Explain the significance of a consumer confidence survey.

Transcription

1 Lesso Descriptio I this lesso, studets are give excerpts from Frakli Delao Roosevelt s fireside chats ad categorize the excerpts accordig to ecoomic problems. After idetifyig ecoomic problems ad FDR s commets o the problems, studets simulate a fireside chat by makig a recordig for the class. After listeig to the recordigs, studets complete a simple cosumer cofidece survey cocerig their reactios to the recordig. To coclude the lesso, studets idetify ad evaluate a curret ecoomic problem ad apply the strategy of FDR to promote ad build cofidece i a proposed solutio. Cocepts Balaced budget Cosumer cofidece Moey supply (stock) Persoal icome Real Gross Domestic Product Uemploymet Uemploymet rate Objectives Studets will: Explai why improved cofidece was importat to the U.S. recovery from the Great Depressio. Aalyze the effect of direct commuicatio with U.S. citizes i restorig cofidece i the ecoomy durig the Great Depressio. Explai the sigificace of a cosumer cofidece survey. Cotet Stadards Natioal Stadards for History Era 8, Grades 9-12 Stadard 2: The New Deal addressed the Great Depressio. Natioal Stadards i Ecoomics Stadard 10: Istitutios evolve i market ecoomies to help idividuals ad groups accomplish their goals. Baks, labor uios, corporatios, legal systems ad ot-for-profit orgaizatios are examples of importat istitutios. A differet kid of istitutio, clearly defied ad eforced property rights, is essetial to a market ecoomy. Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis, 5-1

2 Bechmark 1, Grade 8: Baks ad other fiacial istitutios chael fuds from savers to borrowers ad ivestors. Stadard 19: Uemploymet imposes costs o idividuals ad atios. Bechmark 2, Grade 8: The labor force cosists of people ages 16 ad over who are employed or actively seekig work. Bechmark 1, Grade 12: The uemploymet rate is the percetage of the labor force that is willig to work, does ot curretly have a job ad is actively lookig for employmet. Stadard 20: Federal govermet budgetary policy ad the Federal Reserve System s moetary policy ifluece the overall levels of employmet, output ad prices. Bechmark 1, Grade 12: Fiscal policies are decisios by the federal govermet to chage spedig ad tax levels. These decisios are adopted to ifluece atioal levels of output, employmet ad prices. Bechmark 2, Grade 12: I the short ru, icreasig federal spedig ad/or reducig taxes ca promote more employmet ad output, but these policies also put upward pressure o the price level ad iterest rates. Decreased federal spedig ad/or icreased taxes ted to lower price levels ad iterest rates over the log term, but they reduce employmet ad output levels i the short ru. Natioal Coucil for the Social Studies Strads Time, cotiuity ad chage Power, authority ad goverace Productio, distributio ad cosumptio Sciece, techology ad society Civics, ideals ad practices Time Required 120 miutes Materials Visual 5.1 A copy of Hadout 5.1, cut apart to make 21 half-sheets ad three labels A copy of Hadouts 5.2 ad 5.4 for each studet A copy of Hadout 5.3 for each group Three tape recorders ad three blak tapes, oe for each group Maskig tape to tape labels from Hadout 5.1 o the classroom wall A copy of Hadout 5.5 for each pair of studets 5-2

