focuses on the behavior of individual markets. This section covers different types of competition, supply and demand, absolute and comparative advantage, market failure, roles of government, and classification of goods. Section III: Macroeconomics = 30% (15 questions) Section III moves to macroeconomics, which explains how to analyze a national economy. This section covers measurement of GDP, inflation, unemployment, financial markets, short-run fluctuations, and government policy. Section IV: Economics of Communist and Post-Communist Russia = 20% (10 questions) Section IV focuses on the economics of this year’s theme, Russia. This section covers the economics of Russia before and after the fall of the Soviet Union as well as its recent (and controversial) transition from a planned to market-based economy. It outlines the effects of its economic reforms under various leaders. If you have the time, focus on concepts, because these take the longest to learn. Once you understand what demand really is, it’s not as hard to grasp what can impact it. If you run short on time, look for the areas of greatest marginal benefit to you as a Decathlete. Focus on the Power Lists and Power Tables—or consult the Cram Kit. Read through the section summaries at the end of this guide and spot-check concepts that give you trouble. Good luck! Section I - Fundamentals 10% Section II - Microeconomics 40% Section III - Macroeconomics 30% Section IV - Russia 20% Economics Power Guide | 3 FUNDAMENTAL ECONOMIC CONCEPTS Introduction3  What does economics address?  The field of economics explains how individuals make choices about allocating scarce resources to satisfy unlimited wants and how these choices interact with each other  Economists study how human societies organize themselves to transform available resources into what their members wish to consume  The field emerged over 200 years ago  Adam Smith established the field of modern economic analysis with An Inquiry into the Nature and Causes of the Wealth of Nations (1776)  Even before Smith, Aristotle wrote on topics relevant to economics  Two main approaches  Microeconomics analyzes individual decisions and how those decisions intersect in the market  Macroeconomics considers entire economies and develops models to explain them  The two fields start from different points, but assume the same basic things about human behavior Why Economics?  Economics and everyday life  While economics may appear obscure, it concerns three simple ideas  (1) Everyday life  (2) Choices a person makes in his or her daily life  (3) Impact of these choices on the world around us  Examining life through the lens of economics illuminates hidden wonders in the everyday world around us  The local supermarket  The average supermarket carries nearly 47,0004 different items  Each item purchased at a grocery store is the result of a long chain of complicated decisions  Nothing ensures any of these products will be at the supermarket  No one commanded anyone to create them 3 USAD is not supposed to test on anything covered just in the Introduction. This has not stopped them from doing so in the past. I recommend reading the Intro once or twice, but not to fret about it a great deal. 4 This is just the sort of obscure detail USAD would test on, even though the number is likely outdated by now. POWER PREVIEW POWER NOTES This section eases the reader into the field of economics. It begins with the logic and common sense of economic analysis, continues with important definitions, and concludes with some basic assumptions of economics. Most of microeconomics and a good portion of macroeconomics will rely on these concepts.  10% of the exam (5 questions) will be from this section, but the concepts in this section can appear in questions on other sections.  5 questions from the USAD practice test are on topics from this section.  This section loosely covers pgs. 5 – 8 of the USAD Economics Resource Guide, including the Introduction. Economics Power Guide | 4  At each step along the way, each person made decisions for his or her own self interest  This example is only one supermarket out of thousands across the country  Supermarkets are only one of the millions of businesses in our economy  Economics explains why our economy functions and why it does not Basic Assumptions of Economics  Scarcity and no free lunches!  Humans have unlimited wants  Economists assume people cannot fulfill their desires  Desires are insatiable  When one desire is satisfied, people will think of something else that they want  If I buy a new laptop, I will want a wireless mouse  If I buy a wireless mouse, I will need batteries for it5  This situation can be framed quantitatively through the concept of utility6  Utility uploads/Philosophie/ economics-power-guide.pdf

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