EPF 5 - knowledge of a nation’s economic goals

OBJECTIVE Be able to describe the official measures of an economy’s health or, in other words, “How do we know if the economy is doing well?”

MEASURES OF AN ECONOMY’S HEALTH Seed Questions How is our economy doing? How do you know?

WHY IS IT IMPORTANT?

BECAUSE “Its the economy!” The state of the economy is a major factor in how people vote for public officials

Seed Question Economic Goals What should our economic goals be for this country??? (Identify at least three)

Economic Goals Usually a country’s economics goals revolve around three issues? Inflation Employment Productivity

Economic Goals 1. Low Inflation 2. Full Employment 1 - 5% is ideal 10% + is painful Deflation is bad also 2. Full Employment 96% is full All 16+ yrs. old & able to work

Economic Goals 3. Productivity to Increase Found by dividing input (of resources) by output ($ value)

Economic Goals But how do we know when we’ve reached our economic goals?

Economic Goals But how do we know when we’ve reached our economic goals? We Look at our Economy’s Measuring Devices

Economic Goals But how do we know when we’ve reached our economic goals? We Look at our Economy’s Measuring Devices What are they?

Economic Measuring Devices GNP (GNDP) Total value of a nation’s products & services in a year:

Economic Measuring Devices Standard of Living: Measure of the value of goods & services people have: Divide GNP by population For example, one year, GNP was $4,235,000,000,000 & the population was 240 million. Therefore, the Standard of living was $17,646

Economic Measuring Devices Consumer Price Index Measures the average price of 400 different normal household products Also called the “Cost of Living Index”

Economic Measuring Devices Unemployment Figures % of workforce out unemployed

Economic Measuring Devices Unemployment Figures % of workforce out unemployed But it’s not that simple We have to look at the types of unemployment

Economic Measuring Devices Structural Unemployment: Unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand. Employees need to be retrained But it’s not that simple We have to look at the types of unemployment

Economic Measuring Devices Cyclical Unemployment: Occurs within the business cycle. During prosperity, cyclical unemployment will be low, during depressions, high. Calls for an effort to recover the economy. But it’s not that simple We have to look at the types of unemployment

Economic Measuring Devices Frictional Unemployment: Exists in any economy due to people being in the process of moving from one job to another. Can be positive & might be as high as 4% of unemployment But it’s not that simple We have to look at the types of unemployment

Economic Measuring Devices Uncounted Unemployment: These are people who have stopped trying to find work because they’ve lost hope of finding work. They need to be inspired and encouraged to believe that better times can be had. But it’s not that simple We have to look at the types of unemployment

OBJECTIVE Be able to describe the “Economic Cycle” and what factors influence its fluctuations

The Economic Cycle Prosperity Recession Recovery GNP Depression TIME

The Economic Cycle Make a Large Chart Inflation Employment Productivity The Economic Cycle

Prosperity Lowest Unemployment Maximum Output Highest Consumer Spending Possible Inflation High Confidence

Recession General Slowdown in the Economy Unemployment Rising Fewer Good/Services Being Produced Spending Slows Down Confidence is Waning (Going Down)

Depression Prolonged Recession Lowest Amount of Spending Highest Unemployment Production is at its Lowest Tax Collection is Down Possible Deflation Feelings of Hopelessness Poverty Occurs

Recovery Economy Picks Up Unemployment Decreases Production Increases Spending Increases Confidence Recovers

The Economic Cycle What would you do if you were a ________ during a ________ business cycle?

The Economic Cycle Business What will you do??? Consumer Government MAKE ANOTHER LARGE CHART Business Consumer Government The Economic Cycle What will you do???

Prosperity Business:

Prosperity Business: Invests/Expands Hires More People Pays More in Taxes Maintains Max. Inventories Reaps Profits Keeps Prices High

Prosperity Consumers: The Government

Prosperity Consumers: The Government Work Spend, Spend, Spend Save Some The Government Collects Taxes Keeps Interest Rates High

Recession Business:

Recession Business: Starts to slow down production Reduces stock Cuts back on investments & expansion Lays off staff

Recession Consumers: The Government

Recession Consumers: The Government Spend less & save more Protect their jobs more The Government Encourages investment by lowering interest rates Might spend more to stimulate the economy

Depression Business

Depression Has massive layoffs or lowers salaries Stops spending Business Has massive layoffs or lowers salaries Stops spending Eliminates stock (sales) spends their savings Cuts back on quality Lowers prices

