Economics ESOL Study Guide

Unit 4: Macroeconomics

Chapters 9, 10, 13, 14

Test wk of 10/30 (can always change)

Economics Standards covered in this unit:

Macroeconomic Concepts

SSEMA1 The student will illustrate the means by which economic activity is measured.

By the end of this unit, you should be able to:

Explain that overall levels of income, employment, and prices are determined by the spending and

production decisions of households, businesses, government, and net exports.

Define Gross Domestic Product (GDP), economic growth, unemployment, Consumer Price Index

(CPI), inflation, stagflation, and aggregate supply and aggregate demand.

Explain how economic growth, inflation, and unemployment are calculated.

Identify structural, cyclical, and frictional unemployment.

Define the stages of the business cycle; include peak, contraction, trough, recovery, expansion, as

well as recession and depression.

Describe the difference between the national debt and government deficits.

Unit 4: Macroeconomics

Key Terms

Chapters 9, 10, 13, 14

Image Definition What that means

Aggregate demand

The total quantity of goods and services demanded at

different price levels

Total demand for a country

Aggregate supply

The total value of goods and services that all firms would produce in a specific period

of time at various price levels

Total supply for a country

Business cycle

Systematic changes in real GDP marked by alternating

periods of expansion and contraction

The up and down of business

Capital

expenditures

Funds used by a company to acquire or upgrade physical

assets such as property, industrial buildings or

equipment

Money spent to improve the business

Commodity

a raw material or primary agricultural product that can be bought and sold, such as

copper or coffee

Something that can be traded

Consumer price

index

Index used to measure price changes for a market basket of

frequently used consumer items

Looking at how much something used to cost

compared to today

Creeping inflation

Relatively low rate of inflation, usually 1 to 3

percent annually

Expected rate of inflation

Current GDP Gross Domestic Product

measured in current prices, unadjusted for inflation

GDP without inflation

Cyclical

unemployment

Unemployment directly related to swings in the

business cycle

When demand is low and workers are not

needed

Deflation

Decrease in the general level of the prices of goods and services

Prices drop

Depreciation

Gradual wear on capital goods during production

Cost of something goes down over time

Depression

State of the economy with large numbers of

unemployed, declining real incomes, overcapacity in

manufacturing plants, general economic hardship

Extremely low economic growth

Estate tax

Tax on the transfer of property when a person dies

Tax paid when property is transferred

(after death)

Excise tax

General revenue tax levied on the manufacture or sale of

selected items

Tax on specific things (just paper, etc) – usually things not

needed

Expansion

Period of growth of real GDP; recovery from

recession Economy grows

External shock

An event that produces a significant change within an economy, despite occurring

outside of it

Unpredictable change in economy

War, natural disaster

FICA

Federal Insurance Contributions Act; tax levied on employers and employees

to support Social Security and Medicare

Taxes that pay Social Security &

Medicare

Flat tax

Proportional tax on individual income after a

specified threshold has been reached

Limit to how much income tax that people

have to pay

Benefits the wealthiest tier

Frictional

unemployment

Unemployment caused by workers changing jobs or waiting to go to new ones

When people are in between jobs

Full employment

A situation in which all available labor resources are

being used in the most economically efficient way.

all of the workers are employed

Galloping inflation

Relatively intense inflation, usually ranging from 100 to

300% annually Period of high inflation

Gross Domestic

Product (GDP)

The most complete measure of total output

How much money a country makes

Hyperinflation

Extremely rapid or out of control inflation

Almost slang – inflation out of control

Implicit GDP

price deflator

Index used to measure price changes in Gross Domestic

Product

How GDP changes are measured

Inflation

Rise in the general level of prices

Prices go up

Innovation

knowledge, technology, entrepreneurship, and innovation are

positioned at the center of the model rather than seen

as independent forces

Innovation (making new things) at center of economic

model – not side factor

Luxury tax

Tax on good that has low supply and high demand

Tax on luxury items (expensive cars,

jewelry)

Mandatory

spending

Federal spending authorized by law that continues

without the need for annual approvals of Congress

Govt spending that doesn’t need approval

every year

Soc Sec, vet benefits

Marginal tax rate

Tax rate that applies to the next dollar of taxable income

Tax rate increases when income increases

The more you make,

the more taxes you pay

Medicare

Federal health-care program for senior citizens, regardless

of income Health care for elderly

Monetary factors

A cause of the business cycle that depends on

ease/availability of loans Available loan $$

Peak

Point in time when real GDP stops expanding and begins

to decline

Highest point of business cycle

Per capital

spending

Govt spending per person; total divided by population

How much the govt spends on the average

person

Can also be ‘per capita output’

– how much a person produces for the

country’, etc

Price index

Tracks price changes over time and can be used to remove the

distortions of inflation from other statistics

Method of tracking prices

Private sector

That part of the economy made up of private

individuals and businesses Private businesses

Producer price

index

Index used to measure prices received by domestic

producers; formerly called the wholesale

price index

Like consumer price index,

but only measures domestic products (stuff made in US),

and not services

Progressive taxes

A tax that imposes a higher percentage rate of taxation

on persons with higher incomes

Tax rate goes up as income goes up

Proportional taxes

Tax in which percentage of income paid in tax is the

same regardless of the level of income

Tax rate stays the same, regardless of

income

Public sector

That part of the economy made up of the local, state,

and federal govts Govt businesses

Real GDP

Constant dollar GDP How much a country

made without inflation

Real GDP per

capita

How long-term economic growth is measured

Long-term growth

Recession

Decline in real GDP lasting at least two quarters or more

When economic growth is going down

Regressive tax

Tax where percentage of income paid in tax goes

down as income rises

Tax rate goes down as income goes up

Seasonal

unemployment

Unemployment caused by annual changes in the

weather or other conditions that prevail at certain times

of the year

Some workers have less work

during certain seasons (construction, etc)

Sectors of macro

economy (4)

Consumer, investment, government, foreign sectors

GDP = C + I + G + F

Parts of the economy that control how much money a country makes

Economics: ESOL Study Guide

Unit 4: Macroeconomics

Chapters 9,10,13,14

Test 10/29 (may change)

Background Reading Read this before we begin the unit. This is from the EOCT Study Guide. This is all

the major concepts we will discuss in this unit.

Macroeconomics

If you look through the pages of a business newspaper you will see two major types of articles. One set of

articles discusses how individual firms are making profits, losing money, or making various economic

decisions. These articles deal with microeconomic issues. The second set of articles takes a larger view of

Structural

unemployment

Unemployment caused by a fundamental change in the economy that reduces the demand for some workers

When workers lose jobs because they

are not needed (skills outdated,

products no longer needed)

Technological

unemployment

Unemployment caused by technological development or automation that make

some workers’ skills obsolete

When workers are replaced by

machines/computers

Trough

Point in time when real GDP stops declining and begins to

expand

When GDP stops declining

Unemployment

rate

Ratio of unemployed individuals divided by total number of persons in the

civilian labor force, expressed as a percentage

People out of work divided by

number of able workers

Welfare

Government or private agency programs that

provide general economic and social assistance to

needy individuals

Govt agency that gives $$ to people in need

the economy and includes issues such as overall economic growth, unemployment rate, inflation, and government policies. These articles cover macroeconomic issues.

As mentioned briefly in the last section, macroeconomics means “large economics” and indeed covers

large-scale economic issues. While a single company has employees, a nation has a national employment

rate. While a single firm produces a set of goods or services, a nation has a Gross Domestic Product

(GDP), which is the sum of all goods and services produced. As you can see from these two examples,

microeconomics and macroeconomics are similar. Both are concerned with employment, goods and

services, pricing, and other basic economic topics. The difference between microeconomics and

macroeconomics is the scope of their analysis of economic behavior. While microeconomics covers

single firms and their relation to particular markets, macroeconomics sums all these individual markets together to discuss the economic health of a nation.

Key economic indicators

When you go for a checkup, the doctor looks at several indicators—heart rate, blood pressure, and body

temperature—to help determine your basic level of health. The general economic health of a nation can

also be judged by looking at several basic economic indicators, which include the Gross Domestic

Product, the Consumer Price Index (CPI), aggregate supply and demand, and the unemployment rate. A

quick glance at these factors can often tell you how an economy is doing. As stated earlier, the GDP is the market value of all goods and services produced by a country over a specific period of time, usually a year.

There are different methods of measuring GDP, but the most common is known as the expenditures

approach. This approach adds up all the money spent by a country’s consumers, firms, and the

government, and then factors in net exports. The formula for GDP can then be written as

Gross Domestic Product =

Consumer Expenditures + Business Investment + Government Expenditures + Net Exports

GDP = C + I + G + Xn

The Net Exports part (Xn) is needed to take into account the amount of money that foreigners spend on

our goods and services as well as the amount we spend on foreign goods and services. Foreigners buying our goods should be part of GDP, while money we spend on foreign goods is not part of the Gross

Domestic Product.

Net Exports =

(American goods and services bought by foreigners) – (foreign goods and services bought by Americans)

Net Exports = exports – imports

Tracking GDP over a period of years can tell you if a nation’s economy is expanding or contracting. If

GDP rises by 4% from Year 1 to Year 2, then the economy appears to be doing well. However, inflation—

a rise in the price level—can distort GDP growth, since a rise in the average price level would increase

GDP. If inflation between Year 1 and Year 2 was very high, then GDP might not have grown at all. The

higher prices caused by inflation may have caused the 4% shift, but the economy was actually unchanged.

For this reason, GDP is often discussed as real GDP. A base year is used, and a price index (called the

GDP deflator) is used to measure all future GDP in terms of the base year prices. Ideally, using base-year

prices will eliminate any distortions caused by price changes and allow real GDP to accurately reflect

changes in the nation’s economy.

The GDP deflator is a price index that is designed to track inflation (and deflation, which is a decrease in

the price level). The Consumer Price Index does the same thing. The CPI takes a hypothetical basket of goods and services purchased by a typical household. It then tracks changes in the amount of money required to purchase this same basket of goods and services year after year. For a simplified example,

suppose a household’s basket of goods consists of milk, paperback books, and plastic sofas.

Quantity in Year 1 Year 1 Price Cost

300 gallons milk $1.20 $360

50 paperback books $5 $250

2 plastic sofas $110 $220

Total cost of Basket in Base Year $830

Quantity in Year 2 Year 2 Price Cost

300 gallons milk $1.80 $540

50 paperback books $5.50 $275

2 plastic sofas $100 $200

Total cost of Basket in Year 2 $1,015

Note that the quantity of each good purchased does not change from year to year. This is true when

creating a CPI. This is not exactly true in the real world, since consumers might substitute another good

for a good whose price increased too much. For this reason, CPI sometimes overstates the increase in

price levels.

Consider prices in the base year to have a standard value (known as an index) of 100. To find the increase

in price in year 2, you must divide the Year 2 basket cost by the base year basket cost, and then multiply

by 100 to find the index.

