The United States Economy: Economic Terms and the Global Economy. Mr. Mattingly U.S. History

Transcription

1 The United States Economy: Economic Terms and the Global Economy Mr. Mattingly U.S. History

2 Measuring an Economy: GDP Gross Domestic Product (GDP) = total dollar value of all final goods and services produced within a country during one calendar year Final Good Example: Made in the U.S.A Sticker Does not include secondhand items (used cars) Real GDP (Baseline Prices) vs. Nominal GDP (Today s Prices) Calculating GDP: Output-Expenditure Model C + I + G + (X-M) = GDP C (Consumer Purchases) I (Investments in Capital Goods) G (Government Purchases) X (Exports) and M (Imports) USA Rank: #1 (X-M) is a negative number

3 Video Clip: Growth and GDP

4 Video Clip: Real GDP vs. Nominal GDP

5 2008 World GDP: US Rank?

6 Economic Phases: Business Cycle The Business Cycle represents changes in GDP. Four Phases of the Business Cycle: Expansion Peak (high point) Contraction Recession = two consecutive quarters of decline Depression = prolonged decline (years) Trough (low point) What is the current phase of the U.S. Economy? Fragile Economy: Expansion (Minimal) 2009: Great Recession

7 U.S. Economy: GDP Growth

8 Where are your clothes from?

9 Outsourcing and Free Trade: Reasons for Outsourcing: Low Wages / No Benefits Little Government Regulation (Factory Conditions) Endorsement of Free Trade: Tariff = tax on a foreign good Basically all but eliminated NAFTA, 1994 (North American Free Trade Agreement) WTO, 1995 (World Trade Organization) Fair Playing Field? Mixed Results: Inexpensive Goods U.S. Job Loss / Trade Deficits

10 Is Wal-Mart Good for America?

11 What is employment? Employment = the condition of having paid work Phrases: Work, Job, Career, Occupation, Profession, Trade, Craft Reasons for Employment: Paycheck (Wages / Salaries) Benefits (Healthcare and Retirement) Self-Satisfaction Biggest Impact on Employment: Education Education Creates Options

12 Visual: Education and Employment

13 Measuring Employment: Employment Classification: Individuals 16 or older who 1. work for pay or profit one or more hours 2. Worked without pay for 15 hours in a family business 3. Have jobs but did not work as result of illness, vacations or labor disputes Types of Unemployment: Frictional = move from one job to another (their choice) Structural = changes in the economy due to technology Seasonal = season to season (holidays, farming, construction) Cyclical = due to recessions or depressions (most harmful) Current U.S. Unemployment Rate: 7.9% (2013) Unemployment Rate = percentage of people who are not working Problem #1: Does not include people who give up Problem #2: What if you re underemployed?

14 ECON Hodgepodge Quiz #1: T / F 1. In terms of Gross Domestic Product (GDP), the United States ranks first in comparison to other countries. 2. A 2002 Chevy Corvette sold in the year 2010 would be calculated into both 2002 and 2010 GDP. 3. There are four phases of the business cycle that describe a country s economy. 4. A recession lasts longer than a depression. 5. Outsourcing has resulted in the production of cheaper goods, increased U.S. job loss, and lower trade deficits. 6. The United States was eager to enter the World Trade Organization (WTO) in order to increase its market size. 7. China and the United States both participate in NAFTA. 8. Overall, the U.S. imports more than it exports.

15 ECON Hodgepodge Quiz #1:? 9. What factor has the biggest impact on determining employment in the future? 10. What is a tax on a foreign good? 11. What are the two most important benefits a job can provide? The formula to calculate GDP is C + I + G + (X-M) = GDP 12. What does the C stand for? 13.What does the I stand for? 14.What does the G stand for? 15.What does the X and M stand for?

16 Movie Review: Roger and Me

17 General Motors (GM): Economics Terms Entrepreneurship: William Durant and Louis Chevrolet GM: Chevrolet, Buick, Cadillac, Oldsmobile, Pontiac, GMC High Point: Largest World Corporation : Led in Global Auto Sales (Now Toyota) 1936 Flint Sit-Down Strike: Unionization Union = organized association of workers United Auto Workers (UAW) Collective Bargaining = union negotiates for wages, benefits and conditions GM Factory Workers received great wages and benefits Inflation = increase in prices / fall in purchasing value of money Chevy Camaro: Late 60s = $3500 / Today = $30,000 Why can unexpected inflation be a major problem?

