economics / unit iii - virtual enterprises international how people and societies use limited...
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ECONOMICS/UNITIII“ThebusinessofAmericaisbusiness”–CalvinCoolidge
TableofContents
LESSON1:TheBasicEconomicProblem:TheMismatchofUnlimitedWantsandNeedsandLimitedEconomicResources;anIntroductiontoSustainability
HANDOUTIII.1.A,“Illustration”
HANDOUTIII.1.B,“Scarcity”
HANDOUTIII.1.C,“TheImportanceofSustainability”
LESSON2:DifferentEconomicSystems
HANDOUTIII.2.A,“TheShipwreck”
HANDOUTIII.2.B,“EconomicSystems”
HANDOUTIII.2.C,“MixedEconomy”
LESSON3:TheFactorsofEconomicProduction
HANDOUTIII.3.A,“Chart”
HANDOUTIII.3.B,“GroupWork”
HANDOUTIII.3.C,“Application”
HANDOUTIII.3.D,“SustainabilityandtheFactorsofProduction”
LESSON4:PrinciplesoftheU.S.EconomicSystem
HANDOUTIII.4.A,“Drawing”
HANDOUTIII.4.B,“Principles”
HANDOUTIII.4.C,“BuildingBlocks”
HANDOUTIII.4.D,“Critics”
LESSON5:SupplyandDemand
HANDOUTIII.5.A,“Q&A”
HANDOUTIII.5.B,“Definitions”
HANDOUTIII.5.C,“LawofDemand”
HANDOUTIII.5.D,“LawofSupply”
HANDOUTIII.5.E,“ElasticityofDemandandSupply”
(continued)
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
TableofContents:pageii
LESSON6:MarketStructureandPrices
HANDOUTIII.6.A,“Competition”
HANDOUTIII.6.B,“DifferentMarketStructures”
HANDOUTIII.6.C,“Advantages&DisadvantagesofMonopolies”
HANDOUTIII.6.D,“Advantages&DisadvantagesofMonopolisticCompetition”
HANDOUTIII.6.E,“Advantages&DisadvantagesofOligopolies”
LESSON7:TheCircularFlowofEconomicActivities
HANDOUTIII.7.A,“Diagram”
HANDOUTIII.7.B,“GovernmentandthePublic”
HANDOUTIII.7.C,“FlowofEconomicActivity”
HANDOUTIII.7.D,“TheHouseholds”
HANDOUTIII.7.E,“Businesses”
HANDOUTIII.7.F,“Government”
LESSON8:MeasuringEconomicActivity
HANDOUTIII.8.A,“Doctor”
HANDOUTIII.8.B,“Beginner’sGuidetoEconomicIndicators”
HANDOUTIII.8.C,“ImportantIndicators”
HANDOUTIII.8.D,“Application”
HANDOUTIII.8.E,“Flaws”
LESSON9:BusinessCycle
HANDOUTIII.9.A,“Chart”
HANDOUTIII.9.B,“Interview”
HANDOUTIII.9.C,“Phases”
HANDOUTIII.9.D,“Causes”
LESSON10:TheEconomicRoleofGovernment
HANDOUTIII.10.A,“StudentPoll”
HANDOUTIII.10.B,“GovernmentPrograms”
HANDOUTIII.10.C,“Laissezfairevs.Progressivism”
HANDOUTIII.10.D,“Debate”
(continued)
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
TableofContents:pageiii
LESSON11:Taxation
HANDOUTIII.11.A,“Cartoon”
HANDOUTIII.11.B,“ReasonsforTaxes”
HANDOUTIII.11.C,“TooMuchinTaxes?”
HANDOUTIII.11.D,“Chart”
HANDOUTIII.11.E,“Q&A”
LESSON12:TheFederalReserveandtheBankingSystem
HANDOUTIII.12.A,“BookCover”
HANDOUTIII.12.B,“CentralBanks”
HANDOUTIII.12.C,“MajorRoles”
HANDOUTIII.12.D,“HowtheFedIsOrganized”
LESSON13:FiscalPolicy
HANDOUTIII.13.A,“Poll”
HANDOUTIII.13.B,“SlidePresentation”
HANDOUTIII.13.C,“AutomaticFiscalPolicies”
HANDOUTIII.13.D,“SupplySideEconomics”
HANDOUTIII.13.E,“Editorial”
LESSON14:BusinessintheGlobalEconomy
CULMINATINGACTIVITY:“EconomicsJeopardy”
HANDOUTIII.14.A,“Blog”
HANDOUTIII.14.B,“Chart”
HANDOUTIII.14.C,“SmallBusinesses”
HANDOUTIII.14.D,“Reading”
UNITIII/LESSON1
TheBasicEconomicProblem:TheMismatchofUnlimitedWantsandNeedsandLimitedEconomicResources;anIntroductiontoSustainability
TimeFrame1day
StandardsNES:Economics–Describethenatureofeconomicsandeconomicactivity
ExplainhowsocietyusesscarceresourcestoproduceanddistributegoodsandservicesNES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionHowiseconomicsrelatedtotheproblemofscarcity?
MaterialsHandoutsIII.1.A‐C
ObjectivesStudentswillbeableto:
Defineeconomicsandexplainhowitrelatestoneeds,wants,andscarcity.
Explainandgiveexamplestoprovewhyeveryone’swantsandneedscannotbesatisfied.
Discusstheimportanceofsustainabilityandhowitrelatestomeetingpeople’sneedsandwants.
TeacherBackgroundEconomicshasbeendefinedashowpeopleandsocietiesuselimitedresources(bothnaturalandhuman)tomeettheirunlimitedwantsandneeds.Theproblemofmeetingthesewantsandneedsisonewhichallpeopleface,nomatterhowwealthyorpoortheyare.Itisaproblemthatrequiresustomake
choicesastohowwewillusethefactorsofproduction(i.e.,land,labor,andmanagement).Toensurethatwewillalwaysbeabletomeetourmostvitalneedsandwants,humankindisstudyingsustainability,theefforttopreserveandrationnaturalandhumanresources.
Thelessonbeginswithadiscussionofhowhumankind’sneedsandwantsaresurpassingourlimitedresources.ThisconceptisaddressedinHandoutIII.1.A,inwhichstudentsareaskedtoexplaintheillustrationfocusingontheconceptofscarcity,thebasisforthestudyofeconomics.InHandoutIII.1.B,
studentswillreadanexplanationofscarcity,afterwhichtheywillbeaskedtoanswerquestionsabouthowscarcityhasaffectedtheirlives.Finally,HandoutIII.1.Cpresentsaneditorialaboutsustainability,whichtheclasswillbeaskedtoanalyze.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON1:page2 TeachingStrategies/SupportingActivities Writethefollowingontheboard:
“NeedsandWants.”Askstudentstoexplaintheiranswerstothefollowingquestions:
– Whatdothesetermsmeantoyou?
– Howwouldyouidentifyyourmostimportantneedsandwants?
– Whydosomesaythatpeople’sneedsandwantsareunlimited?
– Explainsomeoftheproblemsthatarisewhenpeopletrytomeettheirunlimitedneedsandwants.
DistributeHandoutIII.1.A,“Illustration.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatdowelearnfromthishandout?
– Whydoes“A”outweigh“B”?
– Whydon’tthescalesbalance?
– Basedonthiscartoon,howwouldyoudescribetheproblemofscarcity?Canyougiveareal‐lifeexampletoshowthatwehaveonlylimitedresourcestomeetourunlimitedneedsandwants?
– Whyisthiscentralproblemsosignificant?
– Howdoesthefactthatallyourneedsandwantscannotbemetaffectyourlife?
DistributeHandoutIII.1.B,“Scarcity.”Havestudentscompletetheexerciseonthehandout,then
havethemexplaintheiranswerstothefollowingquestions:
– Whatdidyoulearnaboutscarcityfromthisreading?
– Whatdoesthereadingmeanwhenitsaysthatresourceslikeland,labor,andcapitalarescarce?
– Whichofthefollowingsuggestionsservesasthebestwayfordealingwiththeproblemofscarcity?
1)Thegovernmentshoulddeterminewhogetsthescareresources.
2)Scarceresourcesshouldbegiventothosepeoplewiththegreatestneeds.
3)Scarceresourcesshouldbegiventopeoplewhohavethemoneytopayforthem.
– Inoureconomy,peoplewhohavethemoneygetthescarceresources;isthisthebestwayto
dealwiththeproblemofscarcity?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON1:page3 DistributeHandoutIII.1.C,“TheImportanceofSustainability.”Havestudentscompletetheexercise
onthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatdidyouidentifyasthemajoropinionstatedinthiseditorial?
– Whatargumentsdidyoufindtosupporttheopinionstatedinthiseditorial?
– Towhatextentdoyouagreewiththeeditorialwriterabouttheimportanceofsustainability?
– Hownecessarydoyouthinkitisthatwepreserveresourcestodayforfuturegenerations?
– Whataresomeoftheproblemswefaceintryingtosupporttheconceptofsustainabilityintoday’sresource‐thirstyworld?
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
Howshouldwedealwiththefactthatwecannothaveallthethingsweneedandwant?
FollowUpAskstudentstoresearchthetopicofsustainability.Havestudentsbringtoclassaneffectiveideabasedonthatresearchrelatedtosustainingourpreciousnaturalandhumanresources.Aspartoftheclass
discussion,askstudentstoexplaintheiranswerstothefollowingquestions:
Whatisoneeffectiveidearelatedtosustainability?
Whydoyouthinkthisideaissoeffective?
Arewedoingenoughtodaytopromotesustainability?
Whatadditionalthingscanwedotopromotesustainability?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON1:page4
HandoutIII.1.A,“Illustration”Directions:Studytheillustrationbelow,includingthetitleandcaption,andanswerthequestionsintheexercise.
Scarcity: The Central Problem of Economics
“The scales do not balance.”
Exercise:
1. Whatisthetitleofthisillustration? ____________________________________________________
2. Whatdoesthecaptionundertheillustrationsay? ________________________________________
3. Whydoes“A”outweigh“B?” _________________________________________________________
4. Whydon’tthescalesbalance? ________________________________________________________
_________________________________________________________________________________
5. Basedontheillustration,explain“scarcity.”______________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
A All the needs and wants of people around the world
B The resources available to meet
people’s needs and wants
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON1:page5
HandoutIII.1.B,“Scarcity”
Directions:ReadtheQ&Abelowandcompletetheexerciseatthebottomofthepage.
Q. Whatdoeseconomicshavetodowithscarcity?
A. Economicsisallaboutscarcity,aproblemthathasexistedeversincethebeginningofhumankind,aproblemfacedbyrichandpoor,andaproblemconfrontingbothindividualsandsocieties.
Q. Whatisscarcity?
A. Scarcity,ingeneralterms,isbasicallyalackofsupplyorashortage.Accordingtoeconomics,scarcityreferstotheshortageofresourcesavailabletomeettheunlimitedneedsandwantsoftheentirepopulation.Inotherwords,scarcitycanbedefinedastheexcessofhumanwantsoverwhatcan
actuallybeproduced.
Q. Areallresourcesscarce?
A. Thescarceresourceswearetalkingaboutarethefactorsofproduction.Amongthemostimportantare:
Labor–theworkersavailabletoproducegoodsandservices.Land&RawMaterials–therawmaterials,etc.,usedtoproducegoodsandservices.Capital–theamountofmoneyavailableforinvesting.
Inspiteofalltheabove‐mentionedresources,therearesomeresourcesthatareconsideredtobeunlimitedandtheyareknownas“freegoods.”Airandwaterareconsideredtobe“freegoods.”Thisisbecausetheyarefreelyavailabletothepopulation.However,itshouldbesaidthateventhough
airandwaterareconsideredtobefreegoods,forsomenationsairandwaterareconsideredtobescarce.Thisisbecausetheairandwateraroundthemarepolluted,andinordertoproducepurifiedairandwatertheybasicallyhavetouseresources.Forthosecountries,airandwaterarenolonger
freegoodsbutinsteadconsideredtobeeconomicgoodsbecausetheyarescarce.
Q. Whyisscarcitycalledthecentralproblemofeconomics?
A. Ifalltheresourceswereunlimitedor,inotherwords,ifthereweresufficientamountofresourcesto
fulfillalloftheever‐changingdemandsofthepeople,thenofcoursethepeoplewouldhavefulfilledtheirneedsandwantswithoutanyproblem.Butinrealitythisisnotthecase.That'swhyscarcityhasbecomeaproblem,thuspavingwayforalloftheeconomicissuesfacedbytheworldtoday.
Adaptedfrom:http://www.articlesbase.com/management‐articles/economics‐understanding‐the‐problem‐of‐scarcity‐2181754.html
Exercise:Inthespacebelow,suggestaquestionaboutscarcitythatyouwouldliketoask.
Q: __________________________________________________________________________________
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON1:page6
HandoutIII.1.C,“TheImportanceofSustainability”
Directions:Aneditorialisanessayexpressinganopinion.Readtheeditorialbelowandcompletetheexercisethatfollows.
In the past, the entire human population was small and civilizations had very few
needs. At that time, natural resources seemed limitless because the capacity of nature to regenerate was much higher than the rate at which human beings used up resources. Today, our needs are much greater—some would say our needs are unlimited—and we are painfully beginning to learn that environmental resources to meet those needs are limited and are quite sensitive to everything that we do. We are starting to experience the effects of the actions of generations that came before us.
To make sure that future generations will not experience a situation worse than ours, we need to be aware of the ideals and requirements of sustainability. Sustainability is the ability to maintain a certain status or process in existing systems. Sustainability is important because all the choices we pursue and all the actions that we make today will affect everything in the future.
For example, if we continue wasting water and polluting the dwindling supply of fresh water that we have today, we leave future generations with no other choice than to desalinate saltwater or treat contaminated water for their consumption and daily use. We can also be assured that, if that happens, all life that depends on clean fresh water will become extinct.
The same goes with the supply of soil that we currently have. Without proper care, our soils can easily lose quality enough that they will no longer be able to encourage growth and sustain life. If that happens, future civilizations will be void of crop and other natural sources of food. They will then have no other choice but to create man-made sources for nourishment and sustenance.
The two examples described above may seem frightening but, in fact, those are not the worst circumstances we can leave the future of mankind. If clean water and good soil become scarce enough, all life on Earth can become extinct. Keep in mind that this does not just apply to soil and water. The fact is that all resources, including human resources, are becoming scarce and being outweighed by our unlimited needs and wants.
As we become aware, we need to put what we learn into action, as that is the only way we can allow nature to catch up with the rate at which our requirements grow. This does not mean having to stifle human development. On the contrary, it means sustaining the supply of resources so that we can, in turn, sustain human development.
We need to make sound decisions at present in order to avoid limiting the choices of generations to come. Understanding and valuing sustainability will help us make those sound decisions.
Adaptedfrom:http://www.benefits‐of‐recycling.com/whyissustainabilityimportant.html
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON1:page7
HandoutIII.1.C,“TheImportanceofSustainability”(continued)
Exercise:Inthespacebelow,identifyone,majoropinionstatedinthiseditorial.Then,listtwo
argumentsofferedintheeditorialtosupporttheopinionyouidentified.
Opinion stated in the editorial:
Argument #1 supporting the opinion stated in the editorial:
Argument #2 supporting the opinion stated in the editorial:
UNITIII/LESSON2
DifferentEconomicSystems
TimeFrame2days
StandardsNES:Economics–Explainthetypesofeconomicsystems(market,traditional,command,andmixedeconomies)
Describehowsocietyusesscarceresourcestoproduceanddistributegoodsandservices
NES:Skills–FollowdirectionsApplyeffectivelisteningskills
Makeoralpresentations
GuidingQuestionHowdothedifferenteconomicsystemsanswerthefundamentaleconomicquestions?
MaterialsHandoutsIII.2.A‐C
ObjectivesStudentswillbeableto:
Defineandgiveexamplesofthedifferenteconomicsystems.
Identifythefundamentalquestionsconfrontingalleconomies.
DrawconclusionsastowhytheUnitedStatesisidentifiedashavinga“mixed”economy.
Drawconclusionsandgiveexamplestoprovewhydifferenteconomicsystemsanswerthefundamentaleconomicquestionsdifferently.