3 Procedures 1. Begi the lesso by askig studets about televisio programs ad movies they have watched recetly ad about sogs they have listeed to o their MP3 players. After a few miutes, ask the class to imagie that they lived i a time before the ivetio of the televisio, MP3 players ad computers. Allow time for resposes to questios: How would your life be differet? (Aswers will vary.) What would be a likely substitute for etertaimet, such as MP3 players ad televisio? (radio, books ad ewspapers) What would be a likely substitute for receivig ews ad iformatio? (radio ad ewspapers) 2. Explai that the radio was iveted i the late 1800s, ad radio broadcastig bega o a large scale i the 1920s. The broadcast of the 1920 presidetial electio results is geerally cosidered the begiig of professioal broadcastig. The golde age of broadcastig bega aroud 1925 ad, i 1926, the Natioal Broadcastig Compay (NBC) made plas for radios to be i 26 millio America homes. Families gathered i the eveig to liste to music, comedies ad dramas. The radio ot oly supplied the major source of etertaimet, but also coected people with the world through ewscasts. 3. Explai that Frakli Delao Roosevelt (FDR) became the presidet of the Uited States i 1933 at the most severe poit of the Great Depressio. The atio was i fiacial despair. Baks were failig, at least oe-fourth of the labor force was uemployed, families were losig their homes ad may were goig hugry. 4. Explai that Roosevelt promised a New Deal to the America people. The goal of the New Deal was to restore cofidece i the U.S. ecoomy. I his iaugural address, his words of hope ad assurace rag out to the atio: Let me assert my firm belief that the oly thig we have to fear is fear itself... this Natio asks for actio, ad actio ow. We must act ad act quickly. Durig his first hudred days, FDR made chages i federal govermet spedig ad rushed a uprecedeted umber of measures through Cogress, icludig a aggressive fiscal expasio focusig o three areas: relief, recovery ad reform. 6. FDR s greatest challege was to restore cofidece i the ecoomy, ad the techology to deliver his message was available the radio was his tool to restore cofidece ad hope by direct commuicatio with the America people. FDR bega a series of eveig radio talks immediately after his iauguratio. I these fireside chats, he appealed to the people with words of ecouragemet ad explaatio. Referrig to listeers as my frieds, he explaied his strategies ad New Deal programs ad attempted to make the average citize part of his team. He became the ma of the hour. 7. Display Visual 5.1: Ma of the Hour ad ask studets to draw coclusios from the political cartoo. (For example, the America flag behid a strog face could represet strog leadership for America.) Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis, 5-3

4 8. Tape each label from Hadout 5.1: Group Work Uemploymet, Bakig Crisis ad Federal Spedig to a differet area or wall of the room. Radomly distribute from Hadout 5.1 the 21 half-sheets to idividual studets (or pairs of studets if more tha 21 studets are i the class). Explai that there are three problems addressed i the hadouts. Studets should read their half-sheets ad go to the area of the classroom where a posted label idetifies the topic that their iformatio idicates. Studets will form oe group per label, ad each complete group should iclude oe problem label (posted o the wall), oe data chart ad a umber of excerpts from the fireside chats that address the idetified problem. (Half-sheet umbers 1-7 should be grouped with Uemploymet, umbers 9-17 should be grouped with Bakig Crisis ad umbers should be grouped with Federal Spedig.) 9. After the three groups are formed, each studet should discuss ad explai the iformatio o his or her hadout to the group by idetifyig the iformatio as a data table or a excerpt from a fireside chat, by readig the excerpt aloud, or by summarizig the data ad by explaiig how the iformatio relates to the problem Distribute a copy of Hadout 5.2: Key Words ad Cocepts to each studet. Tell studets to discuss ways i which ay of the cocepts o Hadout 5.2 are relevat to their groups problems, data ad fireside chat excerpts. (For the Federal Spedig group, relevat cocepts are balaced budget, fiscal policy ad atioal debt; for the Uemploymet group, relevat cocepts are depressio, icome, moey supply, uemploymet, uemploymet rate ad Gross Domestic Product; ad for the Bakig Crisis group, the relevat cocept is moey supply.) Clarify the terms o the hadout with the followig discussio. Ecourage studets to take otes o the hadout for use later. Balaced budget meas that the federal govermet s expeditures o programs equal the amout of tax reveue collected. Presidet Roosevelt ofte addressed the fact that the govermet was spedig more tha the reveue it was collectig. Whe the govermet is spedig more tha the reveue it collects, it is operatig i a deficit. The govermet borrows moey to pay the deficit ad this adds to the govermet s debt, kow as the atioal debt. The Great Depressio was the worst i U.S. history. The ecoomy was experiecig high uemploymet, with 25 percet of the work force uemployed. Real Gross Domestic Product was decliig, which meas that the output of goods ad services was decliig. These ecoomic problems were occurrig across the Uited States ad across all sectors of the ecoomy maufacturig, bakig ad fiacial services, agriculture, ad so o. Roosevelt tempered his cocer about the atioal debt by poitig to icreased atioal icome ad by poitig to the log-term beefits the ecoomy would experiece from the govermet s ivestmet i ifrastructure (roads, bridges, dams) ad educatio (schools). Persoal icome refers to icome received by people from all sources. It icludes wages ad salaries, retal icome, profit, trasfer paymets, ad iterest icome. Real Gross Domestic Product (GDP) is the market value of all fial goods ad services produced i a ecoomy i a give year adjusted for iflatio. Real GDP ad atioal icome which are essetially equal were fallig. The moey supply (stock) is the quatity of moey available i a ecoomy. The basic moey supply i the Uited States cosists of currecy, cois ad checkig accout deposits. The bakig crisis forced baks to susped operatios, ad may baks failed. This reduced the moey supply ad the availability of credit.