18 Where is General Motors today? 2009: Filed for Chapter 11 Bankruptcy (reorganization) Bankrupt = declare in law unable to pay outstanding debts Reorganized: Lay-Offs, Reduced Wages, Benefits and Pension Programs 2009: Auto Bailout for GM and Chrysler $80 Billion in Government Loans to avoid bankruptcy Is this the role of U.S. Government? Why would we do this? Will GM be able to pay the loan back? Result of the Auto Bailout: Tax Payer Loss of over $50 Billion and rising Research: Saved over one million auto jobs

19 Political Cartoon: Auto Bailout

20 Employment: Job Report Keynote Research and create a Job Report on three career options. (Occupational Outlook Handbook) Due Monday: 50 Points Keynote Guidelines: Title Slide (background image) + 3 Career Choices + 1 Reaction Slide Job Report Sections: Nature of Work, Training and Qualifications, Job Outlook and Salary Must have one image on each slide Use main and sub points Must have transitions Include the estimated education costs (select a school with that degree) Search Tuition Rates on a College Website

21 Job #1: Teacher Nature of Work: What does it do? Training and Qualifications: Schooling? Certifications? Job Outlook: How Fast? Salary: Average / Low / High Potential Education Cost: College: Minnesota State University Moorhead ($15,000) College: University of Sioux Falls ($25,000)

22 Planning for Retirement: Investing Goal: Long term economic security (Retirement) Are you going to work forever? Retirement Income Sources: Social Security = social insurance program Funded by a payroll tax (4.2 or 6.2%) Claim early at 62 Employee Benefits (Pension, 401Ks) Matching Contribution (Always take it) Investing = expectation of making a profit in the future Some Investment Options: Diversification = variety of investments Low Risk: Savings Account, Certificates of Deposit (CDs), Savings Bonds More Risky: Stock Market (stocks, mutual funds, ect.)

23 Video: Dave Ramsey & Retirement

24 The Game: The Stock Market Stock = shares of ownership in a company Quotes = price of a stock Bull Market = rising stock prices / Bear Market = falling stock prices Stock Terminology: Dividend = stockholder s portion of a company s profit Stock Split = divide stock price into greater shares EX: 1 share equals $50, 2 shares equal $25 Aggressiveness Based on Age: Young Age: afford to be more of a risk taker Close to Retirement Age: transfer to a secure low risk investment

25 Wealth Planning: Web Calculators Compound Interest Calculator CNN Money Calculators Student Loan Calculator 20 Minutes: Financial Intrigue and Research

26 Economic Situation: United States Current Phase: Recession and perhaps recovery? Worst financial crisis since the Great Depression Huge Factor: Subprime Mortgages and the Housing Bubble Subprime Mortgage = adjustable rate mortgage (ARM) Once rate increases people can t afford their mortgage Foreclosure = bank takes your home Surplus of Homes, Price of Homes Decreases Banks are less willing to loan money Other Major Causes of Recession: High Energy Costs - $150 barrels of oil Financial institutions don t account for risks EX: AIG, Fannie Mae and Freddie Mac

27 Rap Video: Keynesian v. Market Approach

28 How to solve the problem? Market Correct Itself or Government to Intervene? Keynesian Economics = macroeconomic theory that the gov t has to stimulate the economy Economist: John Maynard Keynes FDR s New Deal during the Great Depression Government intervention since 2008: Oct. 2008: Troubled Asset Relief Program (TARP) - $800 Billion [Bush] BAILOUTS Jan. 2009: Obama s Stimulus Plan - $825 Billion Federal Reserve Lowers Interest Rates $8,000 First-Time Home Buyers Credit $4,000 Cash for Clunkers Cost of Healthcare? Results: Government Debt / How much did it stimulate?

29 Importance of Employment: Financially Independent and Self-Provider More freedom and decision making capability Self-Esteem Generating Tax Revenue 16th Amendment (1913) = Federal Income Tax is constitutional Specifically Income Tax Leads to other taxes No Government Assistance

30 Federal Tax Brackets: Progressive Income Tax * South Dakota does not use an income tax.

31 New 2013 Tax Brackets: Fiscal Cliff Deal * South Dakota does not use an income tax.

32 U.S. Taxes: Does the rich pay their fair share?

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37 Video Clip: Is Debt Unpatriotic?

38 Major Problem: U.S. National Debt U.S. National Debt: $17+ Trillion Debt = something, typically money, that is owed or due Remember: Pay the interest on debt Interest = money paid at a regular rate for use of money lent How does the United States borrow money? U.S. Treasury Securities (Bonds) - safest investments Foreigners owe almost 1/3 of U.S. Debt Largest Foreign Holder: China How to fix the problem? Cut Spending Raise Taxes (Revenue) What basic economic problem exists in this situation? Scarcity

39 Visual Graphic: U.S. National Debt