TeacherBackgroundEveryeconomicsystemdealswiththreefundamentalquestions:Whatshouldbeproduced,howshould
itbeproduced,andwhoshouldgetwhatisproduced?Thesequestionsareanswereddifferentlybythethreepredominanttypesofeconomicsystems:thetraditionaleconomy(inwhichdecisionsaremadebasedontradition),themarketeconomy(inwhichdecisionsaremadebybusinessesandconsumers
actingaccordingtoindividualneedsandwants),andthecommandeconomy(inwhichdecisionsarebasedupongovernmentdictates).
InHandoutIII.2.A,theclasswilllearnaboutthethreefundamentaldecisionsfacingsocieties.Handout
III.2.Bpresentsthethreedifferenteconomicsystemsandasksstudentstoexplainhoweachsystemanswersthethreefundamentalquestions.Finally,theclasswillexaminethecharacteristicsofamixedeconomysuchastheonethatexistsintheU.S.today.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON2:page2
TeachingStrategies/SupportingActivities DistributeHandoutIII.2.A,“TheShipwreck.”Havestudentscompletetheexerciseonthehandout,
thenhavethemexplaintheiranswerstothefollowingquestions:
– Howwouldyouhaveansweredthethreequestionsposedintheexerciseonthehandout?
– Whyarethreequestionsmentionedinthehandoutconsideredthefundamentaleconomic
questionsthatallsocietiesmustanswer?
– Whichofthesethreequestionsisthemostimportantforasocietytoanswer?Whichquestionwouldcausethegreatestdispute?
DistributeHandoutIII.2.B,“EconomicSystems.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Inyourownwords,howwouldyoudescribehowthefollowingeconomicsystemsdiffer:traditional,market,andcommandeconomies?
– Whatdoyouseeasthegreateststrengthofeachoftheeconomicsystems?
– Whatdoyouseeasthegreatestweaknessofeachoftheeconomicsystems?
– Whichoneofthethreeeconomicsystemshasmoreadvantagesthantheothertwo?
DistributeHandoutIII.2.C,“MixedEconomy.”Havestudentscompletetheexerciseonthehandout;
thenhavethemexplaintheiranswerstothefollowingquestions:
– Whataresomeofthecharacteristicsofamixedeconomythataredescribedonthishandout?
– WhichfeatureofamixedeconomylistedinthisreadingcanbefoundintheU.S.today?
– Whatdidyouidentifyasthegreateststrengthofthemixedeconomy?
– Whatdidyouidentifyasthegreatestweaknessofthemixedeconomy?
– WouldtheU.S.bebetteroffasamixedorpurelycapitalisteconomy?
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
Ifyouwerethepresidentofanewlyindependentnation,whatisoneelementoftraditionaleconomies,oneelementofcapitalisticeconomies,andoneelementofcommandeconomiesthatyouwouldliketobringtoyournation?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON2:page3
FollowUpOrganizeadebateamongadvocatesoftraditional,capitalist,andcommandeconomies,focusingonthefollowingresolution:“Resolved:Thetraditional/capitalist/commandeconomybestmeetstheneedsand
wantsofpeoplewholiveunderit.”Eachgroupofadvocateswillhavethreeteammembers.Thedebatewouldproceedaccordingtothefollowingagenda:
1. Openingstatements–2minutesforeachteam
2. Mainarguments:Traditionaleconomy–3minutes
3. Rebuttal:Commandeconomy–1minute
4. Rebuttal:Capitalisteconomy–1minute
5. Mainarguments:Commandeconomy–3minutes
6. Rebuttal:Capitalisteconomy–1minute
7. Rebuttal:Traditionaleconomy–1minute
8. Mainarguments:Capitalisteconomy–3minutes
9. Rebuttal:Traditionaleconomy–1minute
10. Rebuttal:Commandeconomy–1minute
11. Closingstatements–2minutesforeachteam
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON2:page4
HandoutIII.2.A,“TheShipwreck”
Directions:Readthestorybelowandcompletetheexercisethatfollows.
Oneday20people,includingthepayingcustomersandcrew,setsailonafishingexpedition.Afterafewhoursofpeacefulsailing,theshipencounteredaterriblestorm.Asaresultofthestorm,thefishingboat
sank.Luckily,all20peoplesurvived,makingtheirwaytoasmalldesertedisland.Unfortunately,allthecommunicationequipmentwentdownwiththeshipsotherewasnowaytosignalforhelp.
Oncesettledontheisland,thecaptainofthefishingboatcalledthesurvivorstogetherandsaidthe
following.
HerearethefactsaboutoursituationasIseethem:
Forbetterorworse,the20ofuswillbespendingdays,weeks,ormaybeyears
together.
Weallhavedifferentneedsandwants.
Inordertosurvive,wehavetodependoneachother,eventhoughsomeofusare
smarter,somehavemoremoney,andsomearemoreskilledthantheothersinthegroup.
Finally,andmostimportant,therearethreefundamentalquestionswehaveto
answertodeterminehowwewillmeetthevariousneedsandwantseachofushas.Thethreequestionsare:
1. Whatgoodsandservicesshouldweproduce?
2. Howshouldtheybeproduced?
3. Whoshouldreceivethegoodsandservicesproduced?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON2:page5
HandoutIII.2.A,“TheShipwreck”(continued)
Exercise:Assumeyouareoneofthe20peopleonthisisland.Writehowyouwouldanswereachof
thesequestionsinthespaceprovidedonthechartbelow.Ifyoucannotansweranyofthequestions,indicatewhatadditionalinformationyouwouldneedtoanswerthatquestion.
Questions Answers Additional Information Needed
1. What goods and services should we produce and how will we decide what goods/services to make: by vote, by who has the most money, or by who is the strongest?
2. How should these goods and services be produced and who should make these goods, who will gather the resources to make them, and who will be the manager?
3. Who will receive the goods/services produced: the person who needs it most, the wealthiest person, the strongest person, or whoever gets a majority vote?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON2:page6
HandoutIII.2.B,“EconomicSystems”Directions:Economicsystemsaredividedupintothreebasictypes:Traditional,Market,andCommand.Thesedifferenteconomicsystemsaredescribedbelowbypeoplewholiveunderthosesystems.After
readingthedescriptions,completetheexercisethatfollows.
TraditionalEconomicSystem“Iliveincountrywhichhasatraditionaleconomy,inwhichpeople'seconomicrolesare
thesameasthoseoftheirparentsandgrandparents.Societiesthatproducegoodsandservices intraditionalwaysarefoundtoday insomepartsofSouthAmerica,Asia,andAfrica.Peoplelivinginanagriculturalvillage,suchasmine,stillplantandharvesttheir
ownfoodontheirownland.Andthewaysweproduceclothingandshelterarealmostexactlythesameasthoseusedinthepast.Traditiondecideswhatourpeopledoforalivingandhowourworkisperformed.”
MarketEconomicSystem“I live inacountrywhichhasamarketeconomy, inwhicheconomicdecisionsare theresultofindividualdecisionsbybuyersandsellersinthemarketplace.CountriesliketheU.Sandotherdevelopednationshavemanyelementsofamarketeconomicsystem.In
mycountry,when Igraduate fromschool, I cango toworkwhere I choose, ifa job isopen.IamalsofreetogointobusinessifIwantandhavethemoneytodoso.IfIdecide
to open a business, I must take a risk with the money that I invest in the business,recognizingIcouldloseitall.Thepricesthatbusinesseschargeforgoodsorservicesinamarket system will be influenced by the prices charged by competitors (other
businessessellingthesameitems).Thesuccessthatbusinesseshavewilldependonthedemandbyconsumersfortheirgoodsorservices. Insuchabusinessyoumaydowell.Butifpeopledonotwantwhatyouareselling,youwillgooutofbusiness.”
CommandEconomicSystem“Iliveinacommandeconomy,similartotheonethatexistedinRussiabeforethefallofcommunism. In a command economic system, the main decision maker is thegovernment. No person may independently decide to open and run any kind of
business.Thegovernmentdecideswhatgoodsandservicesaretobeproduced.Andthegovernment sells these goods and services. The government also decides how thetalentsandskillsofitsworkersaretobeused.”
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON2:page7
HandoutIII.2.B,“EconomicSystems”(continued)
Exercise:Basedonthedescriptionsyouread,writeanexplanationofhowthethreefundamentaleconomic
questionsappearingonHandoutIII.2.A,areansweredintraditional,market,andcommandeconomies.
Questions Traditional Economy Market Economy Command Economy
1. What goods/ services should be produced?
2. How should goods/services be produced?
3. Who will receive the goods/services produced?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON2:page8
HandoutIII.2.C,“MixedEconomy”
Directions:Feweconomiesarepurelytraditional,command,ormarketsystems.Rathertheycouldbemostaccuratelydescribedasmixed,havingelementsofcapitalism,socialism,commandeconomies,etc.
Readaboutthefeaturesofamixedeconomybelowandcompletetheexercisethatfollows.
Amixedeconomyisaneconomicsysteminwhichboththestateandprivatesectordirecttheeconomy,
reflectingcharacteristicsofbothmarketeconomiesandsocialisteconomies.Mostmixedeconomiescanbedescribedasmarketeconomieswithstrongregulatoryoversight,inadditiontohavingavarietyofgovernment‐sponsoredaspects.
Thebasicplanofthemixedeconomyisthatthemeansofproductionaremainlyunderprivateownership,thatmarketsremainthedominantformofeconomiccoordination,andthatprofit‐seekingenterprisesandtheaccumulationofcapitalwouldremainthefundamentaldrivingforcebehind
economicactivity.However,thegovernmentwouldwieldconsiderableindirectinfluenceovertheeconomythroughfiscalandmonetarypoliciesdesignedtocounteracteconomicdownturnsandcapitalism'stendencytowardfinancialcrisesandunemployment,alongwithplayingarolein
interventionsthatpromotesocialwelfare.Subsequently,somemixedeconomieshaveexpandedinscopetoincludearoleforindicativeeconomicplanningand/orlargepublicenterprisesectors.
Thereisnotonesingledefinitionforamixedeconomy,butthedefinitionsalwaysinvolveadegreeof
privateeconomicfreedommixedwithadegreeofgovernmentregulationofmarkets.Therelativestrengthorweaknessofeachcomponentinthenationaleconomycanvarygreatlybetweencountries.EconomiesrangingfromtheUnitedStatestoCubahavebeentermedmixedeconomies.Thetermisalso
usedtodescribetheeconomiesofcountriesthatarereferredtoaswelfarestates,suchasNorwayandSweden.Governmentsinmixedeconomiesoftenprovideenvironmentalprotection,maintenanceofemploymentstandards,astandardizedwelfaresystem,andmaintenanceofcompetition.
Supportersviewmixedeconomiesasacompromisebetweenstatesocialismandlaissez‐fairecapitalism,superiorinneteffecttoapureversioneitherofthosetwo.
Exercise:Basedonthereadingabove,indicatethegreateststrengthandgreatestweaknessofamixed
economy.
http://www.answers.com/topic/mixed‐economy#ixzz1njlNz0pv
Greatest Strength of a Mixed Economy Greatest Weakness of a Mixed Economy
UNITIII/LESSON3
TheFactorsofEconomicProduction
TimeFrame2days
StandardsNES:Economics–Describehowsocietyusesscarceresources
toproduceanddistributegoodsandservicesNES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionHowarethefactorsofeconomicproductionbroughttogethertoproducegoodsandservices?
MaterialsHandoutsIII.3.A‐D
ObjectivesStudentswillbeableto:
Defineandgiveexamplesofthedifferentfactorsofproduction.
Drawconclusionsastohowtheproductionofgoodsandservicesdependsonbringingtogetherthevariousfactorsofproduction.
Determinetheroleofmanagementinbringingtogetherthefactorsofproduction.
Explainhowtheissueofsustainabilityimpactstheuseofthefactorsofproduction.
TeacherBackgroundAccordingtosomeeconomiststherearethreefactorsofproduction:labor(humanresources),land(bothnaturalandcultivated),andcapital(themeansofproduction).Somepeoplebelievethereisa
fourthfactorofproduction,entrepreneurship,ormanagement,thefactorthatbringstogetherthethreeotherfactorsofproduction.
HandoutIII.3.Aasksstudentstoselectaproductorserviceandidentifythefactorsofproductionthatgo
intocreatingit.HandoutIII.3.Bisacooperativelearningactivityinwhicheachgroupexplainsadifferentoneofthefourfactorsofproduction.InHandoutIII.3.C,theclassapplieswhattheylearnedaboutthe
factorsofproductioninanexerciseaskingthemtodecidehowtoallocatethefactorsofproductioninahotdogbusiness.HandoutIII.3.Dpresentsareadingdealingwiththerelationshipbetweensustainabilityandthefactorsofproduction,includinganexerciseinwhichstudentssuggestatitleforthereading.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON3:page2
TeachingStrategies/SupportingActivities
DistributeHandoutIII.3.A,“Chart.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Discusstheproduct/serviceyoulistedonyourchartandexplaintherolethatland,labor,andcapitalplayedinbringingtheproduct/serviceyoulistedtocustomers.
– Whydoyouthinkthatland,labor,andcapitalarecalledthefactorsofproduction?
– Somepeoplesayentrepreneurshipshouldbeconsideredthefourthfactorofproduction.Doyouagree?
Dividetheclassintoeightgroups,withapproximatelyfourstudentsineachgroup.Distribute
HandoutIII.3.B,“GroupWork.”Assigntwogroupseachtostudyadifferentoneofthefourfactorsofproductionappearingonthehandout.Explaintotheclassthedirectionsfortheexerciseasstated
onthehandout.Afterthegroupshavecompletedtheexercise,callonfourgroupseachtomakeapresentationaboutadifferentoneofthefourfactorsofproduction.Afterthelastgrouphascompleteditspresentation,aspartoftheclassdiscussion,havestudentsexplaintheiranswersto
thefollowingquestions:
– Whatdidyoulearnfromthepresentationaboutlandasafactorofproduction?
– Whatdidyoulearnfromthepresentationaboutlaborasafactorofproduction?
– Whatdidyoulearnfromthepresentationaboutcapitalasafactorofproduction?
– Whatdidyoulearnfromthepresentationaboutentrepreneurshipasafactorofproduction?
– Whichoftheseshouldbeconsideredthemostessentialfactorofproduction?
DistributeHandoutIII.3.C,“Application.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Howwouldyoudescribeinyourownwordsthebusinesssituationpresentedin“AnotherDayintheHotDogBusiness”?
– Basedonthesituationpresentedin“AnotherDayintheHotDogBusiness,”whatwerethemost
importantdecisionsyouhadtomaketoincreaseprofits?
– Inwhichfactor(s)ofproductiondidyoudecidetoinvestadditionalmoney?
– Inwhichfactor(s)ofproductiondidyoudecidenottoincreaseortocutinvestments?
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
Howdothefourfactorsofproductionworktogetherinthecreationofgoodsandservices?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON3:page3
FollowUpDistributeHandoutIII.3.D,“SustainabilityandtheFactorsofProduction.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
Whatisthisreadingabout?
Whatdowelearnaboutsustainabilityandthefactorsofproductionfromthisreading?
Ifyouwereinbusiness,howmuchimportancewouldyouplaceonsustainabilityinmakingyourproductordeliveringyourservice?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON3:page4
HandoutIII.3.A,“Chart”Directions:Usingthechartintheexercisesectionbelow,writethenameofaproductorserviceyouuseregularly(barofsoap,candybar,pen,haircutter,dentist,etc.).Underthewords“Land,”“Labor,”and“Capital,”writeanexplanationofthepartplayedbyeachofthesefactorsinmakingthe
product/service.Forexample,iftheproductyouchosewasapencil,yourchartmightlooklikethis:
PRODUCT: PENCIL
Land:
1. Trees are needed to obtain the wood used to manufacture pencils.
2. Lead comes from graphite found in rocks.
Labor:
1. Workers must locate and cut down trees to provide the wood for pencil.
2. Miners must extract graphite from rocks that is turned into lead for use in pencils.
Capital:
1. Money must be raised by the pencil producing company.
2. Equipment must be purchased to manufacture pencils.
3. Trucks, trains, and/or boats must be purchased/leased to transport the pencils once they are produced.
Exercise:
NAME A PRODUCT / SERVICE YOU USE REGULARLY:
Land – Not just real estate.
Land includes resources such as plants, other living things, and materials taken from mines.
