Ch 14, 3-4 Economic Stability

Section 3 p. Terms: Price level 389 the relative magnitude of prices at one point in time. A starting point to find inflation.

deflation 390 a decrease in the general price level Two significant deflationary events: – Post WWI recession – The Great Depression

Creeping inflation 390 inflation in the range of 1-3 percent. – US, European Union, Japan

Galloping inflation 390 a more intense form of inflation that can go as high as 100 to 300 percent. – Latin America – Former communist nations

Hyperinflation 390 inflation in the range of 500 percent in a year and above Rare – Hungary, WWII (390) Usually the last stage of a total monetary collapse.

Section 4, p. Terms: Lorenz curve 394 model that shows how much the actual distribution of income varies from an equal distribution The income gap: 1% v. 99% Guardian UK – video video

World Distribution of Income

Poverty guidelines 396 annual dollar amounts used to evaluate the money income received: families unrelated individuals 2003, poverty line was $18,400 for a family of four Note: 2010: poverty line is $22,050 for a family of four

welfare 397 economic and social programs that provide assistance because of need. regular government assistance private agency assistance

Food stamps 397 government-issued coupons that can be redeemed for food. May be given or sold to eligible low-income persons.

Earned Income Tax Credit 398 aka “EITC” Tax credits and sometimes cash to low-income workers To partially offset the payroll tax burden on working families Still popular with qualifying families.

Enterprise zones 398 areas where companies can locate free of some local, state, and federal tax laws Other operating restrictions removed. If businesses will open in low-income areas, residents will have fewer issues with transportation. Stimulates economic growth in depressed areas.

Workfare 398 a program that requires welfare recipients to exchange some of their labor for benefits Recipients can assist – Law enforcement officials – Sanitation – Highway crews – Other community services

Negative income tax 400 would make cash payments to certain groups below the poverty line. In place of existing welfare programs Everyone would qualify Formula….. (See page 400)

Hwk Assessments, Class Work, to Know

Assessments: section 3, Checking for Understanding 1 The price level is the relative magnitude of prices at one point – It is the starting point for measuring the rate of inflation The rate of inflation is the rate of change in the level of prices

3 Change in the price level is divided by the beginning price level, then multiplied by 100

4 Demand-pull Government deficit Cost-push Wage-spiral Excessive monetary growth

5 The dollar buys less Spending habits change Speculation increases The distribution of income is altered

Assessments: Section 4, Checking for Understanding 1. Structural change in the economy as industry changes from goods production to service production; Gap between well-educated and poorly educated workers’ Declining unionism Changing structure of families

3 Incomes are ranked by families from lowest to highest Then divided into quintiles Quintile data is then plotted as a Lorenz curve

4 Education Wealth Discrimination Ability Monopoly power

5 Temporary Assistance for Needy Families (TANF) SSI Food stamps Medicaid Social service programs such as: – Child abuse prevention – Foster care – Family planning – Enterprise zones – workfare

EW Image, p. 390 Question During this period the rate started high, but dipped a year later and remained level (between 0 and 4 percent)

EW Image, p. 391 Question The dollar loses value during a period of inflation

WE Image, p. 395 Questions 1980: 43.7% 2001: 50.1% Note: The “top five percent” are part of the “highest fifth” quintile.

WE Image, p. 397 Question Greater in the 1990s

WE Image, p. 399 Question 32,000-34,999