5 Uemploymet refers to the umber of people 16 years of age ad older who are without jobs ad are actively seekig work. The uemploymet rate is the percetage of the labor force that is willig ad able to work, does ot have a job ad is actively seekig work. 11. Provide each group with oe copy of Hadout 5.3: Tur Your Radio O Questios, cut apart to make five questio strips. Allow each group to distribute the questios i Hadout 5.3 based o the umber of studets i the group. Have each group share its resposes with the class. What are the relevat ecoomic cocept(s)? (For the Federal Spedig group, relevat cocepts are balaced budget, fiscal policy ad atioal debt; for the Uemploymet group, relevat cocepts are depressio, icome, moey supply, uemploymet, uemploymet rate ad Gross Domestic Product; ad for the Bakig Crisis group, the relevat cocept is moey supply.) Defie ad explai. Refer to Hadout 5.2. What is the ecoomic problem, accordig to iformatio provided i the chart? (Uemploymet group: risig uemploymet rate ad decliig per capita persoal icome; Bakig Crisis group: icreased umber of bak suspesios; Federal Spedig group: decliig GDP ad icreased govermet spedig) Defie ad explai. Refer to Hadout 5.2. How did FDR explai the problem, proposed solutio ad his pla of actio to the listeers? (Aswers will vary.) How did FDR s words offer ecouragemet ad build cofidece i the ecoomy? (Aswers will vary.) How would you have felt if you had bee a listeer to this radio broadcast? (Aswers will vary.) 12. Tell the studets that each group is resposible for creatig its ow fireside chat based o these questios. Studets i each group will make audio tapes of their messages, which should last from two to three miutes. The recorded messages will be played to the class to simulate radio broadcasts. The fireside chat should idetify a ecoomic cocept or problem that existed durig the Great Depressio, defie or explai that problem/cocept to the public, ad the propose a solutio i a maer that ecourages citizes to support that pla ad builds cofidece i the ecoomy. Group members should cosider how hearig the fireside chats would have affected them as listeers. 13. Ask the studets what they thik cosumer cofidece meas. (Aswers will vary.) Explai that cosumer cofidece is related to how cosumers feel about the ecoomy ad is a idicatio of their spedig ad savig decisios. 14. Explai that the extet to which cosumers feel cofidet about the health of the ecoomy ad the future of the ecoomy may ifluece their behavior today. If people feel the ecoomy is weak ad their jobs are ot secure, they are likely to sped less ow i order to have savigs for a future layoff or job loss. Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis, 5-5