CPI = (Year 2 basket cost/base year basket cost) x 100

CPI = (1015/830) x 100

CPI = (1.22)(100)

CPI = 122

Compared to a base-year price of 100, prices in Year 2 were 122, or 22% higher. That’s a great deal of

inflation. You can see that the change is mostly attributable to the high increase in the cost of milk, whose

price increased by 50%.

Using a CPI is one way to calculate the change in price level in an economy, but it is not the only way this

can be done. Another method employs the concepts of aggregate supply and aggregate demand. After

explaining these two ideas, you will then see how they can be used as economic indicators.

Aggregate supply and demand are macroeconomic ideas that parallel supply and demand in

microeconomics. Demand for all goods and services within a nation combines to form aggregate demand, while the supply of all goods and services within a country is its aggregate supply. Graphs are often used to

illustrate aggregate demand and aggregate supply.

Aggregate demand curves are generally downward sloping. The primary reason for the negative slope is

the underlying assumption that the economy can have only one money supply at a time. The aggregate

demand curve can increase or decrease depending on certain conditions. One factor that affects the

aggregate demand curve is the amount of money that people save. If consumers collectively save less and

spend more, the increase in consumer spending would increase aggregate demand, shifting the aggregate

demand curve to the right. Higher taxes and lower transfer payments, however, could reduce aggregate

demand and shift the demand curve to the left.

Aggregate supply curves are generally upward sloping, but like most supply curves, they can be vertical

depending on what assumption you use to construct the curve. The aggregate supply curve can increase or

decrease. Most of the increases in aggregate supply are tied to the cost of production. If production costs

go down, aggregate supply tends to increase and the supply curve shifts to the right. On the other hand,

higher prices for foreign oil, higher interest rates, and lower worker productivity could tend to decrease

aggregate supply and the supply curve would shift to the left.

Shifts in aggregate demand and supply can signal changes in the economy. If the aggregate demand curve

shifts to the left, then real GDP is falling. This could mean a recession. If aggregate supply shifts to the

right, then the economy is producing more goods and services at the same price level. This could signal

improvement in production ability brought about by technological and capital improvement.

A recession is typically defined as a decrease in total output that lasts for more than two or three

consecutive quarters of a year. A depression is even worse news for an economy; this event is typically

marked by a steep fall in total output coupled with a high unemployment rate, with both these factors

lasting for more than a year.

Consider this graph:

Suppose that the economy is in a recession and unemployment is high. However, things start to pick up,

and aggregate demand moves from AD1 to AD2. Along this section of the aggregate supply curve, real

GDP grows and prices don’t. This reflects the fact that growth is occurring mainly by eliminating cyclical

unemployment. (Cyclical unemployment will be explained in the next section.) During the recession, the

nation was not working at full capacity, so it had room to grow without spurring prices.

The situation changes from AD2 to AD3. At AD2, the economy was already close to its highest aggregate

supply ability. However, the continued increase in demand “pulls” the price level to P3, even though it

does little to increase real GDP. Like a CPI, this shows that inflation has occurred, but the aggregate

demand and supply curves also illustrate that while prices have increased, real GDP has not changed.

The next graph using aggregate demand and supply curves shows how the change in prices can occur

without a change in aggregate demand. Consider the economy of an agricultural nation suffering from a

years-long drought. Aggregate supply would fall as farms fail and few crops grow. In this event, the nation’s

aggregate supply falls from AS1 to AS2. As you can see, prices rise and real GDP falls. This event is

known as stagflation, a term combining a stagnant economy with inflation.

Along with concepts like aggregate supply and demand, GDP and CPI, economists like to talk about the

unemployment rate of a nation, and whether it's rising or falling. However, the idea of unemployment is

not as simple as it may first appear. Just because you are not working doesn’t mean you are unemployed.

Two-day-old babies at a hospital are not considered unemployed, even though they aren’t working.

Ninety-three-year-old retirees aren’t unemployed. College students are not considered unemployed. If a

student holds a part-time job, however, they might be considered employed, since the unemployment rate

counts part-time and full-time employment as being employed. It is perhaps simplest to define

unemployment in the following way: A person who is able to work and is looking for work but cannot find a job is considered unemployed.

People who have given up looking for employment are called discouraged workers. Even though these

workers could eventually find work, the fact that they are not looking for it means that they are not

included as part of the unemployment rate. As you may have guessed, not all unemployment is the same.

The following information highlights three major types of unemployment.

Forms of Unemployment

1. Structural. Structural unemployment occurs when you have job skills that no one wants, or when a

company wants to hire somebody but can’t find anyone who has the necessary requirements. Suppose

you worked at a company that made old-fashioned phones with dials. Almost no one wants these phones

anymore, so once your company closes there is no place for you to use your old-fashioned-phone-making

skills. At the same time, suppose that a local company needs people who can design computer networks,

but no one in the community has experience in this area. This type of mismatch

is a typical example of structural unemployment. Learning new skills or moving to a different location can

reduce this type of unemployment. For instance, another nation might need old-fashioned dial phones, so

you could move there and have a much better chance of finding a job that matches your

skills. Or you could stay where you are and take computer-networking classes, for example. This might

give you the training needed to apply for a job as a computer networking technician. In any case, this is

considered the most serious type of unemployment because it is usually the most difficult to address.

After all, moving somewhere else might not be very easy (especially if you don’t have the money to pay for

the move) and training for a new job is costly and often takes a long time.

2. Frictional. Unemployed people don’t always take the very first job they can find. They often wait to find

a job that fits their talents and preferences. While they search for a job that is a good fit, these people are

frictionally unemployed. Other people sometimes purposefully decide to leave a job and look for one that

better fits their interests and abilities. These job seekers are also considered frictionally unemployed.

Overall, frictional unemployment is not entirely bad for an economy because it gives people time to find a

job that suits their needs.

3. Cyclical. Most economies encounter cyclical periods of growth and recession. During boom years,

unemployment drops dramatically as companies hire new workers to match the higher demand.

However, boom periods often overreach, and these are followed by recessions. People who are laid off as

a result of a contracting economy are cyclically unemployed.

Generally speaking, nations want to keep their unemployment rates low. Unemployed people are often

unhappy, not to mention out of income and unable to contribute to the economic well-being of the

nation. High rates of unemployment have a negative effect on a society. Nations can offer unemployment

benefits to help people while they are unemployed, but steady employment is much more beneficial to

the economic wealth and well-being of a society and its members.

One way a government can eliminate unemployment is by creating and paying for government jobs.

However, if a government does this too much, then it will be paying out more money (in salaries along

with other government spending) than it takes in (through taxes and other means). In this case, the

government would be running a deficit, spending more money than it takes in. Like a person running up

a credit card bill, this deficit is not always harmful, so long as the debt can be repaid or if the nation’s

economy can handle the interest on the debt easily. Unfortunately, if a government continues to operate

at a deficit for many years, these deficits build up to form what is called the national debt.

This might not seem like a big deal, but continued budget deficits lead to increased interest payments on

that national debt. To get more money, the government might have to raise taxes to pay interest on the

national debt without providing additional services to the taxpayer.

Changes in aggregate supply, aggregate demand, employment levels, and Gross Domestic Product are

closely associated with the five stages of economic activity known as the business cycle: peak, contraction,

trough, recovery, and expansion. During the peak stage of the business cycle, aggregate supply and

demand, employment levels, and Gross Domestic Product tend to be comparatively high. During the

trough stage of the business cycle, they tend to be relatively low.

The Federal Reserve

In 1913, Congress created the Federal Reserve System to act as the nation’s central bank. By creating this

“lender of last resort,” Congress hoped to insure people that the money they placed into U.S. banks

would not disappear due to shoddy business practices.

Currently, the Federal Reserve System consists of twelve different banks located throughout the United

States. Each bank covers a different district and prints its own currency. You can see which bank printed a

particular one-dollar bill by looking to the left of Washington’s portrait.

The Federal Reserve System (also called the Fed) influences monetary policy for two main reasons. It

wishes to control inflation (for reasons you have just seen) and it attempts to curb recessions. The Fed

achieves these goals by buying and selling government securities in the open market. Imagine that these

securities are pieces of paper promising that the government will eventually repay the amount of the

security (plus interest). So, if the government wants to reduce the money supply, it can simply sell these

securities, essentially trading cash for secure promises. By buying and selling these securities (called open-

market operations), the government can immediately affect the money supply and eventually change the

interest rate.

For example, suppose the Fed believes that a rapidly growing economy will cause inflation. To deter

inflation, the Fed will sell securities at prices low enough to guarantee someone will buy it. This influx of

securities causes bond prices to fall and interest rates to rise. Higher interest rates discourage business

investment and consumer spending, which reduces real GDP and in turn slows economic growth and

curbs inflation.

If the Federal Reserve wanted to stimulate the economy to reduce unemployment, it could buy securities

on the open market. This would have the opposite effect as the scenario described above.

The Federal Reserve could also manipulate the discount rate, which is the interest rate that the Fed

charges on loans it makes to banks. (The Fed is like a banker’s bank in many ways.) Altering this rate

affects whether banks take loans from the Federal Reserve Bank. For example, a low discount rate

encourages banks to borrow money, leading to more loans, which ultimately means more money in the

economy.

Finally, the Federal Reserve can influence the money supply by changing the reserve requirement. A

lower reserve rate means banks can loan out more money.

Fiscal policy and the federal government

In addition to using monetary policy to influence the economy, the federal government can affect the

national economy through taxes, expenditures, and borrowing. To see how each of these fiscal policy

factors can change GDP, recall the earlier formula:

GDP = C + I + G + Xn

The first element, taxes, can affect both consumers (C) and business investment (I). Consumers make up

more of GDP than business investment, however, so consumer taxes have a greater influence on GDP

than taxes relating to business investment.

To boost GDP, the government can reduce taxes. This would encourage most consumers to purchase

more because the government is taking a smaller portion of their income. When consumers spend more,

producers increase their output and the GDP increases.

Another way to increase GDP would be to increase government spending, G. However, consider what

would happen if tax cuts and government spending were to occur at the same time. The new tax

deduction would reduce government revenue while the government was simultaneously increasing its

spending. This could lead to a budget deficit, where the government spends more than it collects. Over

time, the government would have to borrow money in order to make up this deficit, and this could lead to

the potential problems of a high national debt.

There is a difference between a government’s fiscal policy and its monetary policy. Monetary policy refers

to changes in the money supply of a nation in order to influence its economy. Fiscal policy refers to

expenditures, taxes, and borrowing made by a government in order to influence an economy.

Econ 10-2 Unit 4: Macroeconomics

Macroeconomics - Big picture economics. This guy wrote this book – my frat bro & college friend. If

people like you, they’ll use you again. Why Obama won – how likeability helped decide the 2012

Presidential Campaign; also, Personality Not Included. Making it personal. I’d like to buy the world a

Coke…name on a can. Presidential race – nothing about facts. But people picked their sides. While

politics divided & blamed each other…voters made choices. Ended up w same useless conclusion. Raised

debt same percentage. Emotion wins – why’d you go back to BF? ‘Cuz I loves him. Doesn’t matter if he

smells like fish. Emotion wins. Obama - unbeatable msg.