Labor – Not just the work performed by humans. Labor includes the planning, research, and creative talents of the people involved.
Capital – More than the money invested. Capital includes the machinery, trucks, and other equipment involved in creating product and transporting it.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON3:page5
HandoutIII.3.B,“GroupWork”Directions:Inordertoproduceanygoodorservice,thefollowingthreefactorsofproductionmustbebroughttogetherbymanagement:land,laborandcapital.Somepeoplehavesuggestedthatentrepreneurshipisafourthfactorofproduction.
Theclasswillbedividedintogroups.Studythefactorofproduction,below,thathasbeenassignedtoyourgroup.Yourtaskwillbetomakea1‐2minutepresentationtotheclassinwhichyou:1)describe,inyourownwords,thefactorofproductionyoureadabout;2)giveanexampleofhowyourfactorof
productionisusedtocreateagoodorservice;3)describetherelationshipofyourfactortotheotherthreefactorsofproduction.
Land“Land,”asafactorofproduction,referstothephysicalgroundandnaturalresources,suchasminerals,usedintheproductionofgoods.Italsoreferstoanythingthatisnotman‐madeandcanbeusedto
producegoods.Naturalresources,suchasmineralsandfossilfuels,arethebackbonetomanygiantminingcompanies.Soilisalsoanaturalfactorthatsupportseconomicactivitiessuchasfarming.Landisascarceresourceandrequiresgoodmanagement.
Labor“Labor”referstotheworkandproductionactivitiesprovidedbyhumansformonetarycompensation.Thisconsistsofvariousabilitiesandskillsthathumanbeingsapplytoenhanceproductionofgoodsand
servicesandensuresthatbusinessisupandrunning.Companiesinvestinlaborbytrainingemployeestooperatedifferentmachinesfortheproductionofgoods(e.g.,operatingamachinetopackageproducts).Theabilitytoapplymentaltalentstoinnovativelyperformerrandsanddiscovernewproductsisalso
countedaslabor.Entrepreneurship,however,isnotcategorizedaslabor.
Capital“Capital”referstotheuseofwealthtocreatemorewealthbyenhancingtheproductionofgoods.Apartfrommoney,capitalalsoreferstotools,machinery,andinfrastructuremadetoproduceothergoods.Forexample,inproducingcropsorlivestock,afarmerwillneedtoincludefarmingequipmentandother
machineryascapital.Factories,machinery,andofficestructuresusedfortheproductionofgoodsarereferredtoasfixedcapital,whilesocialcapitalreferstogovernment'sinvestmentinlearninginstitutionsandinfrastructuretofacilitateproduction.Finishedandunfinishedproductsproducedforconsumption
orturnedintoconsumergoodsinthefuturearereferredtoas“workingcapital.”
Entrepreneurship“Entrepreneurship”referstoindividualswithaneconomicmotivationwhoattempttomakemoney
fromanidea.Entrepreneursareinnovatorsreadytotakeriskstopushtheirideastosetupbusinesses.Economistshavehaddebatesoverentrepreneurshipasafactorofproduction.Somecategorizeitunderlaborwhileothereconomistsviewitasanindependentfactor.Ittakesanentrepreneurtodevelop
businessconceptsandtakeriskstoensurethattheideaconceivessuccessfulbusinesses.
Takenfrom:http://www.ehow.com/print/info_8088771_economic‐factors‐production.html
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON3:page6
HandoutIII.3.C,“Application”Directions:Readtheparagraphbelowandcompletetheexercisethatfollows.
Another Day in the Hot Dog Business
Youandyourfriendshavebeendoingagoodbusinessatthehotdogstandyouhavebeenoperatingon
weekendsinalocalparkinglot.Salesarebrisk!Youhavedecidedtoinvesttheprofitstoexpandyourbusinessand—youhope—bringinevenmoreprofit.Youhavebeenselling200hotdogseachweekendat$1.00each.Suppliescostyou$100,andrentforyourspaceintheparkinglostwas$25.Youanda
friendeachspentfivehoursworkingatthestand.Thatmeansyouhave$75lefttodividebetweenyourwages,andmoneytoinvestinexpandingyourbusiness.Themorewagesyoupayyourselfandyourhelper,thelessyouwillhavetoinvest.
Exercise:Nowthatyouhavesomeunderstandingaboutthefourfactorsofproduction,writeupaplanforinvestingyourhot‐dogprofits.Inthisplan,trytoestimate,asbestyoucan:
1. Whatadditionalinvestments,ifany,youshouldmakeinlandandwhatshouldthatinvestmentbe.
2. Whatadditionalinvestments,ifany,youshouldmakeinlaborandwhatshouldthatinvestmentbe.
3. Whatadditionalinvestments,ifany,youshouldmakeincapitalandwhatshouldthatinvestmentbe.
4. Inaddition,estimatehowmanyadditionalhotdogseachoptionwillallowyoutosell,andhowmuchprofittheinvestmentwillbringin.
Takenfrom:http://www.landandfreedom.org/econ/econ2act.htm
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON3:page7
HandoutIII.3.D,“SustainabilityandtheFactorsofProduction”
Directions:BelowisanadvertisementfromCompanyXthatappearedontheInternet.Theaddescribestherelationshipbetweensustainabilityandthefactorsofproduction.Suggestanattention‐grabbingheadlinefortheadvertisementandwriteitonthelinebelow.
_____________________________________________________________________________ (headline)
The factors of production are land (i.e., natural resources, including water and the proportion of the planet given over to agriculture-producing raw materials), labor (i.e., the human effort involved in production), capital (i.e., the money invested in business including equipment purchases), and enterprise (i.e., the process of bringing the above factors together to make a profit).
Any production process involves the use of all factors of production. The efficient and sustainable use of factors of production has long been tackled by Company X working with its agricultural suppliers. Company X helps suppliers in developing countries to increase their output. For example, in Pakistan, sales of milk per farmer have doubled in the last three years as a result of the support our company provided to more than 115,000 farmers.
Despite consuming only a tiny proportion of water, Company X still seeks to minimize water use. Seventy percent of water usage is by agriculture, and agricultural raw materials provide the basis of our company’s finished products. It is important that the environment in which raw materials are grown is safeguarded and protected in a sustainable manner. Company X does not own farms but encourages sustainable agricultural practices among its suppliers. The company invests over $60 million per year in environmental protection, amounting to three percent of total capital expenditure on top of regular capital-investment projects that incorporate environmental components and factory environmental operating costs. Also, in certain parts of the world, Company X has invested in water education programs and community initiatives to develop sustainable and safe water supplies.
Finally, our company uses water in manufacturing (e.g., to wash raw materials). It limits the use of water in its various operations and, where this is not possible, re-uses or re-cycles waste water.
Adaptedfrom:http://businesscasestudies.co.uk/nestle/sustainability‐and‐water/factors‐of‐production.html#ixzz1k28ljzRf
UNITIII/LESSON4
PrinciplesoftheU.S.EconomicSystem
TimeFrame2days
StandardsNES:Economics–Describehowsocietyusesscarceresources
toproduceanddistributegoodsandservicesNES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionWhatarethebasicprinciplesonwhichtheU.S.economyoperates?
MaterialsHandoutsIII.4.A‐D
ObjectivesStudentswillbeableto:
IdentifyandgiveexamplesoftheprinciplesoftheU.S.economicsystem.
DrawconclusionsastohowtheeconomicprinciplesoftheU.S.shapeeconomicdecisions.
Explainhowandwhyeconomicprinciplescancomeintoconflictwitheachother.
TeacherBackgroundFreeenterpriseisaneconomicsystemthatprovidesindividualswiththeopportunitytomaketheirown
economicdecisions,freeofgovernmentconstraints,andasprivateprofit‐potentialbusinesses.Thesystemallowsfortheprivilegeofindividualownershipofpropertyandthemeansofproduction.Thekeyingredientofthefreeenterprisesystemistherightofconsumerstomaketheirownchoicesinthe
purchaseofgoods,thesellingoftheirproductsandtheirlabor,andtheirparticipationinbusinessstructure.Fivebasicprinciplesareatthecoreofthefreeenterprisesystem:privateenterprise,privatepropertyrights,consumersovereignty,theprofitmotive,andcompetition.
InHandoutIII.4.A,studentsareaskedtointerpretanillustrationportrayingthefivebasicprinciplesoftheAmericanfreeenterprisesystem.HandoutIII.4.Bpresentsanin‐depthexplanationofthefivebasicprinciples,askingstudentstogiveexamplesofsituationswheretheprinciplescanconflictwitheach
other.ThebuildingblocksofthefreeenterpriseappearinHandoutIII.4.C.Finally,theclasswillconfrontandevaluatecriticismsofthefreeenterprisesysteminHandoutIII.4.D.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON4:page2
TeachingStrategies/SupportingActivities DistributeHandoutIII.4.A,“Drawing.”Havestudentscompletetheexerciseonthehandout,then
havethemexplaintheiranswerstothefollowingquestions:
– Whatdoyouseeinthisdrawing?
– WhatisthisdrawingtellingusabouttheU.S.freeenterprisesystem?
– Towhatextentdoesthisdrawingpresentanaccuratepictureofthefreeenterprisesystem?
– CanyousuggestsomethingabouttheU.S.freeenterprisesystemthatshouldbeincludedinthisdrawingbutisnot?
DistributeHandoutIII.4.B,“Principles.”Havestudentscompletetheexerciseonthehandout,then
havethemexplaintheiranswerstothefollowingquestions:
– Howwouldyousummarize,inyourownwords,eachofthefiveprinciplesoftheU.S.freeenterprisesystem?
– WhydoyouthinktheU.S.economyiscalleda“freeenterprisesystem”?Isthisanaccuratedescriptionofoureconomy?
– Whichofthesefiveisthemostimportantprinciple?
– Whatexamplesdidyoucreateinwhichtwoofthebasicprinciplesareinconflict?Inthesecases,whichprincipledoyouthinkshouldprevail?
DistributeHandoutIII.4.C,“BuildingBlocks.”Havestudentscompletetheexerciseonthehandout,
thenhavethemexplaintheiranswerstothefollowingquestions:
– Whyarethefouritemsmentionedonthishandoutreferredtoasthe“buildingblocksofthefreeenterprisesystem”?
– Wheredidyouplacethebuildingblocksintheillustrationfeaturedintheexerciseatthebottomofthehandout?
– Inthebuildingblockdealingwithbusinesses,whatdoestheauthormeanby“Profitfuelstheengineofbusiness”?
– Inbuildingblockdealingwithgovernment,whatdoestheauthormeanbysaying“governmentprovidestheumbrellaunderwhichthefreeenterprisesystemoperates”?
– Whichofthesebuildingblocksismostcrucialtotheoperationofthefreemarketenterprisesystem?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON4:page3 DistributeHandoutIII.4.D,“Critics.”Havestudentscompletetheexerciseonthehandout,thenhave
themexplaintheiranswerstothefollowingquestions:
– WhatistheOccupyWallStreetmovementallabout?
– Whataresomeofthemoreimportantdemandsmadebytheprotesters?
– Whichofthesedemandsismostjustified?
– Whichofthesedemandsisleastjustified?
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
TowhatextenthavethefiveprinciplesappearinginthedrawingdiscussedatthebeginningofthelessonmadetheU.S.amore/lessdesirableplacefortheaverageAmericantolive,work,andordo
business??
FollowUpAssumeyouwereaddressingagroupofOccupyWallStreetprotesters.Writeaspeechinwhichyou
discusstheircriticismsoftheU.S.freeenterprisesystemThespeechshouldspecificallytellthem:
Whichoftheirideasyouagreewithmost.
Whichoftheirideasyoudisagreewithmost.
Whatthebestcourseofactionswouldbefortheprotesterstotakethatwouldleadtoahigher
standardoflivingforthepeoplewhoaresufferingmostinthefreeenterprisesystem.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON4:page4
HandoutIII.4.A,“Drawing”Directions:StudythedrawingbelowofthefivebasiceconomicprinciplesonwhichtheU.S.operatesandcompletetheexercisethatfollows.
http://www.socialstudieshelp.com/Eco_Free_Enterprise.htm
Exercise:Intwoorthreesentences,explainthemessagethatthedrawingislookingtoconvey.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON4:page5
HandoutIII.4.B,“Principles”Directions:ThefivebasicprinciplesoftheU.S.economicsystemappearbelow.Foreachprinciple,underlineonesentencethatcontainsthemostimportantidearelatedtothatprinciple.Thencomplete
theexercisebelow.
1. FreedomtoChooseYourBusinesses(FreeEnterprise)
Inthiscountry,thedecisionaboutwhatkindofbusinesstogointoisbasicallyyoursalonetomake.Youwilldecidewhatfeestochargeandwhathourstowork.Certainlawsprohibityoufromcheatingorharmingyourcustomersorotherpeople.But,ingeneral,youwillbeleftalonetorunyourbusinessasyouseefit.
2. RighttoPrivatePropertyPrivatepropertyisapieceofland,ahome,oracarownedbyanindividual,afamily,oragroup.Itdiffersfromapublicbuilding,orpublicproperty,suchasthecityhall,apark,orahighway,allofwhichprovideagovernmentserviceforallcitizens.IntheU.S.economicsystem,people'srighttobuyandsellprivatepropertyisguaranteedbylaw.Peoplemustusethepropertyinsafeandreasonableways,ofcourse,andreflectingthepersonalrightsorpropertyofotherpeople.
3. ProfitMotiveThemainreasonwhyapersonorganizesabusinessistomakemoney.Youdothisbyearningmoremoneythanyouspend.Theamountofmoneyleftoveraftersubtractingyourbusinessexpensesfromyourbusinessincomeisknownasyourprofit.Inthefreeenterprisesystem,businessfirmstryhardtokeepcostsdownandincreasetheirincomefromsales.Thebettertheysucceedatthis,thehigheraretheirprofits.Economistsdescribetheeffortsbybusinessfirmstoearnthegreatestprofitsastheprofitmotive.
4. CompetitionJustasyouarefreetostartthebusinessofyourchoice,soiseveryoneelse.Therivalrybetweensellersinthesamefieldforconsumers'dollarsiscalledcompetition.Ifyourbusinessisprofitable,itislikelythatotherswillenterthesamebusinesshopingtobeassuccessfulasyouare.Theywillbecompetingwithyouforthesamecustomers.Towinashareofthecomputerbusiness,othersellersmaytrytooffermoreandbetterservices,orservicesatlowerprices.Becauseofthepressureofcompetition,businessfirmsmustconstantlytrytoprovidethebestservicesandcreatethebestproductsatthelowestpossibleprices.
5. ConsumerSovereigntyIntheend,itisthecustomers,orconsumers,whodeterminewhetheranybusinesssucceedsorfails.IntheU.S.freeenterpriseeconomy,consumersaresaidtohavesovereignty‐thepowerorfreedomtohavefinalsay.ConsumersarefreetospendtheirmoneyforProductXorforProductY.IftheypreferYoverX,thenthecompanymakingXmaylosemoney,gooutofbusiness,ordecidetomanufacturesomethingelse(perhapsProductZ).Thus,howconsumerschoosetospendtheirdollarscausesbusinessfirmsofallkindstoproducecertaingoodsandservicesandnotothers.
http://www.socialstudieshelp.com/Eco_Free_Enterprise.htm
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON4:page6 HandoutIII.4.B,“Principles”(continued)
Exercise:Describeasituationinwhichtwoofthebasiceconomicprinciplescomeintoconflictwitheach
other.(Forexample,whenaconsumer’srighttochooseaproductattherightprice—consumersovereignty—isdeniedduetoabusinessperson’sdesiretomakeagreaterprofit—profitmotive.)
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON4:page7
HandoutIII.4.C,“BuildingBlocks”Directions:Readaboutthebuildingblocksoffreeenterprisesystembelowandcompletetheexercisethatfollows.
Households,businesses,markets,andgovernmentsmakeupthebuildingblocksofafreeenterprisesystem.Theyaredescribedbelow.
Households—theOwners.Inafreeenterprisesystem,households—notthegovernment—ownmostofthecountry’seconomicresourcesanddecidehowtousethem.Oneoftheresourcesthathouseholdspossessistheirlabor,whichtheyselltoexistingfirmsorusetoformnewbusinesses.Inadditiontosellingtheirresourceswheretheycangetthehighestpriceorlargestprofit,householdsalsoactasconsumers.Thewagesandsalariesofhouseholdspurchaseabouttwo‐thirdsofalltheproductionintheUnitedStates.Consumersvotewiththeirdollars,therebydirectingproductiontowardthegoodsandservicestheywantbusinessestoprovide.Thisiscalledconsumersovereignty.