6 The Coferece Board, a idepedet ecoomic research firm, issues a mothly survey that is based o a represetative sample of 5,000 U.S. households. This Cosumer Cofidece Idex (CCI) gives a measure of cosumer optimism about curret ecoomic coditios through cosumers spedig behavior. Aother well-established idex that measures cosumer cofidece is the Uiversity of Michiga s Cosumer Setimet Idex. I cosiderig cosumer cofidece, ecoomists are seekig to uderstad ad to project how people s attitudes about the health of the ecoomy will ifluece their spedig, savig ad borrowig behaviors. 15. Provide each of the three groups with a tape recorder, a blak tape ad a separate area away from the rest of the class to prepare its broadcast. Tell each group to use the tape player to make a two- to three-miute recordig of its fireside chat. 16. Brig the class together ad explai that the class will tur the radio o by allowig each group to play its recorded fireside chat. Cautio the class to liste carefully to the recordigs ad to assume the role of a U.S. citize durig the time of the Great Depressio. 17. After all recordigs have bee heard, remid the studets that cosumer cofidece i the ecoomy is a importat cosideratio. 18. Provide each studet with Hadout 5.4: Cosumer Cofidece Survey ad explai that this modified ad simplified survey ca measure the effectiveess of the fireside-chat recordigs based o the limited iformatio provided by the groups. Istruct each studet to complete the survey by assumig the role of a U.S. citize durig the Great Depressio cosiderig the problems of the Great Depressio ad by registerig his/her reactio to the three tapes (combied). 19. Istruct each studet to tabulate the results of his/her survey by followig the istructios at the bottom of the survey sheet. Discuss with the class the level of cosumer cofidece based o the survey results. Post the followig scores o the board for your discussio: = very cofidet = somewhat cofidet = eutral (Tapes did ot affect the attitude of the listeer.) = lack of cofidece 5-6

7 Closure 20. Review the importat cotet of the lesso with the followig discussio: How did Presidet Roosevelt s fireside chats cotribute to U.S. recovery from the Great Depressio? (by icreasig citizes cofidece i the ecoomy) Why was it importat to restore citizes cofidece i the ecoomy? (It was importat to get people back ito the bakig system they had to feel cofidet that their moey was safe.) How would citizes puttig their moey back i baks affect the moey supply? (The moey supply ad the amout of credit available would icrease, which would stimulate the ecoomy. If people felt cofidet about their ability to get ad keep a job, they were more likely to sped some of their icome, which would stimulate the ecoomy.) How did techology ehace Roosevelt s ability to commuicate ad improve cosumer cofidece? (The developmet of radio ad people s access to radio gave him direct access to citizes.) What is the sigificace of a cosumer cofidece survey? (A cosumer cofidece survey provides iformatio about what cosumers thik the health of the ecoomy is/will be. How healthy cosumers thik the ecoomy is will ifluece their spedig, savig ad borrowig behaviors.) Assessmet 21. Ask studets to idetify some effective ways a politicia today might commuicate. (Aswers will vary but may iclude a iteret blog, a webcast or a televisio advertisemet.) 22. Distribute Hadout 5.5: Assessmet to each studet. Review the directios with the studets. Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis, 5-7

8 Visual 5.1: Ma of the Hour Seibel i the Richmod Times-Dispatch, March 14, 1933 Reprited with permissio. 5-8

9 Hadout 5.1: Group Work 1 First, we are givig opportuity of employmet to oe-quarter of a millio of the uemployed, especially the youg me who have depedets, to go ito the forestry ad flood prevetio work. This is a big task because it meas feedig, clothig ad carig for early twice as may me as we have i the regular army itself. I creatig this civilia coservatio corps we are killig two birds with oe stoe. We are clearly ehacig the value of our atural resources ad, secod, we are relievig a appreciable amout of actual distress. These great groups of me have etered upo their work o a purely volutary basis, o military traiig is ivolved ad we are coservig ot oly our atural resources but our huma resources. Oe of the great values to this work is the fact that it is direct ad requires the itervetio of very little machiery. May 7, We are plaig to ask the Cogress for legislatio to eable the govermet to udertake public works, thus stimulatig directly ad idirectly the employmet of may others i well-cosidered projects. May 7, 1933 Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis, 5-9

10 3 I spite of the fact that uemploymet remais a serious problem here as i every other atio, we have come to recogize the possibility ad the ecessity of certai helpful remedial measures. These measures are of two kids. The first is to make provisios iteded to relieve, to miimize ad to prevet future uemploymet; the secod is to establish the practical meas to help those who are uemployed i this preset emergecy. April 28, Therefore, let us keep our mids o two or three simple, essetial facts i coectio with this problem of uemploymet. It is true that, while busiess ad idustry are defiitely better, our relief rolls are still too large. However, for the first time i five years the relief rolls have declied istead of icreased durig the witer moths. They are still decliig. The simple fact is that may millio more people have private work today tha two years ago today or oe year ago today, ad every day that passes offers more chaces to work for those who wat to work. April 28,