Depression Consumers:

Depression Stop Spending Spend Their Savings Convert Wealth to Dollars Consumers: Stop Spending Spend Their Savings Convert Wealth to Dollars Loiter Open Their Own Businesses

Depression The Government:

Depression Lowers interest rates more Offers job programs The Government: Lowers interest rates more Offers job programs Spends more on welfare services Spends more to stimulate the economy (?) Cheerleads

Recovery Business:

Recovery Business: Does the opposite of a recession: Hires Spends more Invests Produces Risks more

Recovery Consumers: The Government:

Recovery Consumers: The Government: Spend more Save less Collects more tax money Raises interest rates Spends more (?)

The Economic Cycle GNP TIME

Complete the “Up or Down” Exercise ASSIGNMENT # 1 Economic Cycle Complete the “Up or Down” Exercise

ASSIGNMENT # 2 Economic Cycle With a partner or two, discuss what stage in the economic cycle our country is currently experiencing? Each individual in the group needs to find an article supporting your position on the stage of the economic cycle you believe we’re experiencing and summarize it. From your charts, identify three or more steps you believe the government, businesses, and consumers should each be taking at this point in time? You can include your own opinions

OBJECTIVE Be able to describe the actions a government can do to mitigate the impacts of bad economic times

OBJECTIVE Be able to describe the actions a government can do to mitigate the impacts of bad economic times Investment Tax Credits Job Training Programs Fiscal Policy Monetary Policy Unemployment Insurance “Pure” Research

Be able to describe the actions a government can do to mitigate the impacts of bad economic times Investment Tax Credits - An amount that businesses are allowed to deduct from their taxes reflecting an amount they reinvest in themselves.  Investment tax credits are structured to reward and encourage economic growth

Be able to describe the actions a government can do to mitigate the impacts of bad economic times Job Training Programs - Training programs and other services that are available to assist workers who have been laid off or are about to be laid off. Services are designed to meet local needs and may vary from state to state.

Be able to describe the actions a government can do to mitigate the impacts of bad economic times Unemployment Insurance - A small source of income for workers who have lost their jobs through no fault of their own. Workers who quit or who are self-employed are generally not eligible

“Pure” Government Research - Be able to describe the actions a government can do to mitigate the impacts of bad economic times “Pure” Government Research - A term covering funding for research in the areas of science, technology and social sciences. The funding is obtained through a competitive process in which only the most promising receive an award. Such processes, which are run by government, corporations or foundations, allocate scarce funds

Be able to describe the actions a government can do to mitigate the impacts of bad economic times Fiscal Policy - The means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy

Be able to describe the actions a government can do to mitigate the impacts of bad economic times Fiscal Policy - The means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy For example, increasing federal spending might stimulate job creation or reducing taxes might give people more money to spend thus stimulating the economy

Be able to describe the actions a government can do to mitigate the impacts of bad economic times Fiscal Policy - The means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy For example, increasing federal spending might stimulate job creation or reducing taxes might give people more money to spend thus stimulating the economy Or Does it?

Be able to describe the actions a government can do to mitigate the impacts of bad economic times Monetary Policy - The management of money supply and interest rates. It’s used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity

Be able to describe the actions a government can do to mitigate the impacts of bad economic times Monetary Policy - The management of money supply and interest rates. It’s used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity For example, what does increasing the money supply of the country do for the economy? OR What does decreasing the interest rates charged banks do for the economy?

Be able to describe the actions a government can do to mitigate the impacts of bad economic times Monetary Policy - The management of money supply and interest rates. It’s used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity For example, what does increasing the money supply of the country do for the economy? OR What does decreasing the interest rates charged banks do for the economy?

Be able to describe the actions a government can do to mitigate the impacts of bad economic times Fiscal Policy- https://www.youtube.com/watch?v=otmgFQHbaDo Monetary Policy – https://www.youtube.com/watch?v=1dq7mMort9o DEBATE - https://www.youtube.com/watch?v=_tULRch1PRQ

EXERCISE Be able to describe the actions a government can do to mitigate the impacts of bad economic times Investment Tax Credits Job Training Programs Fiscal Policy Monetary Policy Unemployment Insurance “Pure” Research EXERCISE Research the history and content of these government programs and present your findings.

EPF 5 - knowledge of a nation’s economic goals COMPLETE THE EPF 5 QUIZLET