Why Obama won – Romney rolled sleeves up, Obama fist-bumps janitor. Personal moments. No

video/audio allowed – Romney…Medicaid/Medicare – said 75% people used it. Obama – selfie at Nelson

Mandela funeral! Love him! Everyone feels Obama is personable – even though it’s world leader’s

funeral. Romney – chillin’ w kids in most uptight way possible…Obama – warm & fuzzy on couch w

daughters. Obama – hugs Bruce Springsteen, Romney – shakes hands w musician; Obama – more

intimate & personal. Watching results to election – Obama on couch w wife, mother. Money = emotion.

Why Obama won election – in 6 easy graphs. Inflation rate – prices not going up much at all. Stop buying

kale ships $7 for 2oz. We don’t want crazy inflation, not deflation. Just steady – healthy. 2002 – housing

prices shot up. But we feel bad about it. I lost money. No – you never sold it. Prices rt back to where they

should be. This area – fully recovered. Now people feel ok about it. Unemployment – Should be at 5.5%.

In normal recovery, would have spiked and come back down. 4 days before Obama got reelected, under

8%. Price mentality …$9.99 – not quite $10. Psychological. He changed numbers. Said under 8%. 7.99.

Same as 8%. Just the way he said it. Percent income change – stable rt now. Dropped in 2010. Obama

gets inaugurated – then growth – 50%. Stock market doubled. But really – just went back to where it was.

Daughter photos – son “I am Kill” – came into our room last nt. Staring at us. What?!

Anyway. Useless fact – Obama raising gas prices. FB. Gas prices really high – last month went down 10%.

Obama! Gets credit/blame. 2013 – since inauguration – gas went wayyyy up. Obama! How? Pres doesn’t

control. Bank – people got mortgages. Ninga mortgage – no income, no assets. Whoa – no one paying

back. Credit freeze. Businesses, People. Messy. Fall 2008. No demand for oil/gas. Gas prices tanked.

That’s why. No pres could influence that.

More graphs. “in group” effect. Overlap republican voters w cheap oil prices. All w expensive gas. Fat

counties. Voted for Obama. Conclusion – Obama won bc there were not enough thin people in America.

Poverty rates align also w obesity maps AND Obama voters. Mississippi – slave trade…people stayed –

even though cotton went away. Hasn’t changed in 125 yrs.

Macroeconomics – have to look at the big picture. Ch. 13 Economics Performance Section 1 – National

Output. Inflation, unemployment.

National Output – GDP – heartbeat of a country. All these #s from a govt – make these decisions.

Everyone in govt. Super nerdy. Love numbers. Job secure. GT student. Shows how nation is living & how

country is prospering. Slowing growth will alert politicians. Govt peeps – lots of respect. On the ball.

Number nerd people – they help the economy. Show us what’s up w economy. We need them. If

economy slowing, they tell Congress. Hey – give tax breaks. Give them money – it will make them spend.

Don’t tell them economy is bad. They will save it. Won’t stimulate economy. Obama did plan – did it

work? We’ll see in future. Wall in Mex – public works thing. Put people back to work. Build a wall to

Canada. Who cares – whatever. Roosevelt – built dams, lots of stuff. Shovel-ready projects. Make people

money.

GDP – biggest number. If I took US’s temp, the result would be GDP. Multiply final goods & services

produced by a country in a 12-mo period by the avg price to get the total amt of production. Social issues

– immigrants, same sex marriage, it will come back. When economy is bad, no one cares about social

issues. When economy good, look at social issues. Banned gay marriage during good economy.

GDP Per Capita – US, China, Japan, Germany. Per Capita – Per Person. 350mil person in US

(something like that). Divide GDP by the number of people in a country. Ofetn a signal or indicator of a

country’s wealth. How much we produce. 2nd longest rt now to get out of (besides G Depression). Congo –

poor & sick. Doesn’t increase.

Best video all yr – Hans Rosling 200yrs 200 countries. BBC – The Joy of Stats. Data Visualizer. 4.5 mins

– life expectancy vs how much money country makes. What would increase wea;th health – Industrial

revolution (Europe, Americas…Africa, Asia says where it is). Spanish flu epidemic – goes down.

Hiroshima – Asian down. 1948 – England leaves India. Colonies pull out. 1960 – China dropped by

half…cultural revolution. Fertility – richer you are, less kids you have. Theory – richer we get, lower our

population.

GDP excludes- intermediate products (counts once – flour in donut counted, not donut); secondhand

sales – already counted (G Brooks…secondhand sales – CD stores..I don’t get a cut? Tried to get bill

passed…artist should make $ off all sales – nope. Can’t count again. Ebay stuff – no. Just fees); non-value

(non-market) transactions – cutting our grass, homemaking; underground economy – can’t report illegal

things (my pimp took my crack).

Econ 10-3 Unit 4: Macroeconomics

Cinderella Man – what contributed to Great Depression. Movie. Before FDR. Before govt had safety

nets. Supply & demand. Pick any object and provide examples. What factors led to the Great

Depression? How did it have advantages in mixed economy? Warm fuzziness. Watch movies – see

warm fuzziness. Why did Pres give $$? Heading towards recession. People save it. Makes them feel

happier. Final fight do? What did it do? Scene coming up…govt – other scenes…bar w friend talking

about past & wealth & what happens when Depression hits. Behind the scenes - $$ he needs to live on.

Everything true to life. This is pretty accurate. Madison Square Gardens on this date in 1933. Same

boxer. People’s names same. Was making $8000. $90,00 these days. Due Oct 17 – solid 2 wks. Next wk

solid – the wk after…2 days off & PSAT. Don’t forget this assignment.

**Great Depression – time period in 1930s when the US was super poor.

You need to write a paper. You need to talk about a) the movie, b) the Great Depression, and c) how the

govt affects an economy. The questions below need to be answered in your paper. This is due FRIDAY

OCT 17. You need to type it. It needs to be 3 pages. You need to make a “Works Cited” page with the

websites you used to find the information for the first 2 parts.

Part I: The Great Depression

Source (use Google Scholar or a decent website – NO WIKIPEDIA): (pbs.org or history.com are both

good sites)_________________________________________________________________

What economic factors contributed to the Great Depression:

What factors contributed to the length (+10yrs) of the GD:

How does the Great Depression show the negative aspects of a pure market economy:

How could the Great Depression be explained in terms of supply & demand. Explain in detail.

o Provide examples:

Part II: How the Govt Affects the Economy

Source (use Google Scholar or a decent website – NO WIKIPEDIA): (pbs.org or history.com are both

good sites)_________________________________________________________________________

What factors led to end of the Great Depression and eventual upswing (improvement) in the US

economy:

How do these factors illustrate the advantages of a mixed market economy:

How could this eventual upswing in the US economy be explained in terms of supply and

demand. Explain in detail and give examples.

Part III: The Movie

How were the characters in the movie negatively affected by the Great Depression:

How did the individual characters react to these adversities:

o Provide examples.

Use specific scenes to tell of how people survived during this time.

Explain the interplay btwn Braddock & the govt.

What did the final fight do for the downtrodden people in the country:

About James Braddock (the guy in Cinderella Man):

James J Braddock earned his nickname, Cinderella Man, from his seemingly fairytale

like rise from a poor local fighter to the heavyweight boxing champion of the world.

Braddock, born in New York City, had a powerful right hand and a successful

amateur career. He turned pro in 1926. Braddock had victories over fighters like

Jimmy Slattery and Pete Latzo. Braddock fought light heavyweight champ Tommy

Loughran in 1929 for the title, but was defeated in a heartbreaking 15-round decision.

Following the Loughran fight and the stock market crash of 1929, Jim Braddock was

down on his luck. He had a hard time struggling to win fights and put food on the

table for his young family.

Eventually Jim's luck began to change. In 1934 he had upset wins against Corn Griffin and John Henry

Lewis. With these two wins, Braddock set himself up for a shot for the title against heavyweight

champion Max Baer.

On June 13th, 1935, in Long Island City, N.Y., Braddock, as a 10 to 1 underdog, won the heavyweight

championship of the world from Max Baer. The general reaction in most quarters was described as, "the

greatest fistic upset since the defeat of John L. Sullivan by Jim Corbett". Braddock would lose his

heavyweight title two years later in an 8 round KO to "The Brown Bomber", Joe Louis. He retired after a

final win over Tomomy Farr in 1938. Jim was inducted into the Ring Boxing Hall of Fame in 1964, the

Hudson County Hall of Fame in 1991 and the International Boxing Hall of Fame in 2001.

Econ 10-6 Unit 4: Macroeconomics

Cinderella Man

The story takes place in New York and New Jersey during the Great Depression, a

time when people experienced the worst economic hardship in U.S. history.

James J. Braddock (Russell Crowe) was a light heavyweight boxer, who was forced to

retired from the ring after breaking his hand in his last fight.

His wife Mae (Renee Zellweger) had prayed for years that he would quit boxing,

before becoming permanently injured.

To support his family, Braddock works as a laborer at the docks, but he still has a

dream to box.

Several years after his last fight, Braddock's old manager wants him to be a

last-minute substitute to fight against the second-ranked world contender.

In this case, Braddock is one of those hungry fighters who astonishes everyone by

winning the fight.

Braddock is back in the ring and begins to win all his fights against

younger, stronger, and heavier boxers.

In a sports article, Braddock is named the "Cinderella Man" for his miraculous

comeback.

Braddock gets a chance to fight the heavyweight champion, Max Baer

(Craig Bierko), for the title.

Max Baer had killed two men in the ring, and everybody believed

Braddock would be number three.

As the underdog, Braddock became the champion of the

downtrodden masses.

Econ 10-6B Unit 4: Macroeconomics

DO NOT COPY THESE WORDS – THAT IS AN HONOR CODE VIOLATION. Rephrase them in your own way

by answering the Qs on his handout.

The Great Depression: from history.com

Article Details: The Great Depression Author History.com Staff Website Name History.com Year Published 2009 Title The Great Depression URL http://www.history.com/topics/great-depression Access Date October 06, 2014 Publisher

A+E Networks

The Great Depression (1929-39) was the deepest and longest-lasting economic downturn in the history of

the Western industrialized world. In the United States, the Great Depression began soon after the stock

market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors.

Over the next several years, consumer spending and investment dropped, causing steep declines in

industrial output and rising levels of unemployment as failing companies laid off workers. By 1933, when

the Great Depression reached its nadir, some 13 to 15 million Americans were unemployed and nearly

half of the country’s banks had failed. Though the relief and reform measures put into place by President

Franklin D. Roosevelt helped lessen the worst effects of the Great Depression in the 1930s, the economy

would not fully turn around until after 1939, when World War II kicked American industry into high

gear.

