SSEMA1 The student will illustrate the means by which economic activity is measured. a. Explain that overall levels of income, employment, and prices

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1 SSEMA1 The student will illustrate the means by which economic activity is measured. a. Explain that overall levels of income, employment, and prices are determined by the spending and production decisions of households, businesses, government, and net exports. b. Define Gross Domestic Product (GDP), economic growth, unemployment, Consumer Price Index (CPI), inflation, stagflation, and aggregate supply and aggregate demand. c. Explain how economic growth, inflation, and unemployment are calculated.

2 Essential Question How do the spending and production decisions of households, businesses, government, and net exports affect the countries economy? What is Gross Domestic Product (GDP)? How is economic growth calculated? How and why is economic activity measured?

3 Activating Strategy If you had to decide if China or the U.S. had the greatest economy, how would you decide and why? Explain your self in 5 or more sentences Is employment the most important Is it how many goods these countries make Is it the price of oil in both countries Is it the country that has the most luxury goods (cars, houses) Or does the economy of both countries change from year to year (must measure yearly)

4 Key Concepts Macroeconomics Gross Domestic Product Net Exports Trade Surplus Trade Deficit GDP per Capita Standard of Living

5 Macroeconomics Macroeconomics: the study of the economics of a nation as a whole

6 Measuring the Economy Gross Domestic Product (GDP): The dollar amount of all final goods and services produced within a country s national borders in a year. 1. Calculate GDP a. GDP= C+I+G+ (X - M) b. C = Consumption: total amount of consumer spending c. I = Investment: money put to work earning money d. G = Government: money spent by the Government for defense, welfare programs and others. e. (X - M) = Net Exports: a countries exports minus it imports

7

8 GDP

9 Net Exports can be Positive and a Negative 1. Trade surplus: exporting more than importing 2. Trade deficit: importing more than exporting

10 GDP per Capita 1. GDP per Capita: dollar amount of GDP produced on a per-person basis. 2. GDP per Capita measures the standard of living of the people in a country. 3. Standard of living: is the rough estimate of the quality of life that people in a country are able to afford.

11 GDP per Capita

12

13 Balanced Assessment GDP Activity 1 GDP Activity 2 Standard: SSEMA1a, b, & c Concepts: Macroeconomics, Gross Domestic Product, Net Exports, Trade Surplus, Trade Deficit

14 Balanced Assessment 1 GDP Smart Board Lesson Standard: SSEMA1a, b, & c Concepts: Macroeconomics, Gross Domestic Product, Net Exports, Trade Surplus, Trade Deficit

15 Summary Questions (Ticket out the Door) 1. What is GDP? 2. How do you calculate GDP? 3. What is a trade surplus? 4. What is GDP per Capita? 5. What does GDP per Capita measure?

16 SSEMA1 The student will illustrate the means by which economic activity is measured. b. Define Gross Domestic Product (GDP), economic growth, unemployment, Consumer Price Index (CPI), inflation stagflation, and aggregate supply and aggregate demand. c. Explain how economic growth, inflation, and unemployment are calculated.

17 Essential Questions What is the Consumer Price Index (CPI)? What is the difference between inflation and stagflation? How is inflation calculated? How and why is economic activity measured?

18 Activating Strategy How can you tell if your dollar is worth more or less than it was last year? Explain yourself in 5 or more sentences

19 Key Concepts Consumer Price Index (CPI) Inflation Deflation Stagflation

20 Consumer Price Index Consumer Price Index (CPI): measures monthly changes in the costs of goods and services by monitoring the prices of goods/ services that are typically purchased by consumers.

21 Consumer Price Index (market basket)

22 CPI Chart

23 1. Inflation or Deflation

24 2. Inflation or Deflation

25 3. Inflation or Deflation

26 4. Inflation or Deflation

27 5. Inflation or Deflation

28 6. Inflation or Deflation

29 Using the Consumer Price Index 1. Inflation: rise in overall prices 2. Deflation: fall in overall prices 3. Stagflation: rise in overall prices and unemployment.

30 Calculating Inflation Rate Calculation change in price level Inflation rate= beginning price level x (CPI calculator)

31 Who Benefits and Who Loses from Inflation Winners 1. Borrowers 2. People who barter Losers 1. Savers 2. Lenders 3. People who live on fixed incomes 4. People with long-term contracts

32 Balanced Assessment Inflation Smart Board Standard: SSEMA1a, b, c, e & d Concepts: Inflation

33 Summary Questions (Ticket out the Door) 1. What does the consumer price index measure? 2. What is inflation? 3. What is it when stagflation? 4. How do you calculate the inflation rate? 5. Who benefits from inflation?

34 SSEMA1 The student will illustrate the means by which economic activity is measured. b. Define Gross Domestic Product (GDP), economic growth, unemployment, Consumer Price Index (CPI), inflation, stagflation, and aggregate supply and aggregate demand. c. Explain how economic growth, inflation, and unemployment are calculated. d. Identify structural, cyclical, and frictional unemployment.

