1. "Everything is different
"Everything is different." We heard those words often in the hours and days after Sept. 11, 2001, and in at least one respect they have proven more true than any of us would have liked. Economically, the U.S. feels much less secure than it did in the months and years before the attacks. We've experienced two recessions, including the deepest one since the Great Depression, and seem to be flirting with a third. About 5 million manufacturing jobs have disappeared since 2001, and unemployment is stuck at almost twice what it was before the terrorist attacks. U.S. households remain deeply in debt, and plunging home values have withered or wiped out the net worth of America's middle class. In the 10 years before 9/11, the Dow Jones averaged an annual return of almost 17 percent. In the 10 years since, that average annual return has been under 6 percent. Meanwhile, the U.S. government itself owes three times more than it did in America's credit rating has been cut because lawmakers have been unwilling or unable to address the fact that two cherished government safety nets, Medicare and Social Security, now consume almost half of all federal spending and, absent reform, threaten to bankrupt us in the future. Some of these trends, such as soaring medical costs, existed prior to 9/11. Some, such as the exporting of U.S. manufacturing jobs, were made worse by the economic conditions created by the attacks themselves. Others were the direct or indirect consequences of spending and policy decisions made in response to those attacks. Contrary to what most of us probably remember, the attacks did not plunge the U.S. economy into recession. Unemployment, which had spent more than half of 2000 at or below 4 percent, was already beginning to rise when President George W. Bush was sworn into office in January In March of that year (though it wouldn't be declared until many months later), the U.S. officially entered a recession that would last a relatively brief eight months. But things sure felt worse. It would be four years before the unemployment rate returned to the pre-9/11 level, and for the airline industry, things were never the same. Six North American carriers went bankrupt in the four years after 9/11, including Northwest Airlines. In the last decade, the industry has shed nearly 25 percent of its workforce, or 135,000 high-paying jobs. The stock market and consumer confidence plunged in the days following 9/11, and policymakers responded with measures that would have unforeseen long-term consequences. The Federal Reserve, which had been raising interest rates throughout 2000, began trimming them in the wake of the dot-com job losses. After 9/11, the Fed lowered interest rates four times before year end, to 1.75 percent. By 2003 rates were at a 50-year low of 1 percent. The financial industry responded with an array of increasingly exotic financial products marketed to Main Street and bundled and re-sold across the world. Lulled by the inflated values of our homes and the easy availability of credit, Americans took on record levels of debt. We literally mortgaged our futures. We know how that ended, and the consequences have proven to be a much bigger drag on the economy than the dot-com meltdown of Adjusted for inflation, the median sale price for a new home is unchanged from a decade ago. More than a quarter of all American homeowners owe more than the property is worth, making it harder for them to refinance, and are more interested in saving than spending. And weak consumer demand for their products is the main reason companies are reluctant to make new hires. Finally, there was the cost of fighting the war on terror itself. A Congressional Research Service report puts the direct price tag of military interventions in Afghanistan and Iraq at $1.3 trillion during the last decade. Breathtaking though this total may be, it does not include domestic appropriations for other national, regional and local security initiatives, such as Homeland Security, which some have estimated at an additional $2 trillion or more. That's a lot of money, much of which we borrowed. In a way, we didn't have a choice. President Bush, trying to stave off a recession, cut taxes once in March 2001, and again in May of Those tax cuts cost the U.S. Treasury an estimated $1.3 trillion in lost revenue over 10 years (Those tax breaks were recently extended by President Obama). After 9/11, the federal government's annual budget surpluses became deficits, and the total federal debt outstanding almost doubled, to $10 trillion by Today it's almost $15 trillion. War is always expensive, and the decision to wage one is driven by political and security considerations. But wars have economic consequences, too, and the cost of 9/11 may be with us for years to come. •

2. Introductory Econ Ideas
Fundamental issue is Scarcity
Something must always be given up

3. Economics: Study of limited resources trying to satisfy unlimited wants
People always want more
Pig Principle

4. 3 Big Questions all economies must answer:
What to produce?
How to produce it?
For whom is it being produced?

5. Answer/Discuss
What are the potential problems that will be seen if these trends continue?
Are there similar problems (throughout the world) dealing with limited natural resources? Man-made products?
What is being done to solve these issues? What should/can be done?

6. Allocation of Resources
Econ is not about eliminating scarcity, it’s about dealing with it.

7. Allocate (defined) To set apart for a special purpose; designate.
To distribute according to a plan; allot.

8. Allocation Systems Random Personal Characteristics Performance Based
1st come, 1st served
Fiat
Voting
Willing and Able

9. Random Draw
Lottery
Ex. Drawing for shelter beds, Vietnam Draft, Powerball
FYI: Your odds of winning the Powerball are 1 in 146,107,962

10. Personal Characteristic
Age, weight, ancestry, alphabetical by name
Ex. Soc. Sec. benefits, hearts, choosing you fantasy football team
FYI: There are only 450 total roster spots in the NBA

11. Performance Based By score, race results, Qty. of sales, # of push-ups
Ex. Grades, Promotions, awards

12. First Come First Served
Whoever’s there first
Ex. Stop signs, many goods in the former USSR, most legal immigration to the US

13. Fiat By choice of the those that own the resource
Ex. Most of what parents give to children, a country’s dictator, teacher

14. Voting
Majority rule
Many government decisions, Prom royalty

15. Willingness and Ability to Pay
The amount of cash, goods, or services you are willing to sacrifice
Ex. Most everything in the market economy

16. Other
Combination of others

17. Importance of allocating scarce resources
Scarcity of
Productive Resources
a.k.a. Factors of Production
Produce
Goods and Services
Satisfy society’s wants
-Human, Capital, Natural, and Entrepreneur

18. Human
AKA - Labor
People with their mental and physical abilities

19. Capital
Items that aid production
Ex. Tools, machines, factories

20. Natural Resources AKA - Gifts of Nature
Anything we canNOT make ourselves

21. Entrepreneur The coordinator, the risk-taker Ex.
*This is a very important part of our free-market economy

22. In your small groups, pick an item (good) and discuss the 4 Factors of Production that go into it.

23. Homework
You are to pick an item and describe/show the productive resources that go into this item.
Do this by putting an image of your good into the middle of a piece of blank paper with a label.
Then in each corner place in image of some of the resources that go into this good (for example one corner will have a drawing of workers with a written description of the workers and the impact on this good).