THE GREAT DEPRESSION BEGINS: THE STOCK MARKET CRASH OF 1929

The American economy entered an ordinary recession during the summer of 1929, as consumer

spending dropped and unsold goods began to pile up, slowing production. At the same time, stock prices

continued to rise, and by the fall of that year had reached levels that could not be justified by anticipated

future earnings. On October 24, 1929, the stock market bubble finally burst, as investors began dumping

shares en masse. A record 12.9 million shares were traded that day, known as “Black Thursday.” Five

days later, on “Black Tuesday” some 16 million shares were traded after another wave of panic swept

Wall Street. Millions of shares ended up worthless, and those investors who had bought stocks “on

margin” (with borrowed money) were wiped out completely.

As consumer confidence vanished in the wake of the stock market crash, the downturn in spending and

investment led factories and other businesses to slow down production and construction and begin firing

their workers. For those who were lucky enough to remain employed, wages fell and buying power

decreased. Many Americans forced to buy on credit fell into debt, and the number of foreclosures and

repossessions climbed steadily. The adherence to the gold standard, which joined countries around the

world in a fixed currency exchange, helped spread the Depression from the United States throughout the

world, especially in Europe.

THE GREAT DEPRESSION DEEPENS: BANK RUNS AND THE HOOVER

ADMINISTRATION

Despite assurances from President Herbert Hoover and other leaders that the crisis would run its course,

matters continued to get worse over the next three years. By 1930, 4 million Americans looking for work

could not find it; that number had risen to 6 million in 1931. Meanwhile, the country’s industrial

production had dropped by half. Bread lines, soup kitchens and rising numbers of homeless people

became more and more common in America’s towns and cities. Farmers (who had been struggling with

their own economic depression for much of the 1920s due to drought and falling food prices) couldn’t

afford to harvest their crops, and were forced to leave them rotting in the fields while people elsewhere

starved.

In the fall of 1930, the first of four waves of banking panics began, as large numbers of investors lost

confidence in the solvency of their banks and demanded deposits in cash, forcing banks to liquidate

loans in order to supplement their insufficient cash reserves on hand. Bank runs swept the United States

again in the spring and fall of 1931 and the fall of 1932, and by early 1933 thousands of banks had closed

their doors. In the face of this dire situation, Hoover’s administration tried supporting failing banks and

other institutions with government loans; the idea was that the banks in turn would loan to businesses,

which would be able to hire back their employees.

FDR ADDRESSES THE GREAT DEPRESSION WITH THE NEW DEAL

Hoover, a Republican who had formerly served as U.S. secretary of commerce, believed that

government should not directly intervene in the economy, and that it did not have the responsibility to

create jobs or provide economic relief for its citizens. In 1932, however, with the country mired in the

depths of the Great Depression and some 13-15 million people (or more than 20 percent of the U.S.

population at the time) unemployed, Democrat Franklin D. Roosevelt won an overwhelming victory in

the presidential election. By Inauguration Day (March 4, 1933), every U.S. state had ordered all

remaining banks to close at the end of the fourth wave of banking panics, and the U.S. Treasury didn’t

have enough cash to pay all government workers. Nonetheless, FDR (as he was known) projected a calm

energy and optimism, famously declaring that “the only thing we have to fear is fear itself.”

Roosevelt took immediate action to address the country’s economic woes, first announcing a four-day

“bank holiday” during which all banks would close so that Congress could pass reform legislation and

reopen those banks determined to be sound. He also began addressing the public directly over the radio

in a series of talks, and these so-called “fireside chats” went a long way towards restoring public

confidence. During Roosevelt’s first 100 days in office, his administration passed legislation that aimed to

stabilize industrial and agricultural production, create jobs and stimulate recovery. In addition, Roosevelt

sought to reform the financial system, creating the Federal Deposit Insurance Corporation (FDIC) to

protect depositors’ accounts and the Securities and Exchange Commission (SEC) to regulate the stock

market and prevent abuses of the kind that led to the 1929 crash.

THE GREAT DEPRESSION: HARD ROAD TO RECOVERY

Among the programs and institutions of the New Deal that aided in recovery from the Great Depression

were the Tennessee Valley Authority (TVA), which built dams and hydroelectric projects to control

flooding and provide electric power to the impoverished Tennessee Valley region of the South, and the

Works Project Administration (WPA), a permanent jobs program that employed 8.5 million people

from 1935 to 1943. After showing early signs of recovery beginning in the spring of 1933, the economy

continued to improve throughout the next three years, during which real GDP (adjusted for inflation)

grew at an average rate of 9 percent per year. A sharp recession hit in 1937, caused in part by the Federal

Reserve’s decision to increase its requirements for money in reserve. Though the economy began

improving again in 1938, this second severe contraction reversed many of the gains in production and

employment and prolonged the effects of the Great Depression through the end of the decade.

Depression-era hardships had fueled the rise of extremist political movements in various European

countries, most notably that of Adolf Hitler’s Nazi regime in Germany. German aggression led war to

break out in Europe in 1939, and the WPA turned its attention to strengthening the military

infrastructure of the United States, even as the country maintained its neutrality. With Roosevelt’s

decision to support Britain and France in the struggle against Germany and the other Axis Powers,

defense manufacturing geared up, producing more and more private sector jobs. The Japanese attack

on Pearl Harbor in December 1941 led to an American declaration of war, and the nation’s factories

went back in full production mode. This expanding industrial production, as well as widespread

conscription beginning in 1942, reduced the unemployment rate to below its pre-Depression level.

When the Great Depression began, the United States was the only industrialized country in the world

without some form of unemployment insurance or social security. In 1935, Congress passed the Social

Security Act, which for the first time provided Americans with unemployment, disability and pensions for

old age.

The Great Depression: from pbs.org

http://www.pbs.org/wgbh/americanexperience/features/timeline/rails-timeline/

October 1929

The stock market crashes, marking the end of six years of unparalleled prosperity for most sectors of the

American economy. The "crash" begins on October 24 (Black Thursday). By October 29, stock prices

will plummet and banks will be calling in loans. An estimated $30 billion in stock values will "disappear"

by mid-November.

November 1929

President Herbert Hoover says, "Any lack of confidence in the economic future or the basic strength of

business in the United States is foolish."

March 1930

More than 3.2 million people are unemployed, up from 1.5 million before

the October, 1929 crash. President Hoover remains optimistic, however,

stating that "all the evidences indicate that the worst effects of the crash upon

unemployment will have passed during the next 60 days."

November 1930

The street corners of New York City are crowded with apple-sellers. Nearly 6,000 unemployed

individuals work at selling apples for five cents apiece.

January 1931

Texas congressman Wright Patman introduces legislation authorizing immediate payment of "bonus"

funds to veterans of World War I. The "bonus bill" had been passed in 1924. It allots bonuses, in the

form of "adjusted service certificates," equaling $1 a day for each day of service in the U.S., and $1.25 for

each day overseas. President Hoover is against payment of these funds, saying it would cost the Treasury

$4 billion.

February 1931

"Food riots" begin to break out in parts of the U.S. In Minneapolis, several hundred men and women

smash the windows of a grocery market and make off with fruit, canned goods, bacon, and ham. One of

the store's owners pulls out a gun to stop the looters, but is leapt upon and has his arm broken. The "riot"

is brought under control by 100 policemen. Seven people are arrested.

Resentment of "foreign" workers increases along with unemployment rolls. In Los Angeles, California,

Mexican Americans are accused of stealing jobs from "real" Americans. During the month, 6,024

Mexican Americans are deported.

December 1931

New York's Bank of the United States collapses. At the time of the collapse, the bank had over $200

million in deposits, making it the largest single bank failure in the nation's history.

January 1932

Congress establishes the Reconstruction Finance Corporation. The R.F.C. is allowed to lend $2 billion to

banks, insurance companies, building and loan associations, agricultural credit organizations and

railroads. Critics of the R.F.C. call it "the millionaires' dole."

March 1932

Three thousand unemployed workers march on the Ford Motor

Company's plant in River Rouge, Michigan. Dearborn police and

Ford's company guards attack the workers, killing four and injuring

many more.

April 1932

More than 750,000 New Yorkers are reported to be dependent upon city

relief, with an additional 160,000 on a waiting list. Expenditures average about

$8.20 per month for each person on relief.

May 1932

More than 300 World War I veterans leave Portland, Oregon en route to Washington, D.C. to urge

Congress to pass the Bonus Bill. It will take them 18 days to reach Washington, D.C.

June 1932

Determined to collect their "bonus" pay for service, 15,000 - 25,000 World War I veterans gather and

begin setting up encampments near the White House and the Capitol in Washington, D.C. On June 15,

the House passes Congressman Wright Patman's "bonus bill" by a vote of 209 to 176. The bill falls to

defeat in the Senate, however, 62 to 18. The vets maintain their determination to stay camped out until

they get their pay.

July 1932

The Reconstruction Finance Corporation is authorized to lend needy states sums from the National

Treasury. The money is to target relief and public works projects.

President Hoover signs a $100,000 transportation bill to assist "bonus Army" demonstrators in getting

home. He sets a July 24 deadline for the men to abandon their encampments.

On July 28, when some "bonus Army" members resist being moved from their camps, violence erupts,

leading to the deaths of two veterans. Hoover orders Federal troops, under the command of General

Douglas MacArthur, to assist D.C. police in clearing the veterans.

November 1932

Franklin Delano Roosevelt is elected president in a landslide over Herbert Hoover.

Roosevelt receives 22.8 million popular votes to Hoover's 15.75 million.

March 1933

Before a crowd of 100,000 at the Capitol Plaza in Washington, D.C., Franklin Delano Roosevelt is

inaugurated. FDR tells the crowd, "The people of the United States have not failed. In their need they

have registered a mandate that they want direct, vigorous action. They have asked for discipline and

direction under leadership. They have made me the present instrument of their wishes. In the spirit of

the gift I take it."

FDR announces a four-day bank holiday to begin on Monday, March 6. During that time, FDR

promises, Congress will work on coming up with a plan to save the failing banking industry.

By March 9, Congress passes the Emergency Banking Act of 1933. By month's end, three-quarters of the

nation's closed banks will be back in business.

On March 12, FDR delivers the first of what came to be known as his

"fireside chats." In his initial "chat" he appeals to the nation to join him in

"banishing fear."

April 1933

President Roosevelt, under the Emergency Banking Act, orders the nation off of the gold standard.

The Civilian Conservation Corps (CCC) is established. Designed as a relief and employment program

for young men between the ages of 17 and 27, the CCC is made up of groups of young men who work in

national forests, parks, and federal land for nine-month stints. FDR envisions the program as a kind of

volunteer "army." The first 250,000 young men are housed in 1,468 camps around the country. At its

peak in 1935, the CCC will include 500,000 young men.

May 1933

The Federal Emergency Relief Administration is created by Congress. President

Franklin Roosevelt appoints Harry L. Hopkins as its chief administrator. By the end of

his first day on the job, Hopkins has issued grants totaling more than $5 million.

The National Industrial Recovery Act is introduced into Congress. Under Title I of the act, the National

Recovery Administration is designated to maintain some form of price and wage controls. Section 7(a) of

the act guarantees labor the right to organize and bargain collectively. As part of the act, The National

Labor Board is set up to negotiate disputes between labor and management.