11 5 I these great problems of govermet, I try ot to forget that what really couts at the bottom of it all is that the me ad wome willig to work ca have a decet job a decet job to take care of themselves ad their homes ad their childre adequately; that the farmer, the factory worker, the storekeeper, the gas statio ma, the maufacturer, the merchat big ad small the baker who takes pride i the help that he ca give to the buildig of his commuity, that all of these ca be sure of a reasoable profit ad safety for the earigs that they make, ot for today or tomorrow aloe, but as far ahead as they ca see. I ca hear your uspoke woder as to where we are headed i this troubled world. I caot expect all of the people to uderstad all of the people s problems, but it is my job to try to uderstad all of the problems. April 14, The program for social security ow pedig before the Cogress is a ecessary part of the future uemploymet policy of the govermet. While our preset ad projected expeditures for work relief are wholly withi the reasoable limits of our atioal credit resources, it is obvious that we caot cotiue to create govermetal deficits for that purpose year after year. We must begi ow to make provisio for the future. That is why our social security program is a importat part of the complete picture. It proposes, by meas of old-age pesios, to help those who have reached the age of retiremet to give up their jobs, ad thus give to the youger geeratio greater opportuities for work, ad to give to all a feelig of security as they look toward old age. April 28, 1935 Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis,

12 7 Year Uemploymet Rate Per Capita Persoal Icome % $ % $ % $ % $ % $372 SOURCES: Uemploymet data from Gordo, Robert J. Table A-1, Time Series Data for the U.S. Ecoomy: Macroecoomics, 8th ed., Addiso-Wesley, Per capita persoal icome from 8 UNEMPLOYMENT 5-12

13 9 I wat to talk for a few miutes with the people of the Uited States about bakig with the comparatively few who uderstad the mechaics of bakig but, more particularly, with the overwhelmig majority who use baks for the makig of deposits ad the drawig of checks. I wat to tell you what has bee doe i the last few days, why it was doe ad what the ext steps are goig to be. I recogize that the may proclamatios from state capitols ad from Washigto, the legislatio, the Treasury regulatios, etc., couched for the most part i bakig ad legal terms, should be explaied for the beefit of the average citize. I owe this i particular because of the fortitude ad good temper with which everybody has accepted the icoveiece ad hardships of the bakig holiday. I kow that whe you uderstad what we i Washigto have bee about, I shall cotiue to have your cooperatio as fully as I have had your sympathy ad help durig the past week. March 12, The secod step was the legislatio promptly ad patriotically passed by the Cogress cofirmig my proclamatio ad broadeig my powers, so that it became possible i view of the requiremet of time to exted the holiday ad lift the ba of that holiday gradually. This law also gave authority to develop a program of rehabilitatio of our bakig facilities. I wat to tell our citizes i every part of the atio that the atioal Cogress Republicas ad Democrats alike showed by this actio a devotio to public welfare ad a realizatio of the emergecy ad the ecessity for speed that is difficult to match i our history. March 12, 1933 Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis,

