1. REVIEW- The Federal Reserve System http://www.havefunwithhistory.com/movies/fedReserve.html In your warm-up section, as we watch the video, List 3 important themes about the Federal Reserve System. We will discuss after viewing.

2. Part 1- Government Finances Part 2- An Interdependent World

3. GOVERNMENT FINANCES Part 1

4. Government Finances Each year the President and Congress work together to create a budget; the President writes the budget and then congress approves the budget

5. Government Finances Types of Spending Mandatory spending- spending that does not need the annual approval of Congress ◦ Examples- Social Security benefit checks and interest payments on government debt Discretionary spending- government expenditures that must be approved each year ◦ Examples- Money spent on defense and highway construction

6. Government Finances Appropriations Bills- laws that approve spending for a particular activity Appropriations Bills always start in the House of Representatives

7. Parts of the US Budget Revenues- money taken in by the government ◦ Taken in by- income taxes (16 th Amendment), payroll taxes, excise taxes, estate taxes, & other fees Expenditures- money spent by the government

8. Types of Taxes Progressive tax- the higher one’s income the higher the percentage of tax (income tax) Regressive tax- tax imposed at a flat rate (sales tax) Excise- tax on manufacture, sale, and consumption of goods; often called “hidden tax” (tax on fuel, alcohol, tobacco) Proportional tax- tax that takes the same percentage of income regardless of how much is earned

9. Local Government Finances State and local government receive revenue from- Sales tax State income taxes Property taxes Fines and fees Utilities What are 3 expenditures at the local level?

10. AN INTERDEPENDENT WORLD Part 2

11. Global Interdependence Global Interdependence means that people and nations all over the world depend on one another for goods and services Nations compete and cooperate to make trade beneficial for everyone

12. Why do countries trade? International trade allows nations to produce a limited number of goods based on their resources while consuming a variety of goods Comparative Advantage is ability to produce a product most efficiently given all the other products it could produce The Law of Comparative Advantage states a nation is better off producing goods and services for which it has a comparative advantage

13. Export- a good sent to another country Import- a good brought in from another country Trade Balance- the relationship between a nation’s imports and its exports Trade surplus- nation exports more than it imports Trade deficit- nation imports more than it exports Tariff- a tax on imported good Embargo- complete barrier of trade with a country; NO trade (Cuba)

14. The US and Trade The US imports more than 2/3 of the oil it uses (this number is growing) The Us imports many minerals used in industries The US sells computers, aircraft, medical equipment, and machinery around the world Poor countries look to the US for food, medicine and weapons

15. Economic Development Around the World Historically, economists divided the world’s nations into 3 categories- 1 st World Countries- the Wealthiest countries 2 nd World Countries- Communist countries 3 rd World Countries- the poorest countries

16. Economic Development Around the World Now, economists just use 2 categories- Developed Countries- the wealthiest countries (US, Canada, Japan) Less Developed Countries or Developing Countries- poorer countries (this includes the poorest countries in the world, and countries that haven’t reached a high standard of living for most citizens)