The Tennessee Valley Authority is created. A federally run hydroelectric power program, the TVA Act

is considered a huge experiment in social planning. The TVA also builds dams, produces and sells

fertilizer, reforests the Tennessee Valley area, and develops recreational lands. Opponents of the TVA

call it "communistic to its core."

June 1933

Congress passes the Glass-Steagall Act that separates commercial from

investment banking and sets up the Federal Deposit Insurance

Corporation to guarantee bank deposits.

With an eye toward organizing farmers into soil conservation districts, the

federal government establishes the Soil Erosion Service. The creation of

this service was made necessary by the years of drought and dust that plagued the Southwestern

Panhandle states.

September 1933

In an effort to stabilize prices, the Federal Agricultural Program orders the slaughter of more than 6

million pigs. Many citizens protest this action since most of the meat went to waste.

October 1933

The Civil Works Administration is established. Devised as a wide scale program that could employ up to

4 million people, the C.W.A. is involved in the building of bridges, schools, hospitals, airports, parks and

playgrounds. Additionally, C.W.A. funds go toward the repair and construction of highways and roads.

Early in 1934, Congress will authorize $950 million for the continued operation of the C.W.A.

May 1934

A three-day dust storm blows an estimated 350 million tons of soil

off of the terrain of the West and Southwest and deposits it as far

east as New York and Boston. Some east coast cities are forced to

ignite street lamps during the day to see through the blowing dust.

November 1934

Father Charles E. Coughlin establishes the Union for Social Justice. Using the radio airwaves as his

pulpit, Father Coughlin railes against "predatory capitalism." His criticism of the banking industry and

disdain of communism soon dovetails into a troubling gospel of anti-Semitism.

April 1935

FDR signs legislation creating the Works Progress Administration. (Its name would be changed in 1939

to the Work Projects Administration.) The program employs more than 8.5 million individuals in 3,000

counties across the nation. These individuals, drawing a salary of only $41.57 a month, will improve or

create highways, roads, bridges, and airports. In addition, the WPA will put thousands of artists -- writers,

painters, theater directors, and sculptors -- to work on various projects. The WPA will remain in

existence until 1943.

Business Week magazine announces that "Depression is a forgotten word in the automobile industry,

which is forging ahead in production, retail sales, and expansion of productive capacity in a manner

reminiscent of the 'twenties.'"

June 1935

The National Youth Administration is set up to address the needs of young men and women (who are

not allowed in the CCC). The NYA works on two levels: a student-work program and an out-of-school

program. The student-work program provides students with odd jobs that pay them enough to stay in

school. The out-of-school program sets young people up with various jobs ranging from house painting to

cleaning local parks, and eventually comes to include vocational training.

July 1935

FDR signs the Wagner National Labor Relations Act. The goal of the act is to validate union authority

and supervise union elections.

August 1935

The Social Security Act of 1935 is signed into law by FDR. Among the most controversial stipulations of

the act is that Social Security will be financed through a payroll tax. Historian Kenneth S. Davis calls the

signing of the act "one of the major turning points of American history. No longer could `rugged

individualism' convincingly insist that government, though obliged to provide a climate favorable for the

growth of business profits, had no responsibility whatever for the welfare of the human beings who did

the work from which the profit was reaped."

March 1936

Photographer Dorothea Lange visits a pea-pickers' camp in California's San Joaquin

Valley and takes photographs of harvest workers. The images, especially those in the

"Migrant Mother Series," vividly illustrate the plight of the workers. The San Francisco

News runs the photo essay under the headline, "Ragged, Hungry, Broke, Harvest

Workers Live in Squallor (sic)."

October 1936

The San Francisco News publishes a series of articles written by John Steinbeck called "The Harvest

Gypsies." The series explores the hardships faced by those living and working in migrant labor camps.

Steinbeck writes, "...One has only to go into the squatters' camps where the families live on the ground

and have no homes... to look at the strong purposeful faces, often filled with pain... to know that this new

race is here to stay and that heed must be taken of it."

November 1936

Defeating Kansas Governor Alfred M. Landon, FDR is elected to his second term as president, winning

every state in the Union except Maine and Vermont.

January 1937

United Automobile Workers strike at the General Motors Plant in Flint,

Michigan. The strike turns violent when strikers clash with company-hired police.

March 1937

The slow economic recovery made possible by New Deal programs suffers a setback as unemployment

rises. FDR's detractors call it the start of the "Roosevelt recession."

May 1937

At Republic Steel's South Chicago plant, workers and their families try to combine a picnic with a rally

and demonstration. Ten people are killed and a dozen more are wounded in the "Memorial Day

Massacre."

April 1938

FDR asks Congress to authorize $3.75 billion in federal spending to stimulate the sagging economy.

Economic indicators respond favorably over the next few months. Still, unemployment will remain high

and is predicted to stay that way for some time.

November 1940

Franklin Roosevelt is elected to an unprecedented third term as president, defeating Wendell Willkie.

FDR's victory is seen as proof of the nation's support of his war policies. Roosevelt lobbies Congress to

pass the Lend-Lease Act, which will aid Britain in its struggle to fend off Germany.

In little over a year, following Japan's December 1941 bombing of Pearl Harbor, the U.S. will enter the

war in the Pacific and in Europe. The war effort will jump-start U.S. industry and effectively end the

Great Depression.

Econ 10-8 Unit 4: Macroeconomics

Starting essays. Notes. Busy work w sub. Anyway. Went over GDP before. Cinderella Man accurate.

With rich & poor. Macroeconomics. All states.

Business cycle. Ch 14 Sect 1 Happy or sad – tells us if economy is good or bad. Might be a while before

we have a recession again. Business cycle – not quite like bio cycles. More like math. GDP measures all

produced products in one year. Acronym. Graph. How much we make over time. 5 parts:

1. Peak – everything going well. As a country. Any

country. Size doesn’t matter. Market economies have this.

Lots of measure. How much we’re producing.

2. Recession – then we go down. Can also call this a

contraction. Go down for a while. Coupla months. 6 mos

of negative GDP growth. Super bad. Not just little bad.

More population less production – ungood sign.

Depression – 12mos of negative GDP growth. Month after

month going backwards.

3. Trough – the bottom. When peak & trough occur –

win Nobel Prize. Win lots on stock market.

4. Recovery – going back up (1st of 2 parts of positive..back to peak). Bottom of fluffy state – physical

training. Losing weight, getting healthy.

5. Growth – after previous peak. Over time, should increase over time.

Every 7-10 yrs we hit this.

5 causes of business cycle

1. Capital expenditures – capital? Tools. Expenditures = I’m spending. Businesses buy tools. They’re

gonna expand. When businesses stop buying tools or capital, they don’t plan for much growth. If

Apple stops updating computers, hiring people – telling customers..we don’t expect much business.

Start losing money from tool-making companies. Then fire people. Lay-offs. Leads to..

2. Inventory adjustments – need to adjust based on…Sour Donut – doesn’t make as many donut holes

as they do cinnamon twists. Home Depot – sell 20 nails – slowly through time…they keep ordering

20. People aren’t buying as much. Start ordering 15. Let people who manufacture nails go. When

companies do not keep as much on shelves. Save $$. 1-2 companies doesn’t matter – but huge deal

for society. Squinkies – Minnie Mouse ..lots of little things – caught in vacuum – no Squinkies…just

stickers – didn’t order any more. But adjusted their supply – people weren’t buying them anymore.

3. Innovation & imitation – technology. FB wars – lightbulb wars..Nobel Prize in chem – last name

Hell…nerdy & read it – won over last many years progression – invented the blue LED (dialed

light). Couldn’t figure out blue LED. Just had red & green. But can now make white. Fluorescent

squiggly suck – white bulbs – crazy expensive. But will stimulate economy. New creation – will save

energy. Will increase GDP. Cell phones – think about all the stuff in 90s…lots of imitation –

Samsung – lots of $$. Actually creating wealth – not stealing.

4. Monetary factors – Federal Reserve – I wants me a car – need $6000 interest. I will say no. If

interest rate falls – now $3000 – now how much will it cost me – I will be the one for $3000. When

limited availability of $$ and interest rates affect purchases. This is why housing purchases interest

rates so low. Can’t go lower. People will buy. Stimulates economy. Pretty much the base of Fed

Reserve. Ch 15

5. External shocks – aliens, Ebola, war. How do aliens affect GDP? Idk – spaceship hovers –

somethin’s gonna happen. I don’t know why. Ebola – someone died. US guy. Sounns crazy –

science fiction-y..but if Jerusalem hit by bomb, double use of energy. Each penny that gas goes up,

lots of $$ that goes up…planes cars, etc.

When we have change in business cycle, what’s

one of the first things we see change?

Unemployment – population in US 315mil

people. Labor force – people who can work –

170mil. All humans in US – take out babies,

take out old people, left w 16-65yrs.

Unemployed/labor force = unemployment rate.

Now (on Friday) 5.9%. On the outside, this is

good. Most economists agree – fully employed 5-5.5%. Still 10mil people. But think – May to you…you

graduate. 1 mil from HS. 1 mil fr college. Could economy absorb all of these? No. Of course not. One

other issue w this – Republicans can’t do it – cant educate people the way they want to. 170mil people opt

not to work: stay at home mothers or fathers. Subtract one. Not looking/don’t have job. Govt calls people

at home. How many of age to work? 2. Kids – 3 (can’t work). Husband in labor force. Year later – are

you working? No. Are you looking for a job? No. Not unemployed. Not even part of labor force

anymore. How does this relate? Republicans have hard time telling people this. Obama & candidate

together – put picture up

.

Unemployment rate – going down steadily. All

happy – warm & fuzzy. Starts going up. Then

goes down. Should have been down a long time

ago. People working now. 66% work. 2008 –

goes down. Lost 4% of our workers. Back to

1985 – goes up – goes down. No one died.

Aliens – no. Just went home – watch TV.

Parenting, give up. Other issues going on.

Economists – wonder. Baby boom – 1945-1955

– lots of babies. 65 yrs old – retiring so fast…not

enough people to take jobs. Some give up

looking for work. Food Stamp pool – elect not

to work. Really? Low standard of life. Only

other time it’s been this low – 1945 – then women’s lib – what group of people have highest

unemployment rate? Men. Economy – where are jobs coming from? Break things down – white people.

White men over 20yrs – 4.4% White women 4.8%. Black men over 20yrs 11%. Black women 9%. White

19-29 20%. Black 19-29 30% Hispanics – closer to whites as unemployment. Occupations – pick on

things w degrees – highest unemployment – management jobs. Arts, design, unemployed. Health – lots

employed. Farming, construction – lots of employment. State by state – GA – highest of all states. Sept

19. 8.1% unemployment. DC – makes the list 51. AA – US 12.6%. 1870 – no blacks. North Dakota – 1%

black. Mississippi – GA – bottom. High AA percentage. AL – second from bottom. Vermont 1%.

15 min video tomorrow – business cycle.

Econ 10-9 Unit 4: Macroeconomics

Today: Notes. Video. Notes.

