Economics and the Global Economy Chapter 2 How can your understanding of economic principles and government policies influence your financial decisions?

2 Economics and the Global Economy Chapter 2 The more you know about how an economy operates and the government’s role in the economy, the better educated you will be when making life decisions about the use of your financial resources, voting for government officials, and planning your future career.

Gross Domestic Product (GDP) Consumer Price Index (CPI) inflation Economics and the Global Economy Chapter 2 fiat money money supply budget deficit budget surplus patent copyright trademark Gross Domestic Product (GDP) Consumer Price Index (CPI) inflation deflation recession trough specialization international trade absolute advantage comparative advantage balance of trade protectionism

Economics and the Global Economy Chapter 2 tariff quota embargo

Economics and the Global Economy Chapter 2

Name the three main functions and properties of money. Economics and the Global Economy Chapter 2 Section 1 The Economy and the Government Name the three main functions and properties of money. Discuss the roles government plays in the United States economy. Explain the Federal Budget. Cite examples of government agencies established to protect investors, workers, consumers, and the environment. Describe the structure, purpose, and function of the Federal Reserve System.

Role of Money 2 Economics and the Global Economy Section 1 Chapter 2 Section 1 The Economy and the Government Role of Money Trading Saving What Is Money Used for? Investing Lending

Money in the United States is fiat money. Economics and the Global Economy Chapter 2 Section 1 The Economy and the Government Role of Money Money in the United States is fiat money. fiat money money deemed to be legal tender

Functions of Money 2 Economics and the Global Economy Section 1 Chapter 2 Section 1 The Economy and the Government Functions of Money Functions of Money Medium of Exchange Unit of Value Store of Value

Properties of Money 2 Economics and the Global Economy Section 1 Chapter 2 Section 1 The Economy and the Government Properties of Money Properties of Money Divisible Usable Stable

Properties of Money 2 Economics and the Global Economy Section 1 Chapter 2 Section 1 The Economy and the Government Properties of Money

No Inflation or Deflation Economics and the Global Economy Chapter 2 Section 1 The Economy and the Government Money Supply Money Supply Production of Goods and Services No Inflation or Deflation = money supply total amount of money in circulation in a country

Role of Government in the Economy Economics and the Global Economy Chapter 2 Section 1 The Economy and the Government Role of Government in the Economy

Role of Government in the Economy Economics and the Global Economy Chapter 2 Section 1 The Economy and the Government Role of Government in the Economy Budget Surplus budget surplus financial situation that occurs when more money is received than spent Budget Deficit budget deficit financial situation that occurs when more money is spent than is received

Role of Government in the Economy Economics and the Global Economy Chapter 2 Section 1 The Economy and the Government Role of Government in the Economy Regulation Securities and Exchange Commission (SEC) Federal Reserve System (The Fed) Investors Occupational Safety and Health Administration (OSHA) Equal Employment Opportunity Commission (EEOC) Workers Food and Drug Administration (FDA) Federal Trade Commission (FTC) Consumers Environment Environmental Protection Agency (EPA)

Role of Government in the Economy Economics and the Global Economy Chapter 2 Section 1 The Economy and the Government Role of Government in the Economy patent exclusive right granted by the government to an investor to prevent anyone else from using the invention for a period of time Patent Protecting Companies from Imposters Copyright copyright exclusive right granted by the government to an author Trademark trademark an indicator that protects a company’s name and reputation

Role of Government in the Economy Economics and the Global Economy Chapter 2 Section 1 The Economy and the Government Role of Government in the Economy Assistance Social Security Act Federal Insurance Contribution Act (FICA) Medicare Medicaid National School Lunch Program Grants, Scholarships, Fellowships, Student Loans Federal Emergency Management Agency (FEMA)

Federal Reserve System Economics and the Global Economy Chapter 2 Section 1 The Economy and the Government Federal Reserve System Interest Rates Guides Monetary Policy The Federal Reserve System is the Central Bank of the United States Foreign Exchange Rates Regulates the U.S. Banking System

Federal Reserve System Economics and the Global Economy Chapter 2 Section 1 The Economy and the Government Federal Reserve System Role in the Economy Supervise and regulate depository and other financial institutions Provide banking services to member banks and the government Write regulations and implement consumer credit protection laws Offer statistics and information on the economy Publish related reports

Federal Reserve System Economics and the Global Economy Chapter 2 Section 1 The Economy and the Government Federal Reserve System Functions Regulate the Money Supply Foreign Exchange Markets Influences the economy through control over the federal funds rate May lower interest rates in a recession May raise interest rates when the economy is growing too fast Changes in monetary policies affect international relations and trade A weak dollar and a strong dollar affect the economy in different ways

2 Economics and the Global Economy Section 1 Chapter 2 Section 1 The Economy and the Government What is the government’s role in supporting and stabilizing the economy? How do these actions impact your personal finances? The government controls the federal rate. If the government raises the rate, the rates on loans will increase.

