Coping with Economic Challenges Miss Smith 7th Grade Civics *pgs. 538-541

Causes of Economic Problems If wages aren’t increasing with inflation, workers must lower their standard of living If consumers spend less, businesses make less profit and the produce less This can result in people losing their jobs Unemployed people can’t pay taxes

The Money Supply Too much money in circulation can cause inflation This causes prices to rise Businesses that expand too fast and produce too many goods than they can sell can cause them to lose money

Government Spending Gov. spending money mostly comes from taxes and borrowed money This puts more money into circulation Also causing inflation

Productivity The amount a worker produces per hour Rising productivity = higher wages and profits and lower prices Recently, American productivity has slowed What are some causes of inflation, unemployment, and recession? How do you think the purchase of foreign products by Americans might lead to unemployment?

Government’s Response to Economic Problems Fiscal policy- federal government’s policy (rule or course of action) of taxing and spending An impending recession may result in lower taxes Monetary policy- federal government’s policy regarding money What actions does the Fed take to try to bring the country out of a recession? It buys government bonds back from banks or lowers the interest rates that banks pay the Fed in order to increase the money supply How does lowering taxes lead to the creation of more jobs? When the gov. lowers taxes, people have more money to spend. This stimulates businesses to produce more to meet demands. In order to produce more, businesses must hire new workers.

Other Ways to Help the Economy Reduce Government Spending Increase Saving Buy American-Made Products Increase Productivity How can business managers help economy? Rank the ways citizens can help improve the economy in the order of their importance and explain the reasons for your rankings.