GDP Excludes: Not all items of production are included. The following are excluded

- Intermediate products – products used to make other products (counted 2x). If you buy flour, it is

counted. If a baker buys flour and makes pies it is counted in the sale of the pie

- Second hand sales – already counted

- Non-value (non-makret economy

- Illegal activity

GDP is ideally – a measure of legal voluntary economic activities.

Income GDP Method. In the book. Messy. GDP quiz at some pt. Maybe Friday. Test Oct. 28. I’m

producing GDP rt now – they go through me..like banker - produce something later. Add up everyone’s

income.

GNP – Gross National Product – the $ value of all final goods, services, and structures produced in one

year w labor and property supplied by a country’s residents

- GDP = ADD all foreign funds to America SUBTRACT all funds from America paid to foreign

businesses in America. This will give us GNP. GNP a little smaller.

If we hire someone from other countries – give them special visa. Money goes back with them. This is Ch

14.

NNP – Net National Product

- NNP = GNP MINUS depreciation of items (obsolete or worn out materials).

- Like buying a car. Used when you drive it off lot. Best Buy – no more tube TVs. Big box. Only flat

screens. Overstock.com. Now not worth anthing.

NI – National Income – income left after all taxes except the corporate profits tax are subtracted

- NI = NNP MINUS indirect taxes, sales tax, excise taxes, property taxes. No corporate profit taxes.

- Taxes are fun bc we can see where all the money goes. All in Ch 14

PI – Personal Income: Amt going to consumers before individual income taxes

- PI = NI MINUS corporate profits, corporate income taxes, SS payments ADD assistance such as

SS, Medicaid, unemployment insurance

DI – Disposable Income – the income at the disposal of a countries residents after personal income taxes

- DI = PI MINUS taxes

Discretionary Income – after food clothing mortgage

Bill Maher – Southern Voters HBO – Alexandra Pelossi – mother was Speaker of House for a while.

She’s a film maker. Why do people not want to have SS benefits? It’s amusing. Why does the poorest

state not want these benefts? They did have jobs. Did not want handouts. Economics – understand

rational decisions. These are rational decisions – you would not rather be hungry & broke. FDR – good

old fashioned poor – they would take the $$. Opposite of this – Bill Maher – Obama voters. Newsclips –

not true – lots that need it and use it properly. Miss – such bad place. OK – I’ll go across the street then –

NYC. Lots of Obama voters – looking for a paycheck. Don’t need economic decisions. But the people in

MS – need the welfare check. Then we get to the pt that it’s a joke. Wu Tang Clan – died of AIDS. Old

Dirty Bastard – what does he think about the system – making $$. What does he think – first album cover

…his welfare ID card. How did he get one? It’s a joke – he can actually get welfare. Advanced him

$45,000. System can be broken. These conflicts go back & forth consistently. Welfare system linked to

inflation. Not going to pay you as much.

Inflation: rise in the general price level

- Why do we care about inflation?

- If personal income matches inflation, people are stable. If inflation or other factors are too high,

less stability.

- People in AL..could be doing more. Could give it back – like Braddock. If my salary increases the

same as everything else, I’m even. People are stable. With Fulton teachers – 1st 2 yrs, no raises,

bonuses. Different from raises. If I’m buying stick of gum and prices go up, salary has to go up to

keep up w inflation.

- If I’m not going up, I’m not continuing teaching. Want safe retirement. Lots retire when retirement

stops.

- $1 item + 10% inflation = $1.10

- $1 item + 10% inflation + 2% factors of production = $1.12

- If our salaries went up 10%, we are covered with inflation but not special costs

Price Index

- If we remove inflation, we can see actual change in prices over time

- A price index is created to examine this

- First take one year and examine all prices (the base year)

- Next compare all subsequent yrs to that first year

- The price index expresses the price of goods and services in a given yr as a percentage of those in

the base yr

- Goods & services compared to OG yr

- Base year 1983-1985 = 100

- 2000 = 172.2

- 2012 = 228.6

- There was a 72.2% price increase from 1985 – 2000. There was a 128.6% increase in prices from

1985-2012. Almost double.

Nominal – actual #

Real – take out inflation

CPI – Consumer Price Index

- This is a govt index that look at 80,000 items in 85 different regions in America. These items are

then averaged to a base year (1982-1984) to see what the price changes are year over year

- Someone calls all these people compares prices. Same things as inflation. Call all this stuff ‘market

basket’. Takes # every month.

Computer Lab tomorrow. GDP or something else activity

Econ 10-16 Unit 4: Macroeconomics

Let’s get started. Essay tomorrow – due. Great Depression/Cinderella Man. When you walk in the door.

Don’t ask to print it.

Last few days – let’s review. Stocks – gone down in past few days. Last few months $16000 started – all

went up 7%. 30 big companies. Do magic. Get #. Prices have gone up 7% in 6 mos. In a yr – will be 14%.

Last 20 days, has gone down. 17..to 16%. Last months – has dropped – and undone first 6 mos of

progress. Reasons for decline? Obama. Ebola – yes prob. ISIS. Have this chart – give up gains. These

things happen. 1% of this – snapshot. People think the markets too high – they make profits. Cash in

stocks. How people make $$ in stock market – Wall Street. Big $$. Don’t buy stock - $100/share – I buy

it. $10k. Stock goes down to $90/share. Goes up – I make money. Wall Street – makes bet that it will go

up to a certain # by a certain date. If my bet works, I win $$. I win the ability to go back in time and go

buy it in the past and sell it at today’s price. This is how Wall Street makes big $$. Rather take risk & lose

$60 to make the same amt of $. $1000 – make. $1000 – make. Is this luck? Not exactly. Monkey throws

dart. In last 2 days – let’s see. I thought it was going to go up. I bout 400 shares. 60 cents. Market went

up. I sold it one day later for 50% more. So I made $120 in 24hrs. If I look at AAPL (Apple), July 2015

– I can make a bet that by July 2015 Apple will go up to $115. If it comes through, I’ll make money.

When numbers flash, it changes. Always changing. If it goes past this, I make more. If the #s go up, I can

make more and more and more. I’ve broke even before, but if you take a risk, you can make $$.

Other things in last few days – macroeconomics - # of jobs that are ‘vacated’ (fired or leave). I want my

unemployment $$ - help me out. Lowest level since 2000. This is a good thing People not getting

fired/laid off. Also – oil. Gas prices $3.13…cheapest in 4 yrs. Now people have more $$. UPS – more.

$50 to fill up – now $40. Mortgage rates low again. Oil in N Dakota – show- Life with Lisa Ling. Oil &

men – see what happens. Clip – on this weekend. Parts of US – moving too fast. People maing

$100,000/yr & living in car – not enough housing. Man camps – new Wild West. Thousands of men

live. CNN – Sunday at 10pm. Too many people – not enough houses. Starbucks – 6 stores a day. Other

parts of town can’t keep up. Stuff in news about all this

Taxation – Ch. 9.

Notes – few days – then nothing. Computer Lab. Video. Inflation. Last big thing till Fed Reserve.

Whole chapter – highlights. 30% of chapter. Don’t read whole thing. This is something you can talk

about – most people debate this. People talk about this a lot.

Three types of taxes

- Regressive: income goes up, percentage of income towards taxes goes down. Example – food tax

(dumb). Family earning $25,000 and other family earning $200,000 both taxed $4000 a yr on food.

Family earning $25,000 has greater proportion of their income go towards taxes. Hurts them more.

All states do taxes differently. Most taxes are regressive.

- Proportional: income goes up, taxes stay the same. Flat tax idea. Will never happen. No more IRS tax

rates. %15 and done. As time progresses, will hurt some people more than others.Opponents think

places greater burden on low-income.

- Progressive: as income goes up, percentage of taxes also goes up. This is why Romney didn’t win.

Releases tax returns. Made 22mil. Paid 15%. Others pay 28% when making $70K. But $70K only

paid few thousand. Romney pd millions. His money – unearned income. Not working – just made $$

off interest.

Laffer Curve

Tax rate 0% - govt gets $0. Tax rate is 100%. Govt will give benefits. Govt never makes $$. Want to be in

middle, but Dem & Rep never agree.

Three Criteria of Taxation

- Equity: taxes must be as fair to all groups as possible. Top 1% pay 33%. Bottom 33% pay almost

nothing. If you like being safe (military), throw some $$ in the pot. Shouldn’t you? Made $11K. Get it

all back. Shouldn’t we pay – just to live in US? Protection, etc.

- Simplicity: Tax is easy to understand. If IRS disappears, all that help us understand taxes disappear

(H&R, accountants).

- Efficient: easy to pay. Go to QT – pay tax for candy bar. You can do it in your head. Toll booth

easy? Efficient? Traffic fast – pick a lane, more traffic, look for coins, but cruise card makes it easy.

Random Pictures – bunny, rabbit stew, Smurf, Ebola, prom, gluten, star wars dogs, daughter – cone for

Halloween

Revenue Act of 1913 – 1st tax schedule. Paid 1% - most people. Today – most pay 20-30%. Bottom –

91%. Back in the day – only Rockefeller and those guys paid that much. Congress didn’t set tax brackets –

now they have. $400,000 – 40%. Clinton paid this in the 1990s.

Two Principles of Taxation

- Benefits – Received Principle: Households & businesses should purchase goods and services of govt

basically the same manner in which other commodities are bought. I’ll pay more taxes to help people

who need it. Like peeps in MS who need teeth fixed. National Parks. Not ODB style – but people

who need it.

- Ability to Pay Principle: tax burden should be ties directly to ones ability to pay, based on wealth.

Romney – this is why people didn’t like him. Low tax rate. But still – paid lots of money. People just

don’t understand it. John Kerry – wife’s family = Heinz. Don’t identify w him. G Bush – identified w

him. Want to have a drink. Fun – you can talk to him. You don’t vote for boring people.

Income Taxes

- Main thing taken out of paycheck, Progressive, the more you earn – the more you pay, called

‘withholding’, withhold the more you make. So you make more, but it’s all relative bc taxes take

more.

FICA

- Federal Insurance Contributions Act

- Ensure health & well-being

- Social Security – to provide income to those who are elderly or disabled and not in the workforce.

6.2% on earnings up to $113K

- Medicare – to provide rudimentary healthcare to the elderly who cannot afford it. Flat rate of 1.45%

with no salary limit

Lots of your $$ goes to taxes (like 45% if you add up all taxes). Biggest – federal

Other taxes

- Excise tax: tax on sale of manufacture of select goods. Govt 4th largest revenue soruce (Jack Daniels

distillery – TN). Luxury goods (over $45K jewelry, $80K cars – all different)

- Estate & Gift taxes: taxes on giving people $$ or property. Small percentage of govt revenue. Military

friend – lived in Old Town Alexandria. Mom wanted to give him a house. Get taxed on whole house.

He’ll get charged $100K in taxes. So mom & him formed corportation. Only 2 stockholders. 1

property. After 10 yrs, he owned house. He stops company – he gets house free & clear to get house.

Last notes for a few days. Now we know more stuff.