Businesses—theOrganizers.Businessesorganizeeconomicresourcestoproduceagoodorservice.Thepeoplewhostartbusinessesaretheorganizersandinnovators,constantlydiscoveringnewandbetterwaystobringresourcestogetherinthehopesofmakingaprofit.Profitfuelstheengineofbusiness.Entrepreneurs,luredbythepotentialforprofits,createnewbusinessestosatisfyconsumers’needsanddesires.Theinabilitytomakeprofitssignalsbusinessestocloseortoreorganizetheirresourcesmoreefficiently.Efficiencymeansthatresourcesarebeingusedtoproducethegoodsandservicesthatsocietymostdesiresatthelowesteconomiccost.Inacompetitiveindustry,thepresenceorabsenceofprofitssendsanimportantsignalabouttheindustry’seconomicefficiency.
Markets—theBrokers.Howandwheredobuyingandsellingactivitiestakeplace?Theanswerisinmarkets.Althoughmarketsarenotnecessarilypeople,theyactasagents—somethinglikeastockbrokerorarealestateagent—tobringbuyersandsellerstogether.Overtime,marketshavebecomeincreasinglycomplex.Now,buyingandsellingcanoccur24hoursadayfromanywhereintheworldviatheInternet.Amarketisanyplaceoranywaythatbuyersandsellerscanexchangegoods,services,resourcesormoney.Therearethreecategoriesofmarketsinafreeenterprisesociety:resourcemarkets,productmarkets,andfinancialmarkets.Householdsgothroughresourcemarketstoselltheirlabortobusinesses.Businessesgothroughproductmarketstosellgoodsandservicestohouseholds.Andbothhouseholdsandbusinessesusefinancialmarketstoborrowandsavemoney.Typically,businessesborrowmoneythathouseholdssave,usingfinancialinstitutionsastheintermediary.
Governments—theProtectors.Thecornerstoneofatrulyfreeenterpriseeconomyistheabsenceofgovernmentinterferenceineconomicmatters.However,thegovernmentstillplaysanimportantroleinanyfreeenterprisesystem.Thisisbecauseunlimitedfreedomisimpossible:oneperson’sfreedommaysometimesconflictwithanother’s.Themainroleofgovernmentinafreesociety,then,istodefineandenforcetherulesofsociety.Governmenthasthecoercivepowertomaintainlawandorder,protectpeople’srighttoownpropertyandenforcevoluntarycontractspeopleenterinto.Inessence,governmentprovidestheumbrellaunderwhichthefreeenterprisesystemoperates.Governmentsalsoprovidegoods,suchasnationaldefense,thattheprivatemarketalonewouldhaveahardtimeproducing.
Takenfrom:http://dallasfed.org/educate/everyday/ev5.html#blocks
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON4:page8 HandoutIII.4.C,“BuildingBlocks”(continued)
Exercise:Drawinthefourbuildingblocksdescribedabovewheretheybestfitintheillustrationbelow.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON4:page9
HandoutIII.4.D,“Critics”Directions: In September 2011, a group of protesters called Occupy Wall Street, began a protestinvolvinganumberofcriticismsthatthegrouphasofcurrentgovernmentpolicies,laws,andpracticesaswellaswhat itseesasa lackofresponsibilityatmajor financial institutions. Identifythreeofthesecriticismsmentionedinthereadingbelowandunderlinethem.
What “Occupy Wall Street” Demands of Our Leaders OccupyWallStreetbeganinmid‐Septemberwithagroupof1,000protestorsmarchingthroughthestreetsofNewYorkCity.Ithasnowgrownintoaglobalmovementinsearchofsanityinoureconomicsystem.Manyin thegroup,unemployedanddisheartened,arequietlydemandinganewbreedof leaders inWashingtonandonWallStreet—leadersmeasurablycommittedtotheaverageindividualstrugglingtomakeendsmeet.TheoverarchingdemandofOccupyWallStreetisforgreaterequalityinourfreeenterprisesystem.
AndthatiswherebothWallStreetandWashingtonhavefailedmiserablyintheeyesoftheunemployedorunderemployedprotestors.Inthevariousdivisionsofthemovementsproutinguparoundtheworld,thecryisforhope,foreconomicopportunity,forsoulinourbusiness,andforpromisethattheAmericandreamwillnotbedeniedtotoday’syoungpeople.
OccupyWall Street is looking to our leaders inWashington to enact legislation that focusesmore on theneedsofthestrugglingmiddleclass.TotheparticipantsinOccupyWallStreet,businessandpoliticalleadershavelosttheirfooting.Theyhavedetouredthecountryawayfromthebasictenetsofourgovernment:life,liberty,equality,andthepursuitofhappiness.
WhileOccupyWall Street is a fledglingmovement, it should remind all of us thatwe have a say inwhathappensinoureconomy.Morethanthat,wehavearesponsibilitytoholdourleadersaccountable.
WhileOccupyWallStreetisnotadvocatingonesetofunifieddemandstypesofdemands.Herearesomeofthedemandsmostoftenissuedbytheprotesters:
Anendtotaxpayerbailoutsofbigcorporations,banks,andotherfinancecompanies.
AnendtocorporategovernancestructuresthatallowthepositionsofCEOandpresidentoftheboardtobeheldbythesameindividual.
AreductioninCEOpay.(Backin1965,CEOpaywas24timesgreaterthantheaverageemployee’spay;todayitis300timesgreater.)
StiffpenaltiesforoffshorejobscreationwhileunemploymentfestersintheUnitedStates.
Raisingtheminimumwage.
Amoratoriumonallhomeforeclosuresandlayoffsimmediately.
Anegativeincometax,andataxofupto90percentontheincomeoftheveryrich.
Protestorsmaynotyethaveaunifyinggoal,buttheyarenotconfusedaboutthefactthatlivingconditionsfortheaverageAmericanarerapidlydeteriorating.And,what’smore,nooneappearstobelistening.
Adaptedfrom:http://www.washingtonpost.com/national/on‐leadership/what‐occupy‐wall‐street‐demands‐of‐our‐leaders/2011/10/11/gIQAjHtZcL_print.html/
UNITIII/LESSON5
SupplyandDemand
TimeFrame2days
StandardsNES:Economics–ExplaintheprinciplesofsupplyanddemandExplainhowsupplyanddemandinteracttodetermineprices
NES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionHowdoessupplyanddemandexplainthepriceswepayforgoodsandservices?
MaterialsHandoutsIII.5.A‐E
ObjectivesStudentswillbeableto:
Definesupply,demand,elasticity.
Explainandgiveexamplesofthelawsofsupplyanddemand.
Drawconclusionsastowhythereareshortagesofsomegoodsandservicesandsurplusesofothers.
Illustratetheprinciplesofelasticityofsupplyanddemand.
TeacherBackgroundThetwomostcrucialfactorsindeterminingpricesofgoodsandservicesaresupplyanddemand.Welearnfromthelawofdemandthat:1)peoplewillbuymoreofaproductatalowerpricethanatahigher
price;and2)atalowerprice,morepeoplecanaffordtobuymoregoodsthantheycanatahigherprice.Fromthelawofsupplywelearnthat1)athigherprices,producersarewillingtooffermoreproductsforsalethanatlowerprices;and2)thesupplyofgoodsandservicesincreasesaspricesincreaseand
decreasesaspricesdecrease.
HandoutIII.5.Aiswritingexerciseinwhichstudentsexplaintherolethatsupplyanddemandplayinsettingprices.InHandoutIII.5.B,theclasslearnsthedefinitionsandthelawsofsupplyanddemand.
HandoutsIII.5.CandIII.5.DexplainingreaterdepththeLawofSupplyandtheLawofDemand,providingsomeexamplesofeach.Finally,studentswillencounteranexplanationoftheelasticityofdemandandsupplyinHandoutIII.5.E.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON5:page2
TeachingStrategies/SupportingActivities DistributeHandoutIII.5.A,“Q&A.”Havestudentscompletetheexerciseonthehandout,thenhave
themexplaintheiranswerstothefollowingquestions:
– Inyourownwordshowwouldyousummarizetheinformationpresentedinthe“Question”here?
– (Callonatleastfivevolunteershere.)Whatistheansweryouwrotetothis8thgrader?
DistributeHandoutIII.5.B,“Definitions.”Havestudentscompletetheexerciseonthehandout,then
havethemexplaintheiranswerstothefollowingquestions:
Howdidyouanswertheexerciseonthehandout?
– Inyourownwords,howwouldyouexplaintheconceptof“demand”tosomeonewhohadnever
heardtheterm“demand”before?
– Inyourownwords,howwouldyouexplaintheconceptof“supply”tosomeonewhohadneverheardtheterm“demand”before?
– HowdoesthelawofsupplyanddemandexplainwhythediamondwrittenaboutintheQ&Alettercostsomuchmorethanthet‐shirt?
DistributeHandoutIII.5.C,“LawofDemand.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– IfyouwereMary,whatisoneconclusionyouwoulddrawabouttheamountofdonutsyoucould
sellatthedifferentprices?
– Basedonthegraph,whatconclusionwouldyoudrawabouttherelationshipbetweentheprice
ofanitemandthedemandforthatitem?
– Whyisitimportantforabusinesspersontoknowaboutthelawofdemand?
– Whatotherfactorsbesidedemandplayaroleindeterminingthepriceofanitem?
– Howdoesthelawofdemandhelpexplainwhythereareshortagesofsomegoodsandsurplusesofothers?
DistributeHandoutIII.5.D,“LawofSupply.”Havestudentscompletetheexerciseonthehandout,
thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatdidyoulearnaboutsupplyfromthishandout?
– Accordingtothedataonthechartandgraph,howwouldyouexplainthelawofsupplytosomeonewhoknewnothingaboutit?
– Asabusinessperson,howwouldyouusethelawofsupplytoyouradvantage?
– Howdoesthelawofsupplyhelpexplainwhythereareshortagesofsomegoodsandsurplusesofothers?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON5:page3
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
Howdosupplyanddemandplayaroleindeterminingthepriceswepayforgoodsandservices?
FollowUpDistributeHandoutIII.5.E,“ElasticityofDemandandSupply.”Havestudentscompletetheexerciseon
thehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
Howdidyoucompletetheexerciseonelasticityofdemand?Elasticityofsupply?
Whatdowelearnaboutelasticityofdemandandsupplyfromthishandout?
Towhatextentisitimportantforanentrepreneurtoknowsomethingabouttheelasticityofsupply
anddemandinrunningabusiness?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON5:page4
HandoutIII.5.A,“Q&A”Directions:Assumeyouwriteacolumninwhichyouanswerquestionsfromchildrenabouteconomics.Answerthequestionbelow,writingaone‐paragraphanswer.
Question:Iaminthe8thgrade.Recently,Iwentshoppingwithmyparentstoadepartmentstore.
Theyboughtmeat‐shirtforschoolthatcost$30.Inthestorewepassedthroughthejewelrydepartment.There,Inoticedadiamondinoneofthedisplaycases.Thediamondhadapricetagof$6,000.Iaskedmyparentswhythediamondcostsomuchmorethanmyt‐shirt.Theysaid
thatmostpricesareexplainedbysupplyanddemand.Canyoutellmehow“supplyanddemand”explainswhythediamondcostssomuchmorethanmyt‐shirt?Thanks.
Answer:Youparentsarecorrect.Thepricesofthediamondandt‐shirthavealottodowithsupplyanddemand.Hereistheexplanation.
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ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON5:page5
HandoutIII.5.B,“Definitions”
Directions:TounderstandhowpricesaresetinaneconomyliketheU.S.,itisimportanttoknowaboutconceptslikesupply,demand,andthelawofsupplyanddemand.Thedefinitionsoftheseconcepts
appearinColumnBbelow.However,thetermsthatgowiththedefinitionshavebeenomitted.Enterthecorrectterm(supply,demand,andlawofsupplyanddemand)inColumnAthatmatchesthe
definitionthatappearsinColumnB.
Column A – Term Column B – Definition As the price of a good or service increases, the demand
decreases and vice-versa. As the price of a good or service increases, the supply of goods or services offered by producers increases and vice-versa.
The willingness and ability of the people to purchase particular amounts of goods or services at a variety of alternative prices.
The total amount of a good or service available for purchase.
Adaptedfrom:http://www.thirteen.org/edonline/lessons/supply_and_demand/b.html
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON5:page6
HandoutIII.5.C,“LawofDemand”Directions:ReadPartsOneandTwobelowandcompletetheexercisesthatfolloweachpart.
PartOne
Maryrecentlyopenedadonutshopintheschoolcafeteria.Tohelpherdeterminewhatpricetochargeforadonut,shetriedthefollowingexperiment:Duringfirstweekafteropening,shecharged$.20per
donut,andduringthesecondweekshecharged$.10perdonut.ThechartbelowshowstheresultsofMary’sexperiment.
DONUT PRICE EXPERIMENT
Price per donut
Number of donuts sold
Total Revenue
Week 1 20¢ 50 $10
Week 2 10¢ 500 $50
Exercise1
Whatisoneconclusionyouwoulddrawaboutthepriceperdonutandtheamountsoldfromlookingatthechartabove?
_____________________________________________________________________________ _____________________________________________________________________________
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON5:page7
HandoutIII.5.C,“LawofDemand”(continued)
PartTwo
MarymentionedtheresultsofherexperimenttoMr.Jones,herBusinessEducationteacher.Mr.Jonessaidthatthefindingfromherexperimentdemonstratesoneofthemostimportantconceptsineconomics:theLawofDemand.Hesuggestedthatsheplottheresultsofherexperimentonagraph.
Mr.JonessaidsuchagraphmeasuringtheamountofdonutssoldatthetwodifferentpricesiscalledaDemandCurve.Here’swhatthegraphlookedlike.
Demand Curve Graph Adaptedfrom:http://www.thirteen.org/edonline/lessons/supply_and_demand/b.html Exercise2
Basedonthegraph,fillintheblanksbelowtodescribetherelationshipbetweenthepriceforanitem
andthedemandforthatitem.
Allelseequal,asthepriceofaproduct__________,thequantitydemandedwill____________.
60=600 50=500 40=400 30=300 20=200 10=100 5=50
60=600 50=500 40=400 30=300 20=200 10=100
5=50
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON5:page8
HandoutIII.5.D,“LawofSupply”Directions:Readthepassagebelowandcompletetheexercisethatfollows.
Fredownedawholesalebakeryinwhichhesoldvariousbakedgoodstostoresinthecommunity.One
ofthegoodsFredsoldwascookies.Duringthefirstmonthinbusiness,hefoundthatthestoreswouldpayhim$.10acookie.Asaresult,hesold100cookies,fromwhichhemadeadecentprofit.Hiscookies
wereaninstanthit.Eachmonth,thestorestowhichhesoldcookiesofferedtopayhimpaymorethanthemonthbeforeforeachcookie:$.40acookieaftersixmonthsand$.70acookieafteroneyear.Asaresult,healsoincreasedthenumberofcookieshemade,realizinghecouldsellthematthehigherprice
point.ThechartandgraphbelowindicatehowmanycookiesFredmadeandsoldatpricesrangingfrom$.10percookieto$.70percookie
A.ChartSupply Schedule for Fred’s Cookies
The price Fred charges
per cookie The number of cookies
Fred has available for sale
After 1 year .70 cents 2,000 cookies
.60 1,800
.50 1,000
After 6 months .40 1,000
.30 1,100
.20 700
After 1 month .10 100
B.GraphSupply Curve
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON5:page9
HandoutIII.5.D,“LawofSupply”(continued)
Exercise:Fillintheblankspacesbelowwiththecorrectword.
Thechartandgraphaboverevealaneconomicconceptknownasthe“lawofsupply,”whichstates:
“Asthepriceofagoodincreases,the________________alsoincreases.”
Anotherwaytosaythisis:“Asthepriceofagooddecreases,the________________alsodecreases.”