14 11 First of all, let me state the simple fact that whe you deposit moey i a bak, the bak does ot put the moey ito a safe deposit vault. It ivests your moey i may differet forms of credit bods, commercial paper, mortgages ad may other kids of loas. I other words, the bak puts your moey to work to keep the wheels of idustry ad of agriculture turig aroud. A comparatively small part of the moey you put ito the bak is kept i currecy a amout which i ormal times is wholly sufficiet to cover the cash eeds of the average citize. I other words, the total amout of all the currecy i the coutry is oly a small fractio of the total deposits i all of the baks. What, the, happeed durig the last few days of February ad the first few days of March? Because of udermied cofidece o the part of the public, there was a geeral rush by a large portio of our populatio to tur bak deposits ito currecy or gold a rush so great that the soudest baks could ot get eough currecy to meet the demad. The reaso for this was that o the spur of the momet, it was, of course, impossible to sell perfectly soud assets of a bak ad covert them ito cash, except at paic prices far below their real value. By the afteroo of March 3, scarcely a bak i the coutry was ope to do busiess. Proclamatios temporarily closig them i whole or i part had bee issued by the goverors i almost all the states. March 12, The third stage has bee the series of regulatios permittig the baks to cotiue their fuctios to take care of the distributio of food ad household ecessities ad the paymet of payrolls. This bak holiday, while resultig i may cases i great icoveiece, is affordig us the opportuity to supply the currecy ecessary to meet the situatio. No soud bak is a dollar worse off tha it was whe it closed its doors last Moday. Neither is ay bak which may tur out ot to be i a positio for immediate opeig. The ew law allows the 12 Federal Reserve baks to issue additioal currecy o good assets, ad thus the baks which reope will be able to meet every legitimate call. The ew currecy is beig set out by the Bureau of Egravig ad Pritig i large volume to every part of the coutry. As a result, we start tomorrow, Moday, with the opeig of baks i the 12 Federal Reserve bak cities those baks which o first examiatio by the Treasury have already bee foud to be all right. This will be followed o Tuesday by the resumptio of all their fuctios by baks already foud to be soud i cities where there are recogized clearig houses that meas about 250 cities of the Uited States. March 12,

15 13 O Wedesday ad succeedig days, baks i smaller places all through the coutry will resume busiess subject, of course, to the govermet s physical ability to complete its survey. It is ecessary that the reopeig of baks be exteded over a period i order to permit the baks to make applicatios for ecessary loas, to obtai currecy eeded to meet their requiremets ad to eable the govermet to make commo-sese checkups. Let me make it clear to you that if your bak does ot ope the first day, you are by o meas justified i believig that it will ot ope. A bak that opes o oe of the subsequet days is i exactly the same status as the bak that opes tomorrow. March 12, It is possible that whe the baks resume, a very few people who have ot recovered from their fear may agai begi withdrawals. Let me make it clear that the baks will take care of all eeds ad it is my belief that hoardig durig the past week has become a exceedigly ufashioable pastime. It eeds o prophet to tell you that whe the people fid that they ca get their moey that they ca get it whe they wat it for all legitimate purposes the phatom of fear will soo be laid. People will agai be glad to have their moey where it will be safely take care of ad where they ca use it coveietly at ay time. I ca assure you that it is safer to keep your moey i a reopeed bak tha uder the mattress. The success of our whole great atioal program depeds, of course, upo the cooperatio of the public o its itelliget support ad use of a reliable system. March 12, 1933 Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis,

16 15 I do ot promise you that every bak will be reopeed or that idividual losses will ot be suffered, but there will be o losses that possibly could be avoided, ad there would have bee more ad greater losses had we cotiued to drift. I ca eve promise you salvatio for some at least of the sorely pressed baks. We shall be egaged ot merely i reopeig soud baks but i the creatio of soud baks through reorgaizatio. It has bee woderful to me to catch the ote of cofidece from all over the coutry. I ca ever be sufficietly grateful to the people for the loyal support they have give me i their acceptace of the judgmet that has dictated our course, eve though all of our processes may ot have seemed clear to them. After all, there is a elemet i the readjustmet of our fiacial system more importat tha currecy, more importat tha gold, ad that is the cofidece of the people. Cofidece ad courage are the essetials of success i carryig out our pla. You people must have faith; you must ot be stampeded by rumors or guesses. Let us uite i baishig fear. We have provided the machiery to restore our fiacial system; it is up to you to support ad make it work. It is your problem o less tha it is mie. Together, we caot fail. March 12, Year Number of Bak Suspesios Source: Bak suspesios are from U.S. Bureau of the Cesus, Historical Statistics of the Uited States, U.S. Govermet Pritig Office, Washigto, D.C.,

17 17 The Govermet Bak Deposit Isurace o all accouts up to $2,500 goes ito effect o Ja. 1. We are ow egaged i seeig to it that o or before that date the bakig capital structure will be built up by the govermet, to the poit that the baks will be i soud coditio whe the isurace goes ito effect. October 22, BANKING CRISIS Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis,