Econ 10-21 Unit 4: Macroeconomics

Few different things today. Look – like I said. I bought something for $.60. I made $1.50. If I had waited

4 more days, I would have made lots more. But still - I made $$. Perfect example. That’s how people

make $$.

Economics – primarily the study of rational thought. Ben Stein on Taxes. Was in Nixon Administration

– also, Ferris Bueller.

BS Video – Obama says I’m rich. I pay my taxes. I’m left w $.35 of every $1. I live a great life. I pay lots

of taxes. I have lots of food. There is no known theory that says raising taxes will help. Charity – I pay. I

don’t gamble. I tried to be successful. When economy recovers, maybe raise taxes. But why now? During

recession. Spending stimulates. Should lower tax rate, Spends more. Goes into debt. Then economy will

be good. Then raise tax rates. Obama – raise taxes? Why? Shorten gap btwn rich & poor. Political

stance. No logical reason. Just bc I can, doesn’t mean I should. Rich have more – lets get their $$. We’ll

help you. It’s a political thing.

Govt race coming up – Nathan Deal. Highest unemployment in nation – GA. Nathan Deal should be

losing – right. But let’s keep the incumbent? Goes against normal thought. Same thing w Obama. Raise

taxes. But no reason. It’s politics. I like warm fuzzies. Makes no economic rational sense. But it sounds

good. Small lesson – we don’t vote rationally as a country.

You Tube – How Economic Machine Works: Buyers/sellers = borrowers/lenders. Interest rates high –

loans difficult to get. We don’t buy stuff, employ people. Wants $$ for house, car, business, school.

Student loan bubble – lots of loans out there. When borrowers promise to repay, and borrowers belive

them, credit is created. Immediately turns in to debt. In future, interest + loan paid, transaction settled.

Spending drives economy. When debt is paid. You spend. When you spend more, someone else earns

more. What person produces. When someones income rises, can borrow more. More credit. Ability to

repay & collateral. Ability to repay. If he can’t, has assets to sell. House – take house. House prices never

go down (besides recently). School loans – nothing to back up. Take your paycheck. 20% etc. Increased

income, increased borrowing, increased spending, then cycles again. Economic growth. Cycles. Have to

give something in order to get something. Productivity growth. Raises living standards. Long run. Credit –

short run. Productivity – not big in economic swings. 5-8yrs – recession. 75-100yrs – credit cycle that

needs to catch up. Due to how much credit there is. Borrow from future you. Money is only a fraction of

economy. Most of economy is credit. Fed Res – controls $$ out there. At some pt, you have to sepnd

less than you make. Company – stops spending – fires people. Like teachers – can cut teachers. Raise

class sizes, save $$.

5 Types of Unemployment

House mother/father – not in labor pool. Less people in labor pool right now. Humans like you – media

– Fed Res – avg people don’t understand this

- Frictional – Good unemployment. Graduates. 1mil graduate – lots. Let’s make this up. No job

through no fault. Book has another definition. No outside influence. New graduates. Some school

graduating this month. GED – who knows. Some of you will go to internship, home w parents, this is

almost good employment. Expected. 5-5.5% unemployed. This is a good rate. Fully employed nation.

I graduated, other people do. Moving btwn two things – like friction. Get it. Stay at home parents –

back in workforce later. Then, goes back to job. Deciding to work again. One zone to another. Also –

people that quit. One job to another. In btwn jobs.

- Structural – built on the structure of society. Not fast. iPhones – 7 yrs amazing. Not fast. Your job is

not needed. Sad. Sounds sad. I just don’t need you. Im trained. Sorry. Carriage makers. Blacksmiths.

Saddle makers. Artsy things. Cowboys – yeah. Nobody needs them anymore. Walkman repair guy.

Portable radios. Tape cassette. On my belt. Portable CD players. MP3 players. Size of wallet. Normal

iPhone. Held 14 songs. Now same space holds thousands. What if tomorrow – we would have solar

panels. Who would get mad. Oil companies. Decimated. Not needed.

- Cyclical – Jobs lost based on business cycles. Purchase & use immediately – food. Not cyclical.

Cyclical – durable goods. Lasts 3 or more yrs. Drive a car until it dies. Whole car done. No one? My

last car – that way. Honda Accord – 2 yrs ago. 1st kid in K. Now another one in K – saving $900.

Then car dies. Now car payment. There goes my $$. Trade in value $500. Not even worth that.

Economy’s bad – I hear drip on dishwasher. I’ll wait. Durable goods get hit first – toilet paper,

toothpaste – don’t get hit.

- Technological – Automation. You are not needed, but your job is. Sad. Sad as structural. Like oil

industry. If I have Leaf (car). I have solar panels. I don’t need oil. I’m done w it. Currently – toll

collectors. I’m from NJ. $18 tolls up there. Easy Pass up there. Those people had jobs. Can replace w

automation. They formed union. As they retire, replace them with machine. Most automated up

there. Fears people have. Fear that some of these unemployment factors will increase. Uber – 20

people creating app. Code. Don’t need that many people.

- Seasonal – Relatively self-explanatory. Jobs based on weather/season, calendar. Custom. Doesn’t have

to be fall. Ice cream places. Construction. Jersey shore – lifeguards. Halloween shops. Like mold.

Warm fuzzy – 3 pieces of paper. 3 flaps. Fold. 6 flaps. Staple together. Awesome flip book. Title.

Structural. Others. List. Do type. Use on next test. Test is Oct. 28.

Econ 10-23 Unit 4: Macroeconomics

Few different things today. Look – like I said. I bought something for $.60. I made $1.50. If I had waited

4 more days, I would have made lots more. But still - I made $$. Perfect example. That’s how people

make $$.

Economics – primarily the study of rational thought. Ben Stein on Taxes. Was in Nixon Administration

– also, Ferris Bueller.

BS Video – Obama says I’m rich. I pay my taxes. I’m left w $.35 of every $1. I live a great life. I pay lots

of taxes. I have lots of food. There is no known theory that says raising taxes will help. Charity – I pay. I

don’t gamble. I tried to be successful. When economy recovers, maybe raise taxes. But why now? During

recession. Spending stimulates. Should lower tax rate, Spends more. Goes into debt. Then economy will

be good. Then raise tax rates. Obama – raise taxes? Why? Shorten gap btwn rich & poor. Political

stance. No logical reason. Just bc I can, doesn’t mean I should. Rich have more – lets get their $$. We’ll

help you. It’s a political thing.

Govt race coming up – Nathan Deal. Highest unemployment in nation – GA. Nathan Deal should be

losing – right. But let’s keep the incumbent? Goes against normal thought. Same thing w Obama. Raise

taxes. But no reason. It’s politics. I like warm fuzzies. Makes no economic rational sense. But it sounds

good. Small lesson – we don’t vote rationally as a country.

You Tube – How Economic Machine Works: Buyers/sellers = borrowers/lenders. Interest rates high –

loans difficult to get. We don’t buy stuff, employ people. Wants $$ for house, car, business, school.

Student loan bubble – lots of loans out there. When borrowers promise to repay, and borrowers belive

them, credit is created. Immediately turns in to debt. In future, interest + loan paid, transaction settled.

Spending drives economy. When debt is paid. You spend. When you spend more, someone else earns

more. What person produces. When someones income rises, can borrow more. More credit. Ability to

repay & collateral. Ability to repay. If he can’t, has assets to sell. House – take house. House prices never

go down (besides recently). School loans – nothing to back up. Take your paycheck. 20% etc. Increased

income, increased borrowing, increased spending, then cycles again. Economic growth. Cycles. Have to

give something in order to get something. Productivity growth. Raises living standards. Long run. Credit –

short run. Productivity – not big in economic swings. 5-8yrs – recession. 75-100yrs – credit cycle that

needs to catch up. Due to how much credit there is. Borrow from future you. Money is only a fraction of

economy. Most of economy is credit. Fed Res – controls $$ out there. At some pt, you have to sepnd

less than you make. Company – stops spending – fires people. Like teachers – can cut teachers. Raise

class sizes, save $$.

5 Types of Unemployment

House mother/father – not in labor pool. Less people in labor pool right now. Humans like you – media

– Fed Res – avg people don’t understand this

- Frictional – Good unemployment. Graduates. 1mil graduate – lots. Let’s make this up. No job

through no fault. Book has another definition. No outside influence. New graduates. Some school

graduating this month. GED – who knows. Some of you will go to internship, home w parents, this is

almost good employment. Expected. 5-5.5% unemployed. This is a good rate. Fully employed nation.

I graduated, other people do. Moving btwn two things – like friction. Get it. Stay at home parents –

back in workforce later. Then, goes back to job. Deciding to work again. One zone to another. Also –

people that quit. One job to another. In btwn jobs.

- Structural – built on the structure of society. Not fast. iPhones – 7 yrs amazing. Not fast. Your job is

not needed. Sad. Sounds sad. I just don’t need you. Im trained. Sorry. Carriage makers. Blacksmiths.

Saddle makers. Artsy things. Cowboys – yeah. Nobody needs them anymore. Walkman repair guy.

Portable radios. Tape cassette. On my belt. Portable CD players. MP3 players. Size of wallet. Normal

iPhone. Held 14 songs. Now same space holds thousands. What if tomorrow – we would have solar

panels. Who would get mad. Oil companies. Decimated. Not needed.

- Cyclical – Jobs lost based on business cycles. Purchase & use immediately – food. Not cyclical.

Cyclical – durable goods. Lasts 3 or more yrs. Drive a car until it dies. Whole car done. No one? My

last car – that way. Honda Accord – 2 yrs ago. 1st kid in K. Now another one in K – saving $900.

Then car dies. Now car payment. There goes my $$. Trade in value $500. Not even worth that.

Economy’s bad – I hear drip on dishwasher. I’ll wait. Durable goods get hit first – toilet paper,

toothpaste – don’t get hit.

- Technological – Automation. You are not needed, but your job is. Sad. Sad as structural. Like oil

industry. If I have Leaf (car). I have solar panels. I don’t need oil. I’m done w it. Currently – toll

collectors. I’m from NJ. $18 tolls up there. Easy Pass up there. Those people had jobs. Can replace w

automation. They formed union. As they retire, replace them with machine. Most automated up

there. Fears people have. Fear that some of these unemployment factors will increase. Uber – 20

people creating app. Code. Don’t need that many people.

- Seasonal – Relatively self-explanatory. Jobs based on weather/season, calendar. Custom. Doesn’t have

to be fall. Ice cream places. Construction. Jersey shore – lifeguards. Halloween shops. Like mold.

Warm fuzzy – 3 pieces of paper. 3 flaps. Fold. 6 flaps. Staple together. Awesome flip book. Title.

Structural. Others. List. Do type. Use on next test. Test is Oct. 28.

Econ 10-24 Unit 4: Macroeconomics

Small things today. Budget also. All out money goes to … test Tuesday 10-28.

Mandatory spending

Congress does not have to approve every year

Bill comes in. I pay it. Mortgage – I pay it, or I lose house. Easy. Example – Social Security. Just

what they have to do. They can vote to get rid of SS. They can vote how they spend.

Discretionary spending

Congress has to approve yearly

Similar to GA & other states – gay marriage. 12 states – cannot have same-sex marriage. Now

have to write new law. Military – good example. Have to get rid of ammunition – have to shoot it

off in 10 days so we have to have shot 80,000 rounds – use it or lose it.

14 things we spend on it: (we spent $1380bil total on this stuff) – it’s in order

1. National defense - $706.8 billion (51% - of discretionary)

2. Education - $130 billion (9.4%)..if we cut regulations on these, we can decrease spending (critics)

3. Transportation - $104.4 billion (7.2%)

4. Income security - $69.9 billion (5%)

5. Health - $67.0 billion

6. International affairs - $53.1 billion

7. Administration of justice

8. Veteran benefits - $52.1 billion

9. Natural resources - $42.6 billion

10. Space & technology - $32.7 billion

11. Regional development - $26.4 billion

12. Energy - $24.1 billion

13. General government - $21.3 billion

14. Agriculture - $6.5 billion

Quick ‘quiz’-ish. Socratic site. M.socrative 659539. Answer 3 Qs

Deficit – annual..going down? 48% said yes. Yes – we are. 2.8% now (9.8% 2009) Should lower

taxes during recession. Congress does not know what to do. Cut the budget. Cannot figure it out in

6 mos? Still can’t figure it out. So automatic deductions. BC of their inactivity, we saved $$.

Most of govt spending – SS 21%. Medicare 13%. Mandatory spending – 60%-ish. Mandatory

spending – have to make law about what to spend on. Non-defense discretionary – 18% of total

budget.

Debt vs deficit

Deficit – amt that you overspend (in a yr, month, etc) – Clinton (surplus), spend more than we

have – don’t lower taxes…pay off national debt, stimulate economy in major ways

Debt – all combined deficits (continual)

Brackets – 16 names, pick kids’ names, bball, football, one winner, best will win. Defense, education –

bye (BC they are the biggest in spending), science & tech – most impt w $$ (different every group who

votes)

Econ 10-27 Unit 4: Macroeconomics

Test pushed to Wed. Study guide today.

First - oil men in NE. Other side of the equation. Cheap oil. Oil - always in top 3. Losing $$ in past few

wks. Scared - lots of energy needs taken care of in natural resources. Puts people out of work. Oil - in this

range for 2015. Cheap gas. Who benefits? Transportation - airlines. USPS and UPS. Amazon helped

them a lot. Saving rewards from gas prices going down. UPS might have great 3 mo quarter. Shouldn’t

make any left turns. Don’t idle. Make all right turns. Beneficiary. Europe - not doing as well as we

thought. Global economy - ok. Too much supply - not enough demand. That’s where we’re going with

this. Tells you how much oil refineries operate. Don’t care if everyone in Amer saves $$. Cheaper gas

prices.

Ch. 8. Aggregate Supply

Aggregate Accounting (or national income accounting) is a set of rules and definitions for measuring

ecomonic activity in the aggregate ecomony - that is, in the economy as a whole.

So we’re talking about all economic activity as a whole. PhD in stats - that’s you. That and politics.

Why do we need to know how much US is making? Not enough/too much - politicians should act

A way of measuring total, or aggregate production. I am producing now bc I am getting pd

Politicians - Rep win Senate - what happens - cut everything? No. Besides Obama vetoing, cant run

over everything & everybody. Way of measuring whether economy is good or bad

This is on test - GDP - all goods & services. Total value of all final goods & services in an economy

in a one year period

4 parts of GDP (expenditure - groups who spend)

1. Consumption (consumers) (C) - spending by households on goods & services, go to store every day.

Always need cheese. Whatever - prob buy something 360 days/yr. Gum whatever. 70% of all US

spending from consumers.

2. Investment (I) - spending for the purpose of add’l production - Apple opens new factory. El Porton

7 or 8 restaurants. All businesses out there. 10%ish

3. Government (G) - goods & services the govt buys. Police stations etc. 7%ish

4. Net exports (NX) - spending on exports (X) minus spending on imports (M). Other countries

buying our stuff. We make stuff - not crap. Airplanes. Bulldozers. Accounting firms.

Components of GDP

- Since all production is categorized into one of these four divisions by adding up 4 categories, we get

total production of US goods & services

- GDP = C+I+G+ (X-M)

US Debt Clock.org Govt comes out w seconds divided by how much debt we had last quarter. Spend a

little more than we make. Every yr make 17 trillion. But we’re 17.4ish trillion in debt. $480bil more.

Taxes going up. Not percent - more people. Eventually it will flip. SS & Medicare stay same (unless law

changes). Student loan, credit card debt. Student loan - going faster than cc debt. CC debt going down.

GA debt - increasing. Spending increasing.

Econ 10-28 Unit 4: Macroeconomics

Test tomorrow. Few new terms - 3.

Govt gets involved during recession. Remember PPF/PPC graph. Capital goods, consumer goods.

Capital - tools. I want to make factories. Consumer goods - cookies. Bc I like them. So this is our curve.

This is the line of where we can possibly produce as a country. Where are we as a country. There.

So something’s wrong - were not producing as much as we can as a country. In a recession, what will we

see. Unemployment level. Peole not producing where they should be producing. If I’m this blue dot is 10

and I’m underemployed, my GDP might be 12. GDP gap - what should exist vs what does exist. But govt

can do things. Like what. To get us out of recession. Next 2 terms to look at.

Fiscal Policy - govt taxing & spending

I’m under-producing in a recession. My aggregate demand is

relatively low. Everything of everyone in country. US demand

curve. Like market demand. Similar. Aggregate supply line. If I’m

in a recession, goods aren’t in demand as much, I’m not supplying

as much. If this is where I am now in a recession, this is where is

am. GDP definition - just goods times price. Easy. I can’t shift

this. But govt can. How. Subsidies. Govt gives you $$. What else -

infrastructure. Cut taxes. Cut business taxes. Dem thing. Lower

taxes in recession. Supply curve shifts to right. Cut also your taxes

too. Demand shifts to the right. But price did not change too

much. Govt gives you $$ & businesses. Govt goes into debt. New

roads, new dams. Need $$ for infrastructure. Cities can get it.

Increase demand & production. Against dem/rep but still also, for them.

Monetary Policy - lowering actual amt of $$ out there.

Also, how else can I stimulate economy? Cash in Amer?

How much? From video. $3tril in cash. $50tril credit.

Lots more credit. Static. Not moving. Supply - $3tril. Also

- demand for $$. I need a house. I demand $$. I get a

loan. Interest rates on y-axis. Price of $$ is interest. 6% to

get my loan. Recession - it helped me. I kept my job.

Home loan rates down. Money needs to be less scarce. $1tril in circulation. Later - I could refinance my

house. 3.2% I saved $100,000 in interest. I’m happy. Now people can afford house. Construction,

mortgage brokers, plumbers, lots of jobs - doesn’t just help consumer. Helps all economy. Need to raise

interest rates…now this is the push. On the news. Next unit - Ch 15. Short chapter - but lots of info.

Controversial.

Index card - one side - what do you not know…I will let you use that. 15 mins.

Unit 4 Macroeconomics Study Guide

This is Ch. 9, 10, 13, 14. Use your book. Also – notes. Organize your notes by date. Your book is online

also. http://glencoe.com/sec/socialstudies/economics/econprinciples2001/

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.

Largest sector of macroeconomy -

Commodities –

External shock –

Progressive tax –

Flat tax –

Excise tax –

FICA -

Supply-side economics –

Welfare -

b. Define Gross Domestic Product (GDP), economic growth, unemployment, Consumer Price

Index (CPI), inflation, stagflation, and aggregate supply, and aggregate demand.

Formula for GDP –

Aggregate supply decreases -

Aggregate demand –

GDP gap -

Decline in real GDP per capita –

Unemployment rate -

Full employment rate –

Index that reports on price changes for goods and services –

c. Explain how economic growth, inflation, and unemployment are calculated.

Economic growth benefits govt –

Benefits of long-term economic growth –

Causes of inflation –

Effects of inflation -

Creeping inflation -

Hyperinflation -

Galloping inflation -

Deflation -

Technological unemployment –

d. Identify structural, cyclical, and frictional unemployment.

Unemployment related to business cycle ups & downs -

Seasonal unemployment -

e. Define the stages of the business cycle; include peak, contraction, trough, recovery, expansion as

well as recession and depression.

Business cycle graph -

Peak -

Trough -

Depression –

Recession -

Business cycle since WWII –

f. Describe the difference between the national debt and government deficits.

Mandatory spending –

Govt spending in 1940s –

Unit 4 Macroeconomics Study Guide

This is Ch. 9, 10, 13, 14. Use your book. Also – notes. Organize your notes by date. Your book is online

also. http://glencoe.com/sec/socialstudies/economics/econprinciples2001/

SSEMA1 The student will illustrate the means by which economic activity is measured.

g. Explain that overall levels of income, employment, and prices are determined by the spending

and production decisions of households, businesses, government, and net exports.

Largest sector of macroeconomy -

Commodities – goods/stuff/things you can trade/products

External shock – terrorism, war, disease outbreaks

Progressive tax – make more $$, pay more taxes

Flat tax – proportional tax

Excise tax – tax on certain goods

FICA – SS & Medicare

Supply-side economics – increase govt involvement

Welfare - programs that assist people with low incomes

h. Define Gross Domestic Product (GDP), economic growth, unemployment, Consumer Price

Index (CPI), inflation, stagflation, and aggregate supply, and aggregate demand.

Formula for GDP – consumption + investment + government spending + foreign sector (net

exports)

Aggregate supply decreases -

Aggregate demand – consumers save less & spend more

GDP gap -

Decline in real GDP per capita – population decline during recession

Unemployment rate - % of unemployed workers divided by total workers

Full employment rate – 5.5%

Index that reports on price changes for goods and services – consumer price index

i. Explain how economic growth, inflation, and unemployment are calculated.

Economic growth benefits govt – making tax available for govt

Benefits of long-term economic growth – increase standard of living, employment, international

growth

Causes of inflation – increased price of inputs, increased labor costs, increased cost of energy

Effects of inflation – decreased purchasing power, change in spending habits

Creeping inflation - inflation of 1-3%/year

Hyperinflation - inflation of 500%+/yr

Galloping inflation - intense inflation (100-300%)

Deflation - decrease in prices

Technological unemployment – workers replaced by machines

j. Identify structural, cyclical, and frictional unemployment.

Unemployment related to business cycle ups & downs - cyclical

Seasonal unemployment - unemployment due to weather

k. Define the stages of the business cycle; include peak, contraction, trough, recovery, expansion as

well as recession and depression.

Business cycle graph -

Peak – real GDP stops increasing

Trough - real GDP stops going down

Depression – economy state of high unemployment, shortages, too much production

Recession - real GDP declines for 2 quarters in a row

Business cycle since WWII – extended expansions w brief recessions

l. Describe the difference between the national debt and government deficits.

Mandatory spending – interest on federal debt

Govt spending in 1940s – increased bc of WWII