Cite the three basic goals of an economy. Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Cite the three basic goals of an economy. Describe economic indicators and their significance. Discuss the segments of the business cycle. Examine the reasons nations trade with one another. Explain balance of trade. Compare free trade and protectionism

Economic Indicators and You Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Economic Indicators and You Gross Domestic Product (GDP) value of all final goods and services produced inside a country in a given period of time Gross Domestic Product (GDP) Economic Indicators Consumer Price Index (CPI) Unemployment Rate Consumer Price Index (CPI) a measure of the changes in prices for commonly purchased goods and services in the United States

Economic Indicators and You Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Economic Indicators and You inflation rise in the level of prices for goods and services over time Inflation Deflation deflation decline in the level of prices for goods and services over time

Business Cycles 2 Business Cycles Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Business Cycles recession a period of economic downturn Expansion Achieving Economic Goals Recession Business Cycles trough a low point in a business cycle Recovery Trough

Business Cycles 2 Economics and the Global Economy Section 2 Chapter 2 Section 2 The Economy and Global Trade Business Cycles

Roles of Trade Individuals Trade skills for wages Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Roles of Trade Individuals Trade skills for wages Trade goods and services for revenue Organizations Trade with other nations for resources Nations

Roles of Trade Individuals Organizations Nations 2 Specialization Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Roles of Trade Specialization Organizations and nations specialize Everyone is economically interdependent Production and consumption increase with specialization For trading to be efficient, there is a division of labor and specialization Individuals Organizations Nations specialization in manufacturing, a division of tasks among different workers

Goods coming into a country Goods sold to other nations Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Roles of Trade International Trade Imports Exports Country Goods coming into a country Goods sold to other nations international trade exchange of goods and services among nations

Roles of Trade 2 Economics and the Global Economy Section 2 Chapter 2 Section 2 The Economy and Global Trade Roles of Trade

Roles of Trade Individuals Organizations 2 Why Nations Trade Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Roles of Trade Why Nations Trade Scarcity of resources Abundance of resources Low employee wages in other countries Absolute advantage Comparative advantage Individuals Organizations absolute advantage economic advantage a country has when it can produce more of a product than can any other country comparative advantage economic advantage that a country has when it can produce a product more efficiently and at a lower opportunity cost than another country

Roles of Trade Balance of Trade 2 Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Roles of Trade Balance of Trade balance of trade difference between the value of a country’s imports and exports during a period of time

Roles of Trade Protectionism Restricting Trade 2 Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Roles of Trade Protectionism Restricting Trade protectionism practice of using barriers to free trade

Roles of Trade Protectionism Tariff Restricting Trade 2 Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Roles of Trade Protectionism Tariff Restricting Trade tariff tax on imports

Roles of Trade Protectionism Tariff Restricting Trade Quota 2 Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Roles of Trade Protectionism Tariff Restricting Trade Quota quota restriction on the quantity or value of goods that can be imported into a country

Roles of Trade Protectionism Tariff Restricting Trade Quota Embargo 2 Economics and the Global Economy Chapter 2 Section 2 The Economy and Global Trade Roles of Trade Protectionism Tariff Restricting Trade Quota Embargo embargo restriction on imports and exports to and from a country

2 Economics and the Global Economy Section 2 Chapter 2 Section 2 The Economy and Global Trade If the economy is in a recession, what advice would you give to a business owner, and investor, and a consumer? How would your advice change if the economy was in a period of recovery? Sample answers: In a recession, I would advise business owners and consumers to cut back on spending. Investors should cut their losses. In a recovery, business owners and consumers could resume spending. Investors can be more aggressive.

Economic Activity 2 Economics and the Global Economy Chapter 2 Economic Activity In a market economy, the flow of economic resources, income, and goods and services is circular.

Economics and the Global Economy Chapter 2 Business Cycle

Economics and the Global Economy Chapter 2

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