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON5:page10
HandoutIII.5.E,“ElasticityofDemandandSupply”Directions:Thedegreetowhichthedemandorsupplyofagoodoraservicevarieswithitspriceisreferredtoaselasticity.ThePartIbelowdiscussesbothelasticityofdemandandPartIIdiscusses
supply.InbothPartsOneandTwobelow,circletheunderlinedwords,after1and2,thatyouthinkbestbelongsinthedefinition.
PartOne
ElasticityofDemand
Elasticityofdemandreferstothedegreetowhichdemandforagoodorservicevarieswithitsprice.Normally,salesincreasewithadropinpricesanddecreasewithariseinprices.Asageneralrule,
appliances,cars,candy,haircuts,andothernon‐essentialgoodsandservicesshow:1.more/lesselasticityofdemandthanothertypesofgoodsorservices.Ontheotherhand,mostnecessities(food,medicine,basicclothing)show:2.more/lesselasticityofdemand.
http://www.businessdictionary.com/definition/elasticity‐of‐demand.html#ixzz1kh62Weza
Giveoneexampleofagoodorservicethatyoupurchaseorusethathas:
1. Greatelasticityofdemand_________________________________________________________
2. Littleelasticityofdemand__________________________________________________________
PartTwo
ElasticityofSupply
Elasticityofsupplyreferstotheresponsivenessofproducerstochangesinthepriceoftheirgoodsor
services.Asageneralrule,ifpricesrise,sodoesthesupply.Highelasticityindicatesthesupplyissensitivetochangesinprices,lowelasticityindicateslittlesensitivitytopricechanges,andnoelasticitymeansnorelationshipwithprice.Thesupplyofpaintingsbyaworldfamousartistwhodiedhundreds
ofyearsagowouldbeconsidered:1.elastic/inelastic,whereasthesupplyofcookiesofferedatvariouspriceswouldbeconsidered2.elastic/inelastic.
Readmore:http://www.businessdictionary.com/definition/elasticity‐of‐supply.html#ixzz1khDRabSS
Giveanexampleofanotherkindofgoodorservicethathas:
1. Elasticityofsupply_______________________________________________________________
2. Inelasticityofsupply______________________________________________________________
UNITIII/LESSON6
MarketStructureandPrices
TimeFrame2days
StandardsNES:Economics–Describetheconceptofpriceandhow
pricessendsignalsandprovideincentivestobuyersandsellersDescribethetypesofmarketstructures(perfectcompetition,
puremonopoly,monopolisticcompetition,oligopoly)NES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionHowdoesthedegreeofcompetitionimpactthewaypricesaredetermined?
MaterialsHandoutsIII.6.A‐E
ObjectivesStudentswillbeableto:
Explainsomeoftheadvantagesanddisadvantagesofcompetitioninbusinessforconsumersandbusinesses.
Defineandgiveexamplesofthevariousdegreesofcompetitionthatcanexistindifferentmarketstructures.
Drawconclusionsastohowpricesaredeterminedinapuremarketeconomy.
TeacherBackgroundWhileallmarketsaremadeupofbuyersandsellers,significantdifferencesexistbetweenmarketstructures.Thesedifferencesincludethenumbersofbuyersandsellersandthedegreetowhichthespecificmarketcancontrolprices.Thislessonfocusesofmarketstructures,rangingfrompurecompetition(withlotsofbuyersandsellers)toamonopoly(withoneproviderofaspecificgoodorservice.Othermarketsstructuresthatwillbediscussedinthislessonaremonopolisticcompetitionandoligopolies.
Thislessonbeginswithadiscussionoftheadvantagesanddisadvantagesofeconomiccompetition.HandoutIII.6.Aasksstudentstocompareandcontrastthefollowingmarketstructures:perfectcompetition,monopolisticcompetition,oligopolies,andmonopolies.InHandoutIII.6.B,theclasswritesaneditorial,givingtheiropiniononeconomiccompetition,thesubjectofhandout.Inthenextactivity,usingHandoutsIII.6.C,III.6.D,andIII.6.E,thestudentsaredividedintothreesections.Studentsineachsectionwillreadabouttheadvantagesanddisadvantagesofoneofthefollowing:monopolisticcompetition,monopolies,oroligopolies.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON6:page2
TeachingStrategies/SupportingActivities Writetheword“competition”ontheboard.Havestudentsexplaintheiranswerstothefollowing
questions:
– Whatdoestheword“competition”meantoyou?
– Whataresomeexamplesofcompetitionyouseeamongsellersofdifferentgoodsandservicesyoupurchase?
– Towhatextentiscompetitionamongsellersofgoodsandservicesagoodthing?
– Towhatextentiscompetitionamongsellersofgoodsandservicesabadthing?
DistributeHandoutIII.6.A,“Competition.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatisthishandoutabout?
– Basedonwhatyouread,whatisthegreatestadvantageofcompetition?
– Whatwasthegreatestdisadvantageofcompetitionmentionedinthehandout?
– Whatdidyouwriteinyoureditorialsaboutcompetition?
DistributeHandoutIII.6.B,“DifferentMarketStructures.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatdidyoulearnaboutthedifferentmarketstructuresfromthishandout?
– Inwhatwaysareperfectlycompetitivemarkets,monopolisticallycompetitivemarkets,oligopolies,andmonopoliesdifferentfromeachother?
– Howarethewayspricesdetermineddifferentineachtypeofmarketstructure?
– Whatarethegreateststrengthsandweaknessesofeachmarketstructureforconsumers?Forbusinesses?
Dividetheclassintothreesections.Distribute:HandoutIII.6.C,“AdvantagesandDisadvantagesofMonopolies”toSectionOneHandoutIII.6.C,“AdvantagesandDisadvantagesofMonopolisticCompetition,”toSectionTwo;andHandoutIII.6.E,“Oligopolies”toSectionThree.Askeachgrouptocompletetheexercisedescribedonthehandouttheyreceived.Then,aspartofthewholediscussion,havestudentsexplaintheiranswerstothefollowingquestions:
– Whataregreatestadvantagesanddisadvantagesofmonopoliestobusinessesandconsumers?
– Whatarethegreatestadvantagesanddisadvantagesofmonopolisticcompetitiontobusinessesandconsumers?
– Whatarethegreatestadvantagesanddisadvantagesofoligopoliestobusinessesandconsumers?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON6:page3
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestions:
Asconsumersarewebetterofflivingunderamoreorlesscompetitivemarketstructure,ordoesitdependmoreontheproductwearebuying?
Aresmallbusinessesbetteroffoperatingunderamoreorlesscompetitivemarketstructureordoesitdependmoreontheproducttheyareselling?
FollowUpAskstudentstoselectoneofthefourmarketstructures(perfectcompetition,monopoly,monopolisticcompetitive,oligopoly)theylearnedaboutinthislessonandprepareafive‐minutepresentationtoexplainthatmarketstructuretotheclass.ThepresentationshouldbeaccompaniedbyatleastthreePowerPointslidesandincludeadescriptionofthemarketstructure,someexistingexamplesofthatmarketstructure,andthepositiveandnegativeattributesofthatmarketstructureforconsumersandbusinesses.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON6:page4
HandoutIII.6.A,“Competition”
Directions:Inmosteconomicmarkets,competitiondetermineshowindustriesoperate.Whilethereareobviousadvantagesthatcompetitionbringstoconsumersandproducers,significantdisadvantagesalsoresult.Theadvantagesanddisadvantagesofcompetitionareaddressedbelow.Afterreadingthehandoutcompletetheexercisethatfollows.
AdvantagesofCompetition
Competitionamongcompaniesiswhatgivesconsumerschoice,allowingthemtoselectproductsthatfittheirbudgetsandneeds.Inaddition,economiccompetitionforcescompaniesandcountriestoincreasetheirefficiencyandcontinuallyseekwaystoimprovetheirproductionprocessformaximumefficacy.Newbusinessproblemsandconsumerproblemsarecreatedeveryday,providingopportunitiesforcompaniestocreateinnovativeproductsthatsolvetheseproblems.Healthyeconomiccompetition,whenfreeofmonopolies,canalsoattractinvestmentsfromothercountries,therebyincreasinganation'sgrossdomesticproduct.Afinalkeyadvantageofeconomiccompetitionisthatitallowsanyonewithaspecializedskillsettocreatesomethingbetterthanwhatthemarketcurrentlyoffersandcleanup.Manyofthelargebrandswithwhichwearefamiliartodaywerestartedbyasmallteamdedicatedtosolvingacustomerproblem.
DisadvantagesofCompetition
Unfortunately,economiccompetitioncomeswithsignificantdisadvantages.Foremost,investmentwealthcanbedisproportionatelyallocatedintowhatearnsthehighestprofit,leavinglessmoneyforsocialservices,suchaspolicedepartments,publicschoolsandemergencyaid.Countriesthatoutsourcetheirproductiontocompaniesoverseasmaypartnerwithsupplierswhoprovidepoorworkingconditionsandlowwages,exploitingworkersandofferinginadequateincentives.Somepoliticallymindedeconomistswouldalsoarguethatakeydisadvantageofeconomiccompetitionisthatitreducestheamountofhumanlaborrequiredtoproducegoods,asmachineryreplacesassemblyjobsoncefilledbyhumanworkers.
http://www.ehow.com/print/info_8455003_advantages‐disadvantages‐economic‐competition.html
Exercise:Inyournotebook,writeatwo‐paragrapheditorialunderthetitle“EconomicCompetition:AGood/BadThing.”Intheeditorial,giveyouropinionaboutcompetition,makingsuretoaddresssomeoftheargumentsadvocatingtheopposingpointsviewthatappearabove.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON6:page5
HandoutIII.6.B,“DifferentMarketStructures”
Directions:Thedegreeofcompetitiondifferentiatesthefourtypesofmarketstructures.Afterreadingthedescriptionsofeach,completetheexercisethatfollows.
PERFECTCOMPETITIONPerfectcompetitionisamodelthatdoesnotactuallyexistintherealworld.Economistsdevelopedittoexplainhowmarketsaresupposedtoworkinacapitalisteconomy.Themodelhelpsusunderstandthefreemarketaswellasothermarketstructuresthatdoexist.Perfectcompetitiondescribesamarketinwhich:1)theproductsoldbyanyonesellerisidenticaltotheproductsoldbyanyotherseller;2)therearemany buyers and sellers, so that no one buyer or seller can affect themarket price—instead, allbuyersandsellersmustacceptthemarketprice;and3)resourcesmovetothemostprofitableindustry.Withperfectcompetition,consumersreceivefairtreatmentbecausethepricetheypayforanygoodorserviceisequaltothecostpaidtoproducethegoodordelivertheservice.
MONOPOLISTICCOMPETITIONThe market structure that comes closest to perfect competition is monopolistic competition. It is amarket characterized by many sellers. Unlike perfect competition, the sellers under monopolisticcompetitiondifferentiatecompetitiveproducts.Productdifferentiationisaccomplishedbychangingthephysicalcomposition,usingspecialpackaging,orsimplyclaimingtohaveasuperiorproductsbasedonbrand imagesand/oradvertising. Inaddition to theexistenceofa largenumberof firmsandproductdifferentiation,relativeeaseofentryintotheindustryisconsideredanotherimportantrequirementofamonopolistically competitive market. With the large number of firms that monopolistic competitionrequires,collusion(e.g.,pricefixing) isgenerallydifficult.Aswithperfectcompetition,afirmproducesthe quantity of product that maximizes its profit. But unlike perfect competition, a firm undermonopolistic competition has some control over the price it charges, as the firm differentiates itsproductsfromthoseofothers.However,theprice‐makingpowerofamonopolisticallycompetitivefirmis rather small, since there are a large number of other firms in the industrywith somewhat similarproducts.Animportantconsequenceoftheprice‐makingpowerofamonopolisticallycompetitivefirmisthatwhensuchafirmreducesitsprice,itcanattractcustomersbuyingother"brands"oftheproduct.The opposite is also true when the firm increases the price it charges for its product. Apparel retailstores(withmanystoresanddifferentiatedproducts)provideexamplesofmonopolisticcompetition.
OLIGOPOLYAn oligopoly is a market controlled by a small number of sellers. An important characteristic of anoligopolistic market structure is the interdependence of firms in the industry. The interdependence,actualorperceived,arisesfromthesmallnumberoffirmsintheindustry.However,unlikemonopolisticcompetition,ifanoligopolisticfirmchangesitspriceoroutput,ithasasignificanteffectonthesalesandprofitsofitscompetitors.Thus,anoligopolisticfirmalwaysconsidersthereactionsofitsrivalsinsettingitspricesormakingoutputdecisions.Therearehuge,thoughnotinsurmountable,barrierstoenteringan oligopolistic market. These barriers can involve large financial requirements, availability of rawmaterials, access to the relevant technology, or simply patent rights of the firms currently in theindustry.It ishardtomakeconcretestatementsregardingpricechargedandquantityproducedunderoligopoly. However, from the point of view of the society, one can say that an oligopolistic marketstructureprovidesa fairdegreeofcompetition inthemarketplace if theoligopolies inthemarketdonotcollude.Collusionoccursiffirmsintheindustryagreetosetpriceand/orquantity.IntheU.S.,boththesteelandautoindustriesareexamplesofoligopolies.
continued
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON6:page6
HandoutIII.6.B,“DifferentMarketStructures”(continued)
MONOPOLY
Monopoly istheoppositeofperfectcompetition. It isamarketforminwhichthere isonlyoneseller.Therearemanyfactorsthatgiverisetoamonopoly.Forexample,amonopolycanexistinanindustrybecause an inventor obtained a patent for his product, or a company owns the entire supply of anecessarymaterialneededtoproduceaproduct,or itcanbe legallycreatedbyagovernmentagencywhen it sells amarket franchiseaparticularproductor service. Finally, amonopolymayarisedue todecliningcostsofproductionforaparticularproduct.Insuchacasetheaveragecostofproductionfallsand reaches aminimum at an output level that is sufficient to satisfy the entiremarket. In such anindustry, rival firms will be eliminated until only the strongest firm is left in the market. Generallyspeaking, price and output decisions of a monopolist are similar to those of a monopolisticallycompetitivefirm,withthemajordistinctionofalargenumberoffirmsundermonopolisticcompetitionandonlyone firmundermonopoly.Thus,onemay technically say that there isnocompetitionundermonopoly.Likemonopolisticcompetition,amonopolisticfirmalsomaximizesitsprofitsbyproducinguptothepointwheremarginalrevenueequalsmarginalcost.Asthemonopolistisapricemakerandcanincreasetheamountofsalesby loweringtheprice,amonopolistdoesnot lureconsumersawayfromrivals, rather he or she induces them to buy more. An example of a monopoly is the local electriccompanyinyourcommunity.
Adaptedfrom:http://www.referenceforbusiness.com/encyclopedia/Clo‐Con/Competition.html
continued
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON6:page7
HandoutIII.6.B,“DifferentMarketStructures”(continued)
Exercise:Completethechartbelowbydescribinghowcharacteristics(a),(b),(c),and(d)aredifferentformarketstructures2‐4.(Thesectiononperfectcompetitionhasbeenfilledintogiveyouanexampleofwhattowriteineachcolumn.)
Characteristics of the Market Structure
Market Structure
(a) number of firms in the
market
(b) control over the
price of the relevant product
(c) type of the
product sold in the market
(d) factors stopping new firms from
entering the market
1. Perfect competition
Many firms participate in the market
No one buyer or seller can control prices because so many buyers and sellers exist.
The type of product sold by every seller is identical to the product sold by other sellers.
Other than costs involved, there are no factors stopping new firms from entering the market
2. Monopolistic competition
3. Oligopoly
4. Monopoly
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON6:page8
HandoutIII.6.C,“Advantages&DisadvantagesofMonopolies”
Directions:Circlethemostsignificantadvantageanddisadvantageofthemonopolymarketstructure.
Amonopolyisamarketstructurehavingonlyoneproducerorsellerofaproductorservice.Someofthenegativeaspectsofamonopolyincludethesinglebusinessbeingabletocontrolpricingandchargerelativelyhighprices,exceptionalpoweroverthemarket,andalackofnewproductsbeingintroducedintothemarket.
