Bell Work:In your opinion, what are some of the

biggest problems facing the United States?

5.1

Parties and What They Do:

What is a Party?A political party is a group of people who

seek to control the government through the winning of elections and the holding of public office.

2 major parties in American politics are the Republicans and the Democrats.

What Political Parties Do?Nominate Candidates- Major function of

political parties.Informing and activating supporters-

Informs the public on issues, and encourages them to participate in public affairs.

Bonding agent function- To ensure good performance of its candidates and office holders, political parties choose people who are considered to be most qualified.

Governing- In many ways the government in the U.S. is government by party.

Those who govern are regularly chosen on the basis of their party.

Congress and state legislatures conduct much of their business based on partisanship.

Partisanship means a firm allegiance to a political party.

Acting as a watchdog-Parties act as a watchdog over the conduct of the public’s business. (very true for parties out of power)

A party that is in power controls the executive branch (means the president belongs to their political party).

A party out of power criticizes the policies and behavior or the party currently in power.

So… what party do you belong to?

Bell Work:What is a political party?List the 5 things political parties do.

5.2

The Two-Party System:

The Two-Party System:As mentioned in the previous section,

the two major political parties in the U.S. are the Republicans and Democrats.

Because of this, it is said that the U.S. has a two-party system.

In fact, in a typical election, only the Republican or the Democratic candidates have a reasonable chance of winning public office.

Why A Two-Party System? :Several factors help to explain why the U.S. has had, and continues to have a two-party system.- Historical Basis- Tradition- Electoral System-American Ideological Consensus

The Historical Basis:The two-party system is rooted in

the beginnings of the nation itself.Framers were opposed to political

parties, and made no provisions for them in the Constitution.

However, ratification of the Constitution saw the birth of America’s first two political parties.

-The Federalist and Anti-federalist

The Force of Tradition:Most Americans accept the idea of a two-party system simply because that is the way it has always been.

This type of thinking has prevented minor parties from ever gaining any real strength in the American political system.

The Electoral System:Several features of the American electoral

system tend to promote the existence of only two major parties.

- single-member districts: contest in which only one candidate is elected to each office. The candidate who receives plurality, or the largest number of votes wins.* people can vote Republican, Democrat, or waste their vote on a minor party candidate

- election law: is purposely written to discourage non-major party candidates.* In most States, it is very difficult for minor parties to get their candidate on the ballot.

- Ralph Nader only in 34 states (2004)

* Only 7 times in history have minor party candidates been on the ballot of all the States

- Republican and Democrats regularly act in a bipartisan way to shape these election laws.

The American Ideological Consensus:The U.S. is a pluralistic society,

meaning it consist of several distinct cultures and groups.

However, over time the American people have shared many of the same ideals, principles, and pattern of belief.* recall the basic concepts of democracy:

- worth of the individual- equality of all - majority rule, minority rights

The ideological consensus has also given the nation two major parties that look very much alike.- moderate (middle of the road)- built on compromise -seek the same prize (votes/election wins)- policy positions

Although similar, there are also significant differences between the parties and the people who vote for them.

Democrats and the people who vote for democrats…

Republicans and the people who vote for republicans…

Support social welfare programs.

Favor market forces in the economy

Government regulation of business practices.

Deregulation of businesses

Efforts to improve the status of minorities

Feel that the Federal Government should be less extensively involved in social welfare programs.

Multiparty Systems:Some critics say that the American two-

party system should be scrapped.They would replace it with a multiparty

system, in which several major and smaller parties exist, compete for, and win public offices.- has been used in European democracies and are now found in many other democratic societies.

Those who favor this system claim it gives voters a more meaningful choice among candidates and policy alternatives.

A negative of the multiparty system is that it can lead to an unstable government, because one party is unable to win a majority of the voters.

As a result, the power to govern must be shared by a number of parties in a coalition.

A coalition is a temporary alliance of several groups to form a working majority in order to run a government.

Historically, the Americans have shunned a multiparty system.

One-Party System:Basically amounts to a “no-party”

system.Found in dictatorshipsModified One-Party Systems:Can be found in the U.S.

-when Republicans or Democrats regularly win election in a given state.(ex:) Texas = republican

Party Membership Patterns:Membership in a political party in voluntary.Certain segments of the American

population tend to be aligned with one of the major parties.- African Americans, Catholics, Jews, lower income groups, and union members more often vote for Democrats.-White males, protestants, higher income groups, and the business community have been inclined to vote Republican.