18 19 Year Total GDP (i billios of dollars) Federal Spedig (i billios of dollars) 1929 $103.6 $ $91.2 $ $76.5 $ $58.7 $ $56.4 $ $66.0 $ $73.3 $ $83.8 $ $91.9 $ $86.1 $6.54 Sources: Federal Spedig from Gordo, Robert J. Table A-1, Time Series Data for the U.S. Ecoomy: Macroecoomics, 8th ed., Addiso-Wesley, GDP from U.S. Departmet of Commerce, Bureau of Ecoomic Aalysis. 20 FEDERAL SPENDING 5-18

19 21 If you thik back to the experieces of the early years of this admiistratio, you will remember the doubts ad fears expressed about the risig expeses of govermet. But to the surprise of the doubters, as we proceeded to carry o the program which icluded public works ad work relief, the coutry grew richer istead of poorer. It is worthwhile to remember that the aual atioal people s icome was $30 billio more last year, i 1937, tha it was i It is true that the atioal debt icreased $16 billio, but remember that i that icrease must be icluded several billio dollars worth of assets which evetually will reduce that debt, ad that may billio dollars of permaet public improvemets schools, roads, bridges, tuels, public buildigs, parks ad a host of other thigs meet your eye i every oe of the 3,100 couties i the Uited States. April 14, No doubt you will be told that the govermet spedig program of the past five years did ot cause the icrease i our atioal icome. They will tell you that busiess revived because of private spedig ad ivestmet. That is true i part, for the govermet spet oly a small part of the total. But that govermet spedig acted as a trigger, a trigger to set off private activity. That is why the total additio to our atioal productio ad atioal icome has bee so much greater tha the cotributio of the govermet itself. I pursuace of that thought, I said to the Cogress today: I wat to make it clear that we do ot believe that we ca get a adequate rise i atioal icome merely by ivestig, ad ledig or spedig public fuds. It is essetial i our ecoomy that private fuds must be put to work, ad all of us recogize that such fuds are etitled to a fair profit. As atioal icome rises, let us ot forget that govermet expeditures will go dow, ad govermet tax receipts will go up. April 14, 1938 Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis,

20 23 You may get all kids of impressios i regard to the total cost of this ew program, or i regard to the amout that will be added to the et atioal debt. It is a big program. Last autum, i a sicere effort to brig govermet expeditures ad govermet icome ito closer balace, the budget I worked out called for sharp decreases i govermet spedig durig the comig year. But i the light of preset coditios, coditios of today, those estimates tured out to have bee far too low. This ew program adds $2,062,000,000 to direct Treasury expeditures ad aother $950 millio to govermet loas the latter sum, because they are loas, will come back to the Treasury i the future. The et effect o the debt of the govermet is this: Betwee ow ad July 1, moths away the Treasury will have to raise less tha a billio ad a half dollars of ew moey. Such a additio to the et debt of the Uited States eed ot give cocer to ay citize, for it will retur to the people of the Uited States may times over i icreased buyig power ad, evetually, i much greater govermet tax receipts because of the icrease i the citize icome. April 14, What I said to the Cogress today i the close of my message I repeat to you ow. Let us uaimously recogize the fact that the federal debt, whether it be $25 billio or $40 billio, ca oly be paid if the atio obtais a vastly icreased citize icome. I repeat that if this citize icome ca be raised to $80 billio a year, the atioal govermet ad the overwhelmig majority of state ad local govermets will be defiitely out of the red. The higher the atioal icome goes, the faster will we be able to reduce the total of federal ad state ad local debts. Viewed from every agle, today s purchasig power the citizes icome of today is ot at this time sufficiet to drive the ecoomic system of America at higher speed. Resposibility of govermet requires us at this time to supplemet the ormal processes ad i so supplemetig them to make sure that the additio is adequate. We must start agai o a log, steady, upward iclie i atioal icome. April 14,