35 Essential Question How do you calculate unemployment? What is the difference between structural, cyclical, seasonal and frictional unemployment. How and why is economic activity measured?

36 Activating strategy Which of the following people would be unemployed and why? A stay at home father A homeless man not looking for a job A teacher that has been unemployed for 2 weeks, but is looking for a job A 14 year old kid looking for a job A college student who is not looking for a job

37 Key Concepts Labor Force Unemployment Frictional Unemployment Structural Unemployment Cyclical Unemployment Seasonal Unemployment Natural Rate of Unemployment Full Unemployment

38 Unemployment Labor force: employed and unemployed adults. Unemployed: a labor force participant must be willing and able to work, and must have made and effort to seek work in the past four weeks.

39 2008 Unemployment

40 Unemployment Unemployment rate: is the percentage of labor force unemployed and looking for work. Calculated:

41 Unemployment

42 Types of Unemployment Frictional: transitional unemployment due to people moving between jobs. Includes people experiencing short term unemployment.

43 Types of Unemployment Structural: the result of a skills mismatch, usually poorly educated people find themselves structurally unemployed.

44 Types of Unemployment Cyclical: results from downturns in the business

45 Types of Unemployment Seasonal: regular seasonal changes in employment

46 Other Key Terms 1. Natural rate of unemployment: about 5% in the U.S. 2. Full unemployment: not 100% unemployment, but the level of employment that corresponds with the natural rate of unemployment.

47 Unemployment Continued

48 Balanced Assessment Unemployment Standard: SSEMA1b, c & d Concepts: Unemployment After defining the four types of unemployment, students will brainstorm a list of five examples of each category. Each group would then send a representative to the board to list their respective example under the appropriate category.

49 Balanced Assessment 2 Unemployment Econoland Standard: SSEMA1b, c & d Concepts: Unemployment

50 Balanced Assessment 3 Unemployment Activity 1 Unemployment Activity 2 Standard: SSEMA1b, c & d Concepts: Unemployment After defining the four types of unemployment, students will brainstorm a list of five examples of each category. Each group would then send a representative to the board to list their respective example under the appropriate category.

51 Summary Questions (Ticket out the Door) 1. What does it mean to be unemployed? 2. How do you calculate the unemployment rate? 3. What are the 4 types of unemployment? 4. What is frictional unemployment? 5. What is structural unemployment? 6. What is cyclical unemployment?

52 SSEMA1 The student will illustrate the means by which economic activity is measured. b. Define Gross Domestic Product (GDP), economic growth, unemployment, Consumer Price Index (CPI), inflation, stagflation, and aggregate supply and aggregate demand. f. Describe the difference between the national debt and government deficits.

53 Essential Questions What is aggregate supply and aggregate demand. What is the difference between the national debt and government deficits. How and why is economic activity measured?

54 Activating Strategy What does this number represent? 16,014,170,585,314

55 Key Concepts National Debt National Deficit Aggregate Aggregate Supply Aggregate Demand Price Level Aggregate Output

56 National Debt and Government Deficits National debt: is the amount of money owed by the federal government. (multiple years) National deficits: how much money over budget the government is in a given year. (Debt Clock)

57 Aggregate Supply and Demand Aggregate: total Aggregate supply: supply of all products in an economy Aggregate demand: the demand for all products in an economy

58 Aggregate Supply and Demand Price level: overall price level of goods and services are determined by aggregate supply and demand. Aggregate output: also real GDP

59 Interpreting Aggregate Supply and Demand 1. Equilibrium: when supply equals demand, healthy and stable economy. 2. Supply greater than demand: overall surplus in goods, results in a drop in prices (deflation) 3. Demand greater than supply: overall shortage in goods, results in a rise in prices (inflation)

60 Balanced Assessment National Debt Students discuss the size of the current national debt and what this means. A class discussion covers the causes of the debt how it is financed the difference between a national debt and national deficit Students then participate in an activity presenting different perspectives on whether the national debt is a problem of major concern.

61 Summary Questions (Ticket out the Door) What is the difference between the National Debt and National Deficit? What is aggregate supply? What is aggregate demand? What happens when aggregate supply is greater than aggregate demand? What happens when aggregate demand is greater than aggregate supply?

62 SSEMA1 The student will illustrate the means by which economic activity is measured. e. Define the stages of the business cycle, as well as recession and depression.

63 Essential Question What are the stages of the business cycle? What is a recession? What is a depression? How and why is economic activity measured?