Family plays the biggest role in how a person votes, and what political party they belong to.

Bell Work:

Chp. 5 (econ)

Fiscal and Stabilization Policies:

Measuring GDP:• Gross Domestic Product (GDP): The

total dollar value of all final goods and services produced in the nation during a single year.

• Dollar value: Total selling price of all goods and services produced.

• Final Goods/Services: means completed products.

• In the nation: American cars, produced in another country are not included.

Computing GDP:• Expenditures Approach: Estimates the

annual expenditures of four categories of final goods and services.

1. Consumer goods and services.2. Business goods and services.3. Government goods and services4. Net exports or imports of goods and

services.

Income Approach:• National Income (NI): is the total amount

of income earned by everyone in the economy.

• Sources of income Include:1. Wages and salaries2. Income of self employed3. Rental income4. Corporate profits5. Interest on saving or other investments

Real vs. Nominal GDP:Real GDP: GDP expressed minus inflation.

Nominal GDP: GDP measured with inflation.

Example: Cost in 2010 Cost in 2011

$1.50 $2.00• Same number of ice cream produced and

sold.• However, GDP in 2011 would be higher due

to inflation.

Limitations of GDP:Non-market Activities: does not account

for goods and services that people do themselves. (Caring for children, mowing the lawn, cooking dinner).

Underground Economy: Drugs, weapons, stolen cars, Prostitution

Quality of Life: Some interpret a rising GDP as a rising standard of living. (not true)

Business Cycle:Business fluctuations: The ups and downs in the

national economy.Business cycle: Irregular changes in the level of total

output measured by GDP.

Business Cycle:Ex

pans

ion

Peak

Con

tractio

n

Trough

Expa

nsio

n

Increasing employment

Rising GDP

GDP and Employment is at its highest point

Decreasing GDP and increasing unemployment

GDP is at its lowest point

Unemployment is at its highest point

Unemployment:As you saw in the business cycle, during the

contraction and trough phase, the unemployment rate is high.

Unemployment rate: the percentage of the civilian labor force that is without a job, but actively looking for work.

Full employment: When the unemployment rate is around 5%, the country is said to be at full employment.

4 Types of Unemployment:1. Cyclical

- Unemployment associated with the fluctuations (ups and downs) in the business cycle

- Directly related to recessions or depressions

- Examples: Economy is declining, people buy less __________________, so John Q who works at __________________ loses their job.

CARS

FORD

2. Structural:

- Unemployment caused by changes in the economy, such as technological advances or discoveries of natural resources.

-Ex: Auto worker losing their jobs to robotics

3. Seasonal

- Unemployment caused by changes in the seasons or weather.

- Ex: Farmers, construction workers

4. Frictional

- Temporary unemployment caused because of being fired, laid off, or a voluntary search for a new job.

- Ex: Due to budget cuts, a person laid off.

Fiscal Policy and Stabilization:Fiscal policy: refers to the federal government’s deliberate

use of taxing and spending to affect overall business activity.

John Maynard Keynes developed the theory of fiscal policy during the Great Depression.

- He believed that the self regulating nature of supply and demand would occur too slowly in a period of economic recession.

- Instead, Keynes suggested that the government should intervene.

To understand the Keynesian theory (Fiscal Policy), you must first examine the circular flow of income.

Federal Governm

ent

Firms

Banks

Consumers

Taxe

s Taxes

Savi

ngsLoans

Gov’t

Spen

ding Gov’t Spending

Leakage and Injection:You will note that in this chart, there are both inputs and

outputs coming from the federal government. Money being removed from the circular flow is known as

a leakage. Money being put into the flow is known as an injection.

EXAMPLES:

1. Government caused leakage:

- Charging a higher rate of taxes on the citizen

 

2. Government caused injection

- Lowering Taxes on a business

- Buying supplies from manufacturers for war

- Starting government programs to create jobs.

Fiscal Policy and Unemployment

Democrats: suggest starting job programs (injection) to reduce unemployment and stimulate the economy.

Republicans: argue that tax cuts, usually to the wealthy, lead to more work, saving, and investment. (injection)

-This is called the supply-side effect and was used by George Bush in 2003 as way to stimulate the economy.

-(also known as trickle down economics)

Bell Work:What is the difference between leakage

and injection?

5.4

Minor Parties:

Minor Parties: 

Minor Parties: A party within a two-party system

that is less widely supported than the two major parties.