Advantages
1. ResearchandDevelopmentInamonopolymarket,productsorservicesthatrequirelargescalecapitalbenefitwhenonlyonefirmproducesthesegoodsorservices.Amonopolistwillhavemoreresourcestoinvestinresearch
anddevelopmentoftheproduct.Monopoliesintheirownwayencourageeconomiesofscale,meaningincreasedoutputanddecreasedunitcostforthosegoodsproducedbyamonopoly.Monopolyofaparticularproductorserviceencouragesresearchanddevelopmentforthe
productionofbetterproductsbecausetheresourcesareavailable.
2. DomesticMonopolybutInternationalCompetition
Whenacompanywieldsconsiderabledomesticmonopolypower,itisinaverystrongpositiontochargepricesasitseesfittoincreaseprofitsofthefirm.However,whenthesamecompanyfaces
intensiveinternationalcompetition,marketpowerisreduced;thiscompetitionhelpstokeepthepricesdownforcustomers.Forexample,U.S.SteelCorporationcontrolsoverhalfthesteel
productioninthecountry,butfacesintensivecompetitionininternationalmarketsfromtheU.K.,Japan,China,andIndia.
Disadvantages
3. PoorQualityofProductsMonopolymarketsmayproduceapoorqualityofproductbecauseoflowerlevelsofoutputthanwouldnormallyexistiftherewerecompetitivecompaniesproducingthesameproducts.The
companywiththemonopolyisfreetobuycheapmaterialstoreducethecostofproducingtheproducts.Becauseofthelackofsubstituteproducts,consumersareforcedtobuytheproductsofferedbythemonopolycompany,givingitthefreedomtosellsub‐standardproducts.
4. UnfairTreatmentTowardsEmployees
Inamonopoly,employeesoftensufferunfairtreatmentatthehandsofthecompanymanagement.Becausethecompanyhasamonopolyinacertainindustryarea,employeesmaybeforcedtoacceptlowwages,lackofproperbenefits,andzeromotivationintheirjobs.Themanagementcandictate
thetermsofthesalarypackage,leavinglittleroomfornegotiationfortheemployees.Thisisdonebecausethecompanyknowsthattheemployeeshavenochoicebuttoacceptitsterms.
http://www.ehow.com/print/info_8433706_advantages‐disadvantages‐monopolies.html
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON6:page9
HandoutIII.6.D,“Advantages&DisadvantagesofMonopolisticCompetition”
Circlethemostsignificantadvantageanddisadvantageofthemonopolisticcompetitionmarketstructure.
Advantages
1. CompetitionMonopolisticcompetitionischaracterizedbyfewbarrierstomarketentry;itiseasyfornewfirmsto
enterandleavesuchmarketswithoutfacingthemanybarriersinpuremonopolymarkets;thisallowscreativityandanactivebusinessenvironmentwithamplecompetitors.Thelessrestrictivemarketstructureensuresthatnoonefirmplaysasamonopolyandconsumersgetavarietyof
productsorservicesfromwhichtochoose.Businessesrunninginthismarketstructuremakebusinessdecisionsbasedonvariouseconomicfactorssuchascostofproduction,themarket,andthetypeofproductstheyareoffering.
2. InformedConsumers
Monopolisticcompetitionrequiresconsumerstobecomemoreinformedabouttheproductsandservicesavailableinthemarket.Businessesenteringamonopolisticcompetitionmarketoftenengageinadvertisingtomaketheirpresenceknownanddifferentiatethemselvesfromotherlocal
businessesofferingthesameproducts.Duetocompetition,firmsunderthismarketstructurehavetoenhancetheirvisibilityinthemarketthroughaggressiveadvertisingandmarketing.Inreturn,consumersarefedinformationconcerninguniqueaspectsofproductssuchaspricing,packaging,
andotherspecialservicesthroughadvertisingchannelslikeradioandlocalnewspapers.Consumersinmonopolisticcompetitionenvironmentscanthereforebecomewellinformedaboutproductsandservicesintheirmarketandcanmakeinformedchoicesbasedontheirknowledge.
3. DifferentiatedProducts
Companiesfunctioninginmonopolisticcompetitionmarkethavetodifferentiatetheirproductsfromthoseoftheircompetitors.Differentiatedproductsensurethatconsumerscanchooseaproductfromacompany,forexample,foritsuniquequalitiessuchasthecolorofthepackaging,
size,orprice.Duetothecompetitivenatureofthemarket,companiesstrivetofindadistinctivefeaturetodifferentiateitsproductsfromthoseofitscompetitorsofferingthesametypeofproduct.Forexample,acompanysellingdetergentoftendifferentiatesitsproductthrougheasily
recognizablepackaging.
continued
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON6:page10
HandoutIII.6.D,“Advantages&DisadvantagesofMonopolisticCompetition”(continued)
Disadvantages
4. HighCostsMostlocalcompaniesundermonopolisticcompetitivemarketenjoysomelevelofliberty.Though
themarketisfreeandopentoothercompanies,alocalcompanycanoftenadjustpricesupwardwithoutattractingcompetition.Inaddition,alocalfirmenjoysrepeatbusinessfromlocalcustomers
whoremainloyalirrespectiveofpricechangesorthequalityofservicesoffered.
5. HighExpensesMonopolisticallycompetitivefirmsincurhighexpensesinmarketingandadvertising;advertisingis
expensive,andmonopolisticallycompetitivecompanieshavetospendtomaketheirpresenceinthemarketknown.Inmonopolisticcompetition,firmsmakeanextraefforttodifferentiatetheirproductsintheviewofstiffcompetitionusingmethodssuchasproductpackaging,unique
marketinganddistributionchannelstodifferentiatetheirproducts.Thisbecomesanadditionalcost,whichmakesoperatingcostshigh.
http://www.ehow.com/info_8572321_advantages‐disadvantages‐monopolistic‐compettition.html
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON6:page11
HandoutIII.6.E,“Advantages&DisadvantagesofOligopolies”Direction:Circlethemostsignificantadvantageanddisadvantageofoligopolies.
Advantages
1. BigBusinessesGainMassiveProfitsOneofthegreatestadvantagesforoligopoliesisthedegreetowhichtheyareincontroloftheirbusinesses.ThinkaboutsomeofthemajorcompaniesintheUnitedStates.Youcouldprobablypointoutfivebusinessesthatownthemajorityofotherbusinesses.Sometimes,evenproductsthatappeartocomefromcompetingcompaniesareactuallyresultsofthesamelargerestablishment.Therefore,themaincompanyisabletodriveitsowncompetition,yetitalwayswinsthatcompetition,sinceithasproductsonbothsides.Additionally,thebusinessisabletomakemassiveamountsofmoneysincethatonecompanyisinchargeofsomanydifferentcomponents.
2. AbilitytoDeterminePricesInsteadofhavingtokeepupwiththemarket,oligopoliesessentiallycontrolthemarket.Ofcourse,intimesofeconomichardship,manydifferenttypesofvenuesaregoingtobeaffected‐andthesesuccessfulbusinessescanbehurtaswell.However,onceagain,thinkaboutthemajorbusinessesintheUnitedStatesandhowtheyhavemanagedtostayopenduringthecurrentrecession.
Sinceoligopolieshavesomuchpower,theyareabletosetpricesforbothgoodsthatpeoplewantandgoods that people need, thereby sustaining themselves. However, the practice of "setting" prices isillegal.Therefore,whileitisapositiveforthecompany,itisanegativeforconsumersinsomanyotherways.
3. Long‐TermProfitsThesecompaniesnotonlymakemassiveprofits,buttheyareabletoretainthemforthelonghaul.Thewaythatthemarketissetupdoesnotallowjustanyoldbusinesstocomeintoashareofthepoweroftheoligopoly.
Disadvantages
1. PowerintheHandsofaWealthyFewWhenthewealthisconcentratedinthehandsofafewpeopleandnotmorespreadout,smallerbusinessesarenotnecessarilyabletogettheirnamesoutthereandselltheirproductsandservices,unlesstheyareabsorbedbyalargerbusinessthatispartoftheoligopoly.
2. CreativityWhenthewealthisconcentrated,itisdifficultfornewideastocomeintoplay.Theyeitherneedtobeabsorbedbyoneofthecontrollingbusinessesintheoligopoly,ortheyareneverabletoreachfruition.Fortheindividual,stiflingcreativityissuffocating.Agreatideamightbeallreadytocomeintoexistence,butitisunabletobeintroducedbecauseoftheoligopoly'spowerinthemarketplace.
3. SettingPricesThesebigbusinesseshavethepowertosetprices,whichisnegativeforthesocietyandforothertypesofbusinesses,inadditiontobeingillegal.Thewholeideaofcompetitivepricingisthrownoutthewindowwhenthesebusinessesgoabouttheirpricingpractices.
Asyoucanprobablysee,oligopoliesappeartobebeneficialforthesuccessfulbusinessesinthem,butnotsogreatfortheotherpeopleinthesociety.
http://answers.yourdictionary.com/answers/business/what‐are‐advantages‐disadvantages‐oligopoly.html
UNITIII/LESSON7
TheCircularFlowofEconomicActivities
TimeFrame2days
StandardsNES:Economics–Describethenatureofeconomicsandeconomicactivities
Explainthecircularflowmovementofinputsandoutputsamonghouseholds,businesses,andgovernments
AssesstheimpactofgovernmentactionsonbusinessventuresNES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionHowdohouseholds,government,andbusinessactivitiesworktogethertomakeoureconomyrun?
MaterialsHandoutsIII.7.A‐F
ObjectivesStudentswillbeableto:
DrawconclusionsastohowgoodsandservicesaredistributedintheUnitedStates.
DescribeandillustratewhatismeantbythecircularflowofeconomicactivityintheUnitedStates.
Explainhowthegovernmenthasthepowertoalterthecircularflowandunderwhatcircumstances
thegovernmentwilltakeactionstocontroloraltertheflowoftheeconomy.
TeacherBackgroundTheflowofpaymentsinaneconomyisacircularflowinvolvinghouseholds/consumers,businesses,and
thedifferentlevelsofgovernment.Thiscircularflowworksasfollows:Consumersworkforbusinesses,renttheirproperty(ortheircapital)tobusinesses,and/ormanageandownthebusinesses.Theseactivitiesgenerateincomes—whichcanbelookedatasflowsofpaymentsfrombusinessesto
households.Householdsthenspendtheirincomes‐‐onconsumptiongoods,whichgotobusinesses,orpaytaxestogovernments.Foritspart,governmentsthenspendthemoneytheyhavereceivedongoodsandservices,whichgobacktohouseholdsandbusinesses.
HandoutsIII.7.A,III.7.B,andIII.7.Caskstudentstointerpretdiagramsillustratingtherolehouseholds,businesses,andgovernmentplayinrunningthenation’seconomy.InHandoutsIII.7.D,III.7.E,andIII.7.F,theclasswillreadmoredetailedinformationabouttheinterrelatedroleplayedbythethreesectorsin
theeconomy.Foreachofthesehandouts,studentswillbechargedwithaskingaquestionabouttheinformationcontainedinthehandouts.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON7:page2
TeachingStrategies/SupportingActivities
Writethewords“consumers,”“businesses,”and“government”ontheboard.Askstudentstowrite
onesentenceforeach,toexplaintherolethatthatsectorplaysinmakingoureconomyrun.Thenhavestudentsexplaintheiranswerstothefollowingquestions:
– Whatroledidyousayconsumersplay?
– Whatroledidyousaybusinessesplay?
– Whatroledidyousaygovernmentsplay?
– Whichofthesethreesectorsplaysthemostimportantroleinmakingtheeconomyrun?
DistributeHandoutIII.7.A,“Diagram.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatdidyouseeinthisdiagram?
– WhatideasabouttheCircularFlowofMoney,Goods,andServiceswereexpressedinthediagram?Howdoyouexplaintheuseoftheterm“circularflow”todescribetheeconomicrelationshipbetweenhouseholdsandfirms?
– Whatdidyoulearnfromthediagramabouttherolehouseholdsplayinthecircularflowof
money,goods,andservices?Whatdidyoulearnabouttherolebusinessesplayinthecircularflowofmoney,goods,andservices?
– WhatisthemostimportantthingaboutCircularFlowofMoney.Goods,andServicesthatyou
learnedfromthisdiagram?
DistributeHandoutIII.7.B,“GovernmentandPublic.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatdoyoulearnfromthishandoutabouttheinterrelationshipsbetweenthegovernmentand
publicintheeconomy?
– Towhatextentwouldyousaythathouseholdsaredependentongovernment?
– Towhatextentwouldsaythegovernmentisdependentonhouseholds?
Distribute:HandoutIII.7.C,“FlowofEconomicActivity.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatinformationdoyougetfromstudyingthischart?
– Basedonthischart,howwouldyouexplaintherolehouseholdsplayinthenation’seconomicactivities?
– Basedonthischart,howwouldyouexplaintherolebusinessesplayinthenation’seconomic
activities?
– Basedonthischarthowwouldyouexplaintherolegovernmentsplayinthenation’seconomicactivities?
– Whichsectorplaysthemostindispensablerole?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON7:page3
Distribute:HandoutIII.7.D,“Households.”Havestudentscompletetheexerciseonthehandout,
thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatdidyoulearnfromthisreadingabouttherolehouseholdsplaythatyoudidnotgetfrom
lookingatthediagramonIII.7.C?
– Whatquestionabouthouseholdswouldyouhaveaskedofthepersonwhowrotethenoteonthehandout?
Distribute:HandoutIII.7.E,“Businesses.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– WhatdidyoulearnfromthisreadingabouttherolebusinessesplaythatyoudidnotgetfromlookingatthediagramonIII.7.C?
– Whatquestionaboutbusinesseswouldyouhaveaskedofthepersonwhowrotethenoteonthe
handout?
Distribute:HandoutIII.7.F,“Governments.”Havestudentscompletetheexerciseonthehandout,
thenhavethemexplaintheiranswerstothefollowingquestions:
– WhatdidyoulearnfromthisreadingabouttherolegovernmentsplaythatyoudidnotgetfromlookingatthediagramonIII.7.C?
– Whatquestionaboutgovernmentswouldyouhaveaskedofthepersonwhowrotethenoteonthehandout?
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
Basedonwhatyoulearnedinthislesson,howdohouseholds,government,andbusinessactivitiesworktogethertomakeoureconomyrun?
FollowUpAskstudentstocreatethreePowerPointslidesconsistingofanimageandnomorethanthreelinesoftext,picturingtherolesthathouseholds,businesses,andgovernmentsplayinconductingthenation’seconomicactivities.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON7:page4
HandoutIII.7.A,“Diagram”Directions:Diagramshelpsustounderstandanideabypresentingapictureofthatidea.Studythe
diagrambelowandcompletetheexercisethatfollows.
Circular Flow of Money, Goods, and Services
Takenfromhttp://ingrimayne.com/econ/TheFirm/CircularFlow.htmlhttp://www.enotes.com/circular‐flow‐reference/circular‐flow
Exercise:Writeaparagraphof3‐4sentencesexplainingthemostimportantideascontinuedinthediagram.
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON7:page5
HandoutIII.7.B,“GovernmentandthePublic”Directions:Government’sroleintheflowofeconomicactivitiesisanimportantone,particularlyits
relationshipwithhouseholds.Studythediagrambelowandcompletetheexercisethatfollows.
Exercise:Inthechartbelow,givetwoexamplesoftaxespaidbyhouseholdstogovernmentandtwoexamplesofservicesperformedbygovernmentforhouseholds.
Examples of taxes paid by households to government
Examples of services performed by government for households
1.
1.
2.
2.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON7:page6
HandoutIII.7.C,“FlowofEconomicActivity”Directions:Studythediagrambelow,whichgivesacompletedescriptionoftheinterrelatedroleplayed
byhouseholds,businesses,andgovernmentintheeconomicactivitiesoftheU.S.Thencompletetheexercisethatfollows.
Adaptedfrom,Economics:PracticesandPrinciples,GersonAntell,Amsco:1997,p33
Exercise:Basedontheinformationprovidedinthediagramabove,explain,inoneortwosentencesforeach,therolethatthehousehold,business,andgovernmentsectorsplayintheeconomicactivitiesoftheU.S.
1. Households
2. Businesses
3. Government
Households
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON7:page7
HandoutIII.7.D,“TheHouseholds”Directions:Assumeyoucouldwritetoarepresentativeofthehouseholdsector,askingthatpersonto
explain more about the role of the household sector plays in the economy than was pictured inHandoutIII.7.C.Theletterbelowcontainsapossibleresponsetoyourquestion.Completetheexercisethatfollows.