64 Activating Strategy How can economist prove that the economy is doing bad or great? Think about the following to answer your question? GDP Unemployment CPI

65 Key Concepts Business Cycle Peak Recession Trough Recovery Depression Boom

66 The Business Cycle Business cycle: the ups and downs of production.

67 Stages of the Business Cycle Stages of the Business Cycle 1. Peak: highest point before a recession 2. Recession: a decline that lasts at least 6 months 3. Trough: the lowest point at the end of a recession and before and recovery 4. Recovery: the period between the end of a recession and the next peak Other Key Terms 1. Depression: an extremely bad recession, and trough 2. Boom: an extremely fast expansion, and peak

68 The Business Cycle

69 How the Economic Measures Effect the Business Cycle Business Unemployment GDP Inflation Cycle Rate (CPI) Trough High Low Low Peak Low High High

70 Balanced Assessment Business Cycle Smart Board Standard: SSEMA1a, b, c, e & d Concepts: Business Cycle

71 Balanced Assessment 2 Measuring the Economy Quiz Standard: SSEMA1a, b, c, e & d Concepts: Macroeconomics, Gross Domestic Product, Net Exports, Trade Surplus, Trade Deficit, Business Cycle, Unemployment

72 Summary Questions (Ticket out the Door) 1. Draw a picture of the business cycle and label the trough, peak, recovery, and recession? 2. What the difference between a boom and a depression? 3. What stage of the business cycle are we in when the unemployment rate is high, GDP is low, and the inflation rate is low?

73 SSEMA2 The student will explain the role and functions of the Federal Reserve System. a. Describe the organization of the Federal Reserve System. b. Define monetary policy. c. Describe how the Federal Reserve uses the tools of monetary policy to promote price stability, full employment, and economic growth.

74 Essential Question How does monetary policy decisions affect the nation s economy? How can monetary policy through interest rates contribute to price stability, employment and economic growth?

75 Activating Strategy If you had to get money fast, would you go to the government or a bank to get a loan and why?

76 Key Concepts Monetary Policy The Federal Reserve (FED) Board of Directors Federal Open Market Committee 12 Regional Federal Reserve Banks Private U.S. Member Banks Reserve Requirement Ratio Discount Rate Open Market Operations

77 Monetary Policy Monetary policy: a tool used to help control inflation, encourage consumer spending, and motivate people to save rather than buy (controls the money supply ).

78 The Federal Reserve The Federal Reserve (FED): the central bank that is independent of any branch of government (Bank of Banks). Its purpose is to strictly control the money supply by using monetary policies.

79 Structure of the Federal Reserve 1. Board of Governors: supervises and regulates the FED Regional Federal Reserve Banks: monitors monetary policy in their district 3. Federal Open Market Committee: decides monetary policy 4. Numerous private U.S. member banks: 3,000 banks, 50,000 branches

80

81 12 Regional Federal Reserve Banks

82 Monetary Policies used by the FED 1. Reserve requirement ratio: the percentage of deposits a bank is required to hold in cash. 2. Discount rate: the interest the FED charges on loans to financial institutions. 3. Open market operations: buying and selling government securities (bonds) in financial markets.

83 The Impact of Monetary Policy on the Money Supply

84 Balanced Assessment Using a free curriculum from the Federal Reserve Bank called The Fed Today, students view a video about the structure and function of the Federal Reserve Bank, learn about the tools of monetary policy, and participate in a simulation acting as a member of the Federal Open Market Committee. The simulation has four different economic situations that the students must try to solve using monetary policy and/or the Fed Funds Rate. See resources for Fed web site. y/ (The FED Today Video) The FED Today Activity The FED Today Video Questions

85 Balanced Assessment 2 Federal Reserve Bank of Atlanta pamphlet: Structure and Functions of the Federal Reserve System This appreciation guide takes students through the pamphlet emphasizing the various functions and structures of the Federal Reserve System Dollars and Cents Reading and Questions (Website for Dollars and Cents Images)

86 Summary Questions (Ticket out the Door) 1. What is monetary policy? 2. What is the purpose of the FED? 3. What are the four structures of the FED? 4. What happens when the FED sales bonds on the open market? 5. What happens when the FED lowers the reserve requirement ration? 6. What happens when the FED raises the discount rate?

87 SSEMA3 The student will explain how the government uses fiscal policy to promote price stability, full employment, and economic growth. a. Define fiscal policy. b. Explain the government s taxing and spending decisions.

88 Essential Question How do fiscal policy decisions affect the nation s economy?

89 Activating Strategy If the Federal government bailed out Chevy and Dodge where would the Federal government get the money?

90 Key Concepts Fiscal Policy Government Spending Government Taxing Expansionary Contractionary

91 Fiscal Policy Fiscal Policy: use of government spending and revenue collection (taxes) measures to influence the economy.

92 Government Taxing and Spending Decisions Types Expansionary Contractionary Government Spending Increase Decrease Taxes Decrease Increase Goal To fight recessions To fight inflation

93 Sources of Federal Government Revenue, Fiscal Year 2003 Category Receipts (billions) Percent of GDP Total revenue $1, % Individual income taxes Social insurance taxes Estate and gift taxes Corporate income taxes Excise taxes and customs duties Miscellaneous receipts

94

95 Balanced Assessment

96 Summary Questions (Ticket out the Door) 1. What is fiscal policy? 2. What happens when government spending increases and taxing decreases? 3. What is the goal of contractionary policy? 4. What is the goal of expansionary policy? 5. What happens when government spending decreases and taxing increases?

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