Types of Minor Parties:1. Ideological Party

A party based on a set of beliefs on how social, economic, and political matters should be implemented.

(Examples:) Socialist, Communist, and Libertarian Parties

2. Single-Issue PartiesA party based on a single public policy matterTheir names usually indicate their primary

concern. Most of these parties die off after a period of

time.

(Examples:) Free Soil, Know Nothings, Right-to-Life, and most recently the Green Party.

3. Economic Reform Parties A party that focuses primarily on the

reorganization of the economic system.

These parties proclaim their disgust with the two major parties, and demand better times.

Usually focus their anger on things like the monetary system, or foreign imports.

These types of parties usually appear and disappear based on the changes in the business cycle.

(Examples:) Greenback Party, Populist Party.

4. Splinter Parties  A party that breaks away from one of the

major parties.(Example:) Progressive Party (“Bull-Moose Party”)

 Most splinter parties form around a very

strong personality(T.R. & Bull-Moose Party.)

They tend to be the most successful of the minor parties, but usually dissolve quickly.

Key Roles of Minor PartiesMinor parties have 2 key roles in the American

political system. 1. Spoiler RoleMost “3rd parties” or minor parties realize

that they don’t really have a chance to win.The minor party tries to “steal” votes away

from one of the major parties that they do not want to win.

(Example:) Election of 1912- T.R. & Bull-Moose Party.

Teddy RooseveltWoodrow Wilson

William H. Taft

2. Critic and Innovator Role Minor parties will take a strong stance on

an issue, or create new issues not in the public sector.

This strong position will bring attention to the issue at hand.

It is not unusual for a major party to adopt a stance from a minor party.

* If this happens, the minor party will usually dissolve.

Bell Work: 12.5.11Turn to pg. 140 and define the following

terms.1. Ward-2. Precinct-

Chapter 5 (econ)

Inflation, Fiscal Policy, and Monetarism:

Inflation:Just as unemployment can disrupt the business cycle,

inflation can have an adverse effect on the economy as well.

INFLATION = A general rise in the cost of good or services 

  * Most economists state that a normal rate of inflation

is 3% per year.

• If a person’s pay does not keep up with inflation, their standard of living can be affected.

EXAMPLE: John Q. receives a pay raise of 5%. The inflation rate in the US economy is 8%. John Q. now pays the 8% inflation rate, but only receives a 5% raise to compensate for it. John Q. is now losing 3% more income than he did the previous year.

Inflation hurts people on fixed incomes the most.

- Fixed income = Making the same amount of money every year

- Examples: Employees who get no raise, people on Social Security, etc…

 How Inflation hurts them: John Q (who lives on Social

Security) paid $2.00 for a gallon of milk this year. Next year, because of inflation, the price of milk goes up to $2.50 per gallon. John Q’s pay stayed the same. He can no longer afford to buy __________ because of the price increase.

Theories on Inflation:There are 2 theories on the cause of inflation

1. Demand-Pull

- Theory that prices rise as the result of excessive demand. Demand increases faster than supply, and shortages lead to higher prices.

- Can be caused by having too much money in the system. (Done by the Federal Reserve)

2. Cost-Push- Theory that the push for higher wages by employees causes business to raise prices to maintain a profit.

Federal Governm

ent

Consumers

Banks

Businesses

Taxe

s Taxes

Savi

ngsLoans

Gov’t

Spen

ding Gov’t Spending

The Theory of Monetarism:Monetarism: is the theory that deals with

the relationship between the amount of money the Federal Reserve places in circulation and the level of activity in the national economy.

Monetarism is often linked to Milton Friedman, who is a early and leading supporter.

People who follow this theory are called monetarists.

Government Policy According to Monetarists:Monetarists believe that the economy is so

complex and so poorly understood that the government actually does more harm than good.

As a result, monetarists usually oppose using fiscal policy to stimulate or slow the economy.

Also against the government operating on budget deficits.

A Monetarists View:Other criticism of fiscal policy:1. Too many people involved, too little

accountability.2. Time lags, or the long time it takes for

policies to take effect.

On the Federal Reserve: Stop trying to smooth the ups and downs in the economy.- Instead, they believe that the Fed. should follow monetary rule, or allowing the money supply to grow at a smooth and stead rate per year.- This would result in controlled expansion, which would provide businesses and consumers with more certainty about the future.