21 Hadout 5.2: Key Words ad Cocepts A balaced budget occurs whe govermet reveues equal expeditures. Depressio is a very severe recessio; a period of severely decliig ecoomic activity spread across the ecoomy (ot limited to particular sectors or regios) ormally visible i a declie i real GDP, real icome, employmet, idustrial productio, wholesale-retail credit ad the loss of the overall cofidece i the ecoomy. Fiscal policy refers to spedig ad taxig policies used by the federal govermet to ifluece the ecoomy. Real Gross Domestic Product (GDP) is a way to measure the total output of a ecoomy ad refers to the total market value, expressed i dollars, of all fial goods ad services produced i a ecoomy i a give year adjusted for iflatio. Natioal debt refers to the total amout of outstadig govermet securities held by the public; it ecompasses the fiacial obligatios of a atioal govermet resultig from deficit spedig, also called public debt. Persoal icome refers to icome received by people from all sources. It icludes wages ad salaries, retal icome, profit, trasfer paymets, ad iterest icome. Moey supply is the quatity of moey available i a ecoomy; the basic moey supply i the Uited States cosists of currecy, cois ad checkig accout deposits. Uemploymet rate is the percetage of the labor force that is willig ad able to work, does ot curretly have a job ad is actively lookig for employmet. Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis,

22 Hadout 5.3: Tur Your Radio O Questios Directios: Cut this page apart o the dotted lies to make five questio strips. Distribute questios to members of your group. Use iformatio from your group s cards ad from Hadout 5.2: Key Words ad Cocepts to aswer your questio. What is the ecoomic cocept? Defie ad explai. What is the ecoomic problem, accordig to iformatio provided i the chart? Defie ad explai. How did FDR explai the problem, proposed solutio ad his pla of actio to the listeers? How did FDR s words offer ecouragemet ad build cofidece i the ecoomy? How would you have felt if you had bee a listeer to this radio broadcast? 5-22

23 Hadout 5.4: Cosumer Cofidece Survey Directios: Assume the role of a America citize durig the Great Depressio. Aswer the survey questios based o the fireside chats developed by studet groups. 1. Fiacially, how do you thik you ad your family will be i a year from ow? much better somewhat better same worse 2. At the preset time, how are busiess coditios compared with a year ago? much better somewhat better same worse 3. A year from ow, what ecoomic expectatios do you have for the coutry as a whole? much better somewhat better same worse 4. Durig the ext year, what expectatios do you have for uemploymet? clearly improve improve somewhat same go dow 5. Durig the ext year or two, what expectatios do you have for your family icome? clearly improve improve somewhat same go dow 6. Durig the ext year, what expectatios do you have for your family icome compared with the past year? clearly improve improve somewhat same go dow 7. How would you rate the job that the govermet is doig i fightig uemploymet? good job fair job same poor job 8. Durig the last few moths, have you heard of ay favorable chages i the ecoomy? yes, defiitely same few absolutely ot 9. Durig the ext year, what expectatios do you have for the umber of bak reopeigs? may few same go dow 10. How do you feel about the decisios that have resulted i icreased govermet spedig? strogly agree agree same disagree Tabulate the results of your survey by assigig four poits for each questio for which you checked the first choice, three poits for the secod choice, two poits for the third choice ad oe poit for the fourth choice. Write your total score for all 10 questios i the blak below. Total: Permissio is grated to reprit or photocopy this lesso i its etirety for educatioal purposes, provided the user credits the Federal Reserve Bak of St. Louis,

24 Hadout 5.5: Assessmet With the itetio of buildig citizes cofidece, write i the space provided below a oe-paragraph blog describig a ecoomic problem or cocer that exists today ad suggest a respose (solutio) to this problem. Exchage papers with aother studet i class ad ask him/her to aswer the three questios below ad sig his/her ame at the bottom of the page. Author: Blog: Read the blog above ad aswer these questios. 1. What is the domiat ecoomic problem or cocer that your blog addressed? Defie ad explai. 2. What strategy did this blog use to offer ecouragemet ad build cofidece i the ecoomy? 3. How do you as the reader feel about the ecoomy after readig this blog? More cofidet? Neutral? Less cofidet? Siged 5-24