Dear Sir/Madam:
As the household sector, our spending drives the economy, accounting for about 70 percent of all economic activity in the U.S. Here’s how it works. We get the money to spend from a variety of sources, including businesses and government—some of it is earned (e.g., wages and salaries, interest, rent and dividends). Individuals may also receive income––called transfer payments such as veterans' benefits, welfare payments, and retirement or pension benefits.
Household income, along with borrowings from financial markets, goes to another sector of the economy, businesses, in the form of spending on goods, such as automobiles and food, and services, such as education and entertainment. While the bulk of our income is spent, households, like the other sectors, often borrow to purchase goods and services the cost of which may be beyond the reach of our current incomes. Examples of items for which we typically borrow to pay for are automobiles, homes and education. Of course, consumers may, as a matter of convenience, borrow when they use credit or charge cards to purchase relatively less expensive times such as food in restaurants or clothing.
Finally, individuals pay taxes on the basis of their income, on the things they purchase, or on the property they own. The taxes collected represent the principal source of income to the government sector. The portion of household income that is neither spent nor taxed is saved.
Adaptedfrom:http://ecedweb.unomaha.edu/ve/library/cirf.pdf
Exercise: Write one question you would ask the person who wrote this letter about the household
sector’sroleintheeconomicactivityofthenation.
____________________________________________________________________ ____________________________________________________________________?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON7:page8
HandoutIII.7.E,“Businesses”Directions: Assume you couldwrite to a representative of the business sector, asking that person to
explainmore about the role that the business sector plays in the economy thanwas pictured in thediagramonHandoutIII.7.C.Theletterbelowcontainsapossibleresponsetoyourquestion.Completetheexercisethatfollows.
Dear Sir/Madam:
The principal economic activity of the business sector is to produce consumer and capital goods and services, mostly for households (consumers) but for the government as well. Consumer goods and services include anything—for example, television sets, clothing, health care—that is bought for immediate use. Capital goods are goods—such as trucks, tools, and equipment—which, while not directly consumed, are used to produce either additional consumer goods and services or other goods. By producing we mean not only goods you can see, like steel, but also services, which are also part of the production activities of business firms. For example, the shipment of an automobile from an assembly plant to a dealer's showroom involves the use of transportation services.
As businesses, we compete with each other for resources around the world, as well as human talent, such as designers, workers, and managers. We get this human talent primarily from the household sector. The cost of acquiring resources such as labor is a source of income (namely, wages) for households, who are the labor resource suppliers.
A firm's net income or profit is the difference between its revenue from selling output and the costs or expenses associated with producing it. These profits are an important internal source of funds firms use to finance their expenditures for new capital resources or to place in financial institutions (e.g., banks) for use by the public. In addition to undistributed profits, the funds we borrow are also used to finance business expenditures.
Business investment spending is affected by a variety of factors including the current and expected state of the economy, interest rates, and taxes. An economic slowdown that is expected to continue for some time may result in business firms trimming their capital spending plans. A sluggish economy, high business taxes and rising interest rates normally weaken the rate of business investment spending and, in turn, the economy's capacity to grow and produce goods and services. In contrast, an expanding economy, along with a favorable tax and interest rate environment, will cause the circular flows of economic and financial activity to expand, as well.
Adaptedfrom:http://ecedweb.unomaha.edu/ve/library/cirf.pdf
Exercise:Writeonequestionyouwouldaskthepersonwhowrotethisletteraboutthebusinesssector’s
roleintheeconomicactivityofthenation.
____________________________________________________________________ ____________________________________________________________________?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON7:page9
HandoutIII.7.F,“Government”Directions:Assumeyoucouldwritetoarepresentativeofthegovernmentsector,askingthatpersontoexplainmoreabouttherolethatthegovernmentsectorplaysintheeconomythanwaspicturedinthediagramonHandoutIII.7.C.Theletterbelowcontainsapossibleresponsetoyourquestion.Completetheexercisethatfollows.
Dear Sir/Madam:
Lumped together in our sector are more than 80,000 separate units, made up of all levels of government––federal, state, municipal, and local. Generally, we spend your tax dollars on goods and services, produced by private sector business firms. For example, the federal government provides national defense using aircraft carriers made by and purchased from the private sector. In addition to spending to purchase them, we sometimes produce goods and services ourselves. As a rule, the government sector provides the private sector with goods and services that businesses generally does not or cannot provide. For example, private business firms generally will not provide goods and services to customers who do not pay, yet benefit from their availability. If such goods and services are provided at all, it is generally done by the public sector. They are called public or collective goods and services because individuals “collectively” benefit from their availability whether or not they pay. Some examples are public schools, national defense goods like tanks and missiles, and interstate highways.
The principal source of income for the federal government comes from taxes levied on the earnings of households and businesses. State and local governments, however, rely to a large extent on sales and real estate taxes. A tax on the flow of income affects the amount households and business firms devote to saving as well as to spending on services and consumer and business capital investment goods. For example, an increase in the personal income tax rate would tend to lower after-tax or disposable income and, in turn, the amount of income households allocate to spending and saving. With higher taxes discouraging consumer spending, business firms will generally cut back on production rather than being stuck with unsold inventories of output. A slowing in production will decrease business demand for productive resources and, in turn, will increase resource unemployment and lower resource income, further reducing the general demand for goods and services, which was initially triggered by the income tax increase.
A change in the level of government spending affects the economy's flows. If the government sector were to increase spending on goods and services produced by businesses, the tempo of economic activity would rise and the following is also likely to increase: a) the levels of employment; b) household and business income, spending and saving; and c) tax receipts, as households and businesses pay more taxes on higher incomes. Similarly, a slowing or reduction in government spending (or an increase in taxes) would tend to slow the economy's flows, as well.
Adaptedfrom:http://ecedweb.unomaha.edu/ve/library/cirf.pdf
Exercise:Writeonequestionyouwouldaskthepersonwhowrotethisletteraboutthegovernment’sroleintheeconomicactivityofthenation.
____________________________________________________________________ ____________________________________________________________________?
UNITIII/LESSON8
MeasuringEconomicActivity
TimeFrame2days
StandardsNES:Economics–Macroeconomicconcepts
ExplainmeasuresusedtoanalyzeeconomicconditionsExplaintheconceptofGrossDomesticProductExplaintheconceptofConsumerPriceIndex
NES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionHowdoeconomistsmeasurethehealthofaneconomy?
MaterialsHandoutsIII.8.A‐E
ObjectivesStudentswillbeableto:
Describetheirconceptofhealthyeconomy.
Discusssomeofindicatorseconomistsusetoevaluatetheeconomy(e.g.,GDP,CPI,Employmentdata)andtheflawsinthesemeasures.
Makejudgmentsastowhicheconomicindicatorsgiveustheclearestpictureofthehealthoftheeconomy.
TeacherBackground
Economicindicatorsappearregularlyinthenewsreports.Theseindicatorsprovideimportantinformationtoeconomists,governmentofficials,andbusinessleadersbecausetheyallowanalysisofeconomicperformanceandpredictionsoffutureperformance.Attimes,thevariousindicatorspainta
clearpictureofaneconomygoinginonedirection.Atothertimes,thevariousindicatorsseemtobegoingindifferentdirections.Someindicatorsarecalledleading(e.g.,stockmarketprices)becausetheychangebeforetheeconomyasawholechanges.Othersindicatorsarecalledcoincident(e.g.,personal
income),becausetheychangeatapproximatelythesametimeasthewholeeconomy.Andstillothersarecalledlaggingindicators(e.g.,theunemploymentrate),becausetheychangeaftertheeconomyasawholedoes.Thislessonexaminessomeofthemoreprominentindicators,examiningwhatinformation
theyprovideandhowreliabletheyare.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON8:page2 HandoutIII.8.Aasksstudentstosuggestmeasuresthatanon‐economistwouldlookattodetermine
whetherornotaneconomyishealthy.Studentswillreadabeginner’sguidetoeconomicindicatorsinHandoutIII.8.Btolearnsomebasicinformationonthesubjectandidentifythreeimportantideastheygainedfromthereading.Theclassisexposedtosomeofthemoreimportanteconomicindicatorsin
HandoutIII.8.C.Intherelatedexercisetheyareexpectedtopointtothoseindicatorsthatpresentthemostvitalinformationabouttheeconomichealthofthenation.HandoutIII.8.Dcallsuponstudentstoapplywhatlearnaboutindicatorstoachartandstoryaboutoneofthemostimportantindicators,Gross
DomesticProduct.
TeachingStrategies/SupportingActivities
DistributeHandoutIII.8.A,“Doctor.”Askstudentstofollowthedirectionsonthehandout,thenhave
themexplaintheiranswerstothefollowingquestions:
– Whenyougotothedoctor,whatkindsofthingsdoesheorshelookattodetermineyourhealth?
– Whatdothingslikeaperson’stemperature,bloodpressure,andbloodteststellusabouta
person’shealth?”
– Whatkindsofthingswouldyou,asanon‐economist,lookattodeterminehowhealthyour
economyis?
– IfyouhadtomakeadeterminationaboutthehealthoftheU.S.economytoday,wouldyousayitis:a)veryhealthy,b)somewhathealthy,c)moreunhealthythanhealthy,ord)unhealthy?
DistributeHandoutIII.8.B,“GuidetoIndicators.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Inwhatwaysareeconomicindicatorsimportantto:1)economists,2)businesspeople,and3)governmentofficials?
– Whatarethemajordifferencesbetweenlagging,leading,andcoincidentindicators?Whymight
anentrepreneurbeinterestedinlookingataleading,alagging,andacoincidentindicator?
– Whatisthemostimportantinformationyoulearnedaboutindicatorsfromthishandout?
Distribute:HandoutIII.8.C,“ImportantIndicators.”Havestudentscompletetheexerciseonthe
handout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatinformationdidyougetfromthishandoutabouteconomicindicators?
– Whataresomeoftheimportantdifferencesintheindicatorsinthesethreecategories?
I) TotalOutput,Income,PricesandSpending
II) Employment,Unemployment,andWages
III)ProductionandBusinessActivity
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON8:page3
– SomepeoplebelievethemostimportantstatisticsabouttheeconomycomefromtheCategoryII
Employment,Unemployment,andWages.Howcanyouexplainthatbelief?
– Inyouropinion,whichofthethreecategoriesofinformationismostcrucialtounderstandingthecurrenthealthoftheeconomy?
Distribute:HandoutIII.8.D,“Application.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Howdidyoufillinthesixblanksonthehandout?
– WhatinformationdidyoulearnaboutGDPfromthishandout?
– Basedonthisreport,towhatextentisGDPagoodmeasureofthenation’soveralleconomic
activity?TowhatextentshouldGDPbedescribedasanincompletemeasureofthenation’seconomichealth?
DistributeHandoutIII.8.E,“Flaws.”Havestudentscompletetheexerciseonthehandout,thenhave
themexplaintheiranswerstothefollowingquestions:
– Whatdidyoulearnaboutsomeoftheflawsineachofthemajoreconomicindicatorsfromthis
reading?
– Whatarethemostseriousflawinthefollowing:GDP,CPI,andtheunemploymentrate?
– Basedonwhatyoulearnedabouttheseflaws,towhatextentshouldwerelyontheGDP,CPI,
andunemploymentratewhenattemptingtodeterminethehealthoftheeconomy?
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
WhatdidyoulearninthislessonabouttheindicatorsusedtomeasurethehealthoftheU.S.economy?
FollowUpAskstudentstostudentstowriteathree‐pagepaperentitled“ProblemswithEconomicIndicators.”Thepapershouldaddresssomeoftheshortcomingsrelatedtoeconomicindicatorsthatareusedto
measuretheeconomichealthofthenation.Studentsshouldaddressthisquestionintheirconclusions:“Towhatextentcanwerelyoneconomicindicatorstodeterminethenation’seconomichealth?”
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON8:page4
HandoutIII.8.A,“Doctor”Directions:Onthechart,listthreethingsyouwouldlookattodeterminethehealthofanation’s
economy.
Adaptedfrom:http://thumbs.dreamstime.com/thumblarge_258/1208139620O5siLv.jpg
Measures of a Healthy Economy
1. 2. 3.
Hi— I’m an economist who measures the economic health of a nation.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON8:page5
HandoutIII.8.B,“Beginner’sGuidetoEconomicIndicators”Directions:Underlinethreeimportantpiecesofinformationfromthisbeginner’sguidetoeconomicindicators.
Q: I'mconstantlyhearingabouteconomicindicatorsinthenews,butI'mneversurewhatthey'retalkingabout.Whatareeconomicindicatorsandwhyaretheyimportant?
A: Aneconomicindicatorissimplyanyeconomicstatistic,suchastheunemploymentrate,GrossDomesticProduct,ortheinflationrate,whichinformusabouthowwelltheeconomyisdoingnowandwhichdirectionisitgoinginthefuture.Tounderstandeconomicindicators,wemustunderstandthewaysinwhicheconomicindicatorsdiffer.Therearethreemajorattributeseacheconomicindicatorhas:
ThreeAttributesofEconomicIndicators1. RelationtotheBusinessCycle/Economy
EconomicIndicatorsarerelatedtothebusinesscycleinoneofthesetwoways:
a. Apro‐cyclicaleconomicindicatorisonethatmovesinthesamedirectionastheeconomy.Soiftheeconomyisdoingwell,thisnumberisusuallyincreasing,whereasiftheeconomyisdoingpoorly,thisindicatorisdecreasing.TheGrossDomesticProduct(GDP)isanexampleofaprocyclicaleconomicindicator.
b. Acountercyclicaleconomicindicatorisonethatmovesintheoppositedirectionastheeconomy.Theunemploymentrategetslargerastheeconomygetsworse,soitisacounter‐cyclicaleconomicindicator.Astheeconomygetsbetter,theunemploymentrategoesdown.
2. FrequencyoftheDataSomeindicatorsarereleasedeverythreemonths(e.g.,GrossDomesticProduct),somemonthly(e.g.,unemploymentrate),andstillothersareavailableimmediatelyandchangeminute‐by‐minute(e.g.,theDowJonesIndex).
3. TimingEconomicIndicatorscanbeleading,lagging,orcoincidentwhichindicatesthetimingoftheirchangesrelativetohowtheeconomyasawholechanges.
ThreeTimingTypesofEconomicIndicators:
a. Leading:Leadingeconomicindicatorsareindicators,thatchangebeforetheeconomychanges.Stockmarketreturnsarealeadingindicator,asthestockmarketusuallybeginstodeclinebeforetheeconomydeclinesandtheyimprovebeforetheeconomybeginstopulloutofarecession.Leadingeconomicindicatorsarethemostimportanttypeforinvestors,astheyhelppredictwhattheeconomywillbelikeinthefuture.
b. Lagging:Alaggingeconomicindicatorisonethatdoesnotchangedirectionuntilafewquartersaftertheeconomydoes.Theunemploymentrateisalaggingeconomicindicator,asunemploymentstilltendstoincreasefor2or3quartersaftertheeconomystartstoimprove.
c. Coincident:Acoincidenteconomicindicatorisonethatsimplymovesatthesametimetheeconomydoes.TheGrossDomesticProductisacoincidentindicator.
http://economics.about.com/cs/businesscycles/a/economic_ind.htm?p=1
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON8:page6
HandoutIII.8.C,“ImportantIndicators”Directions: This handout lists three categories of important economic indicators and how frequentlythey are released to the public (this information appears in brackets). Circle the one category of thethreethatyouthinkcontainsthemostimportantindicators.
Eachoftheseindicatorshelpscreateapictureoftheperformanceoftheeconomyandhowtheeconomyislikelytodointhefuture.
I. TotalOutput,Income,PricesandSpendingThesetendtobethebroadestmeasuresofeconomicperformanceandincludesuchstatisticsas:
– GrossDomesticProduct(GDP)[quarterly] – ConsumerPriceIndex(CPI)[monthly]– RealGDP[quarterly] – NationalIncome[quarterly]
– PersonalConsumption(PCE)Expenditure – ConsumptionExpenditure[quarterly] Deflator[quarterly] – CorporateProfits[quarterly]– BusinessOutput[quarterly] – RealGrossPrivateDomesticInvestment[quarterly]
Comment:TheGrossDomesticProductmeasuresthetotaldollarvalueofgoodsandservices
producedbyanation’seconomyoveracertainperiodoftime.Itisacoincidenteconomicindicator.TheConsumerPriceIndexisameasureofthegenerallevelofpricesandthereforeprovidesimportantinformationaboutperiodsofinflationordeflation.Ittendstobealaggingindicator,asitreflectsaneconomicchange(e.g.,ariseininflation)afterithasalreadyoccurred.
II. Employment,Unemployment,andWagesThesestatisticscoverhowstrongthelabormarketisandtheyincludethefollowing:
– UnemploymentRate[monthly]– LevelofCivilianEmployment[monthly]– AverageWeeklyHours,HourlyEarnings,andWeeklyEarnings[monthly]– LaborProductivity[quarterly]
Comment:Theunemploymentratemeasuresthenumberofpeoplelookingforjobswhocannotfindthem.Itisalaggingindicator.Thelevelofcivilianemploymentmeasureshowmanypeopleareworkingandisacoincidenteconomicindicator.
III. ProductionandBusinessActivityThesestatisticsmeasureproductionbybusinessesandthelevelofnewconstructionintheeconomy:
– IndustrialProductionandCapacityUtilization[monthly]– NewConstruction[monthly]– NewPrivateHousingandVacancyRates[monthly]– BusinessSalesandInventories[monthly]– Manufacturers'Shipments,Inventories,andOrders[monthly]Comment:Changesinbusinessinventoriesisanimportantleadingeconomicindicatorasitindicateschangesinconsumerdemand.Newconstructionincludingnewhomeconstructionisanotherleadingindicatorwatchedcloselybyinvestors.Aslowdowninthehousingmarketduringaboomoftenindicatesthatarecessioniscoming,whereasariseinthenewhousingmarketduringarecessionusuallymeansthattherearebettertimesahead.
http://economics.about.com/cs/businesscycles/a/economic_ind_2.htm?p=1
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON8:page7
HandoutIII.8.D,“Application”Directions:BelowisanewsstoryaboutareportontheGrossDomesticProduct(GDP),oneofthemostimportantindicatorsstudiedbyeconomists.Basedonwhatyoulearnedaboutindicators,andlookingatthechartbelow,fillintheunderlinedsixspaceswithwordsthatyouthinkfitbest.
U.S. economy is 1) , but still struggling @CNNMoney January 27, 2012: 10:11 AM ET
NEW YORK (CNNMoney) – The United States economy 2) __________________ at the end of 2011 as businesses substantially built up their inventories and consumers increased their spending.
Gross domestic product, announced every 3) _________ month(s) is a measure of 4) ________________ _____________ . In Q4 20011, it grew at an annual rate of 5) _____% in the last three months of the year, the Commerce Department said. GDP is considered a 6) __________________________ indicator, because it moves at the same time the economy does.
While that's a major improvement from 1.8% in the prior quarter, and the fastest since the second quarter of 2010, it still fell short of economists' expectations of 3.2% and sent stock futures falling.
SignsofweaknessWhile the number appeared to come in strong, there were still signs of overall weakness, and economists remain cautious about the outlook for the economy.
One reason is that the bulk of the growth came from just one area: businesses building up their stock of goods. Private businesses increased inventories $56 billion in the fourth quarter, following a decrease of $2 billion in the third quarter.
An increase on that front can be seen as a double-edged sword. On the one hand, it can be a sign of confidence in the economy. When firms predict greater purchases in the future, they build up their inventories.
Adaptedfrom:http://money.cnn.com/2012/01/27/news/economy/gdp_growth/index.htm
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON8:page8
HandoutIII.8.E,“Flaws”Directions: Economistsandothermarketwatchers look tomajormarket indicators suchas theGrossDomesticProduct(GDP),theConsumerPriceIndex(CPI),andtheunemploymentrateforguidanceonthe stateof theeconomy. However, therearemanypotential flaws in the story these indicatorsaretelling. Someoftheflaws inthesethreemajor indicatorsaredescribedbelow. Foreachofthethreeindicatorsmentioned,underlinethemostseriousflaw.
1. GrossDomesticProductGrossdomesticproduct(GDP),definedasthemonetaryvalueofallthefinishedgoodsandservicesproducedwithinacountry'sborders,iscommonlyusedasanindicatorofacountry'seconomichealth,aswellasagaugeofthecountry'sstandardofliving.CriticsofthisindicatorcorrectlypointoutthattheGDPdoesnottakeintoaccounttheso‐calledundergroundeconomy,includingthosepeoplewhoproducegoodsandservicesbutdonotreporttheseactivitiestoavoidpayingtaxes.Alltransactionsthat,forwhateverreason,arenotreportedtothegovernmentaresimplyleftoutoftheGDPcalculation.Forexample,householdproduction(thevalueofahousewife)countsfornothingwhiletheservicesofamaidaddtothegrossdomesticproduct.Otherexamplesofundergroundproductionincludethetimeyouspendworkinginyourgardenorfixingyourcar.
2. ConsumerPriceIndexTheConsumerPriceIndex(CPI)isaseriesofmeasuresthatreflecttheweightedaverageofpricesofabasketofconsumer’sgoodsandservices.Thegoodsareweightedintheindexaccordingtotheirshareoftotalconsumerexpenditures.ChangesintheCPIareusedtomeasureinflation.Whiletrackinginflationisimportantinthatitcanhelpconsumersunderstandchangesassociatedwiththecostofliving,understandingCPIisnotasimplematter.TheCoreCPI,animportantpartoftheCPI,doesnotmeasurefoodandenergybecausethosepricesgoupanddownsofrequently.Ofcourse,foodandenergycostshaveasignificantimpactonone'sspendingbudgetandgenerallyhaveahard‐to‐avoidimpactonconsumers.Anymeasurethatdoesnotcapturethemisunlikelytoreflecttheexperiencesofthemajorityofthepopulation.TheCPImeasuresarefilledwithcriticism.Forone,thebasketofgoodschangesinfrequentlyand,therefore,maynotalwaysreflectitemsthatprovideanaccurateaccountingoftheconsumerexperience.Foranother,somecriticsarguethatCPIoverestimatesinflation,whileothersarguethereverse.
3. UnemploymentRateTheU.S.government'sBureauofLaborStatistics(BLS)headlineunemploymentnumber,frequentlycitedbythepressintheheadlines,isthenarrowest,mostsugarcoatedmeasureofU.S.joblessnessforthesereasons:
– Itexcludesworkersseekingfull‐timejobs,failingtofindthem,andthenacceptingpart‐timeworkthatalmostinvariablypaysfarless.
– Itexcludesdiscouragedworkerswhohavegivenuplookingforjobsbecausetheycan'tfindany.
– And,asifthatwasn'tenough,theBLShasbeenconsistentlyandgrosslyunderstatingthecurrentunemploymentnumbers,notrevisingthemuntilmonthslater,whenfewerpeoplearepayingattention.
Adaptedfrom:http://www.investopedia.com/articles/economics/11/flaws‐in‐market‐indicators.asp?partner=thebull#axzz1lfIl4iMCandhttp://www.marketoracle.co.uk/Article9960.html
UNITIII/LESSON9
BusinessCycle
TimeFrame:2days
StandardsNES:Economics–Macroeconomicconcepts
DescribetheimpactofbusinesscyclesonbusinessactivitiesExplainmeasuresusedtoanalyzeeconomicconditions
NES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionHowdoesthebusinesscyclehelpusunderstandwhat’sgoingonintheeconomy?
MaterialsHandoutsIII.9.A‐D
ObjectivesStudentswillbeableto:
Discusstheconceptofthebusinesscycle.
Describethedifferentphasesofthebusinesscycle.
Explainthecausesofthebusinesscycle.
TeacherBackground
Thebusinesscycleisdefinedasthetendencyofaneconomytoexperienceperiodicupturnsandslowdownsinproduction.Duringtheseperiods,peoplegainorlosejobs,thedemandforgoodsincreasesordeclines,
andbusinessesexpandorclose.Sometimescalledthe"boom/bust"cycle,thebusinesscyclehasbeenarecurringphenomenonsincethemid‐nineteenthcentury.Thisphenomenonischaracterizedbyfourphasesofeconomicactivity:thepeak(thehighestpointofeconomyactivity,priortothedownturn),the
contractionorrecession(aneconomicdownturncharacterizedbynegativegrowth),thetrough(thelowestpointofeconomicactivity,leadingtoatransitionupward),andtheexpansion(aperiodduringwhichtheeconomyimproves,leadingtothepeak).
StudentswillinterpretachartofthebusinesscycleinHandoutIII.9.A.Theywillnextrole‐playaninterviewaboutthebusinesscyclewithaneconomistinHandoutIII.9.B.HandoutIII.9.Cexplainsingreaterdepththefourphasesofthebusinesscycle.Intheexerciseforthishandout,theclasswillplotthebusinesscycle,in
termsofGDPgrowth,forthe2008‐2009period.HandoutIII.9.Daskstheclasstoposeaquestionaboutthecausesofthebusinesscyclebasedonaletterthatstudentsread.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON9:page2 TeachingStrategies/SupportingActivities
DistributeHandoutIII.9.A,“Chart.”Askstudentstofollowthedirectionsonthehandout,thenhave
themexplaintheiranswerstothefollowingquestions:
– Whatdidyoulearnaboutthebusinesscyclefromthischart?
– Whydoyouthinkthechartistitled“TheBusinessCycle”?
– Afterstudyingthischart,whatisonequestionaboutthebusinesscyclethatyouwouldwantanswered?
DistributeHandoutIII.9.B,“Interview.”Assignsixstudentstothefollowingroles:Interviewer#1(I‐1);Interviewer#2(I‐2);Interviewer#3(I‐3);Interviewer#4(I‐4);Interviewer#5(I‐5);andEconomist(E).
Havethesixstudentsactouttheinterview,accordingtothescriptonthehandout.Havetheremainderoftheclasscompletetheexerciseattheendofthehandout;thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatwasthisinterviewabout?
– Whataresomeoftheimportantthingsyoulearnedaboutthebusinesscyclefromtheinterview?
– Whatquestionwouldyouhaveaskedoftheeconomistaboutthebusinesscycleafterwatchingthe
performanceoftheinterview?
DistributeHandoutIII.9.C,“Phases.”Askstudentstofollowthedirectionsonthehandout,thenhave
themexplaintheiranswerstothefollowingquestions:
– Whatdidyoulearnaboutthephasesofthebusinesscyclefromthishandout?
– Whatarethemajordifferencesamongthepeak,trough,expansion,andcontractionphases?
– Basedonthegraphyoucreatedfortheexerciseonthishandout,whatphase(s)ofthebusinesscyclewasoureconomyinbetweenthefirstquarterof2008andfourthquarterof2009?
– Towhatextentisitnecessaryforanentrepreneurtohaveanunderstandingaboutthedifferent
phasesofthebusinesscycleinrunninghisorherbusiness?
DistributeHandoutIII.9.D,“Causes.”Havestudentscompletetheexerciseonthehandout,thenhave
themexplaintheiranswerstothefollowingquestions:
– Accordingtothisletter,whatarethecausesofthebusinesscycle?
– Howcananeconomythat’sgrowingtoofastleadtoaneconomicdownturn?
– Basedonwhatyoulearnedaboutthebusinesscyclefromthisreading,whydoesthegovernmenthavesomuchtroubleintakingtheproperactiontopreventeconomicdownturns?
– Whatquestionwouldyouhaveposedaboutthecausesofthebusinesscycletotheeconomistwhowrotethisletter?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON9:page3
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
Whatshouldanentrepreneuropeninghisorherfirstbusinessknowaboutthebusinesscycle?
FollowUpForhomework,askstudentstowriteaone‐pagepaperonthebusinesscycleandwhatitmeansto
entrepreneurs.Thepapershouldincludethefollowing:
1. Thestudent’sassessmentofa)whatphaseofthebusinesscycleareweinnow(expansion,trough,contraction,orpeak)andb)whatpartofthatphasewearein(beginning,middle,orend).
2. Threepiecesofevidencetosupportthestudent’sassessmentstatedin“1.”
3. Aninterviewwithonebusinesspersonwhoworksinthecommunitywherethestudentlives.Inthe
interview,thestudentsshouldask:a)Basedonhowwellyourbusinessisdoing,inwhatphaseofthebusinesscycledoyouthinkweareinnow?b)Howwouldyouoperateyourbusinessdifferentlyifwewereinoneofthesephases:peak,trough,expansion,orcontraction?(c)Whatactions,ifany,should
thegovernmentbetakingatthepresenttimewithregardtothephaseofthebusinesscyclewearenowin?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON9:page4
HandoutIII.9.A,“Chart”Directions:Thischartbelowportraysaneconomicconceptknownasthebusinesscycle.Afterstudyingthechart,completetheexercisethatfollows.
http://monevator.com/2009/05/21/investment‐clocks/
Exercise:Inthespaceprovided,writeonethingyoulearnedaboutthebusinesscyclefromthischart.
_____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON9:page5
HandoutIII.9.B,“Interview”Directions:Aftertheplaybelowisperformed,writeaquestionthatyouwouldhaveaskedtheeconomistaboutthebusinesscycle.
I‐1: Thanksforcomingtoourclasstoday.Wearelookingtolearnsomethingaboutthebusinesscycle,atopicwearestudyinginourentrepreneurshipclass.
E: Thanksforhavingme.Thebusinesscycleisaveryimportantconcept,bothtoentrepreneursandeconomists.
I‐2: Canyoutellus,inthesimplestterms,whatthebusinesscycleis?E: ParkinandBade’stextbookEconomicsgivesthefollowingdefinitionofthebusinesscycle:“Theperiodic
butirregularup‐and‐downmovementsineconomicactivity,measuredbyfluctuationsinrealGDPandothermacroeconomicvariables.”
I‐3: WesawadiagramofthebusinesscycleonHandoutIII.9.Aofthislesson.Isthereanythingimportantaboutthebusinesscyclethatdoesnotappearinthediagram?
E: Thereisoneimportantfeatureaboutthebusinesscyclethatthediagramdoesnotshow.
I‐4: Whatisthat?E: Abusinesscycleisnotaregular,predictable,orrepeatingeventliketheswingofthependulumofaclock.
I‐5: IguessHandoutIII.9.Amakestheswingsinthebusinesscycle,betweenpeakandtrough,seemliketheyoccuratregulartimeintervals.
E: That’s just not the case. The timing of the business cycle is random and, to a large degree,unpredictable.
I‐1: IalsorememberthatthebusinesscycleonHandoutIII.9.Ahadtermslike“peak”and“trough”onit.What’sthatabout?
E: Peaksandtroughsaretwoofthefoursequencedphasesofthebusinesscycle.
I‐2: Whatarethosephases?E: Let’s beginwith the two phases you asked about—peaks and troughs. A peak in the business cycle
representsthehighest levelofeconomicactivityofthatcycle.Thepeak istheupperturningpointofthatcycle,meaningafterthepeakeconomicactivitystartsslowingdown.
I‐3: Okay,sowhat’sthetrough?E: Thetroughisjusttheoppositeofthepeak—itisthelowerturnpointofbusinesscycle—thebeginning
ofthetimewhentheeconomystartstogetbetter.
I‐4: Sowhathappensinbetweenthepeaksandtrough?E: Afterthetrough,economicactivityincreasesandconditionsimproveaswemoveintothenextphase
ofthebusinesscycle,called“expansion,”wheneconomicactivityspeedsupandtheeconomytakesoff.Finally,let’stalkaboutthe“contraction”phaseofthebusinesscycle,whichfollowsthepeak.Duringacontraction, economic activity slowsdown to thepointwhere theeconomy stops growing.HandoutIII.9.Aidentifiesthephaseintheeconomywhenaslowdowntakesplace,arecession.
I‐5: Ineverrealizedthattherewassomuchtolearnaboutthebusinesscycle.E: There’sagooddealmoreyoushouldknowaboutthebusinesscycle.However,IthinkI’llstopnow.
YourQuestion:____________________________________________________________________________ Adaptedfrom:http://economics.about.com/cs/studentresources/f/business_cycle.htm?p=1
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON9:page6
HandoutIII.9.C,“Phases”
Directions:Readthe“Entrepreneur’sBrief:TheBusinessCycle”belowandcompletetheexercisethatfollows.
entrepreneