1. Coping with Economic Challenges
Miss Smith
7th Grade Civics
*pgs

2. 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

3. 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

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

5. 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?

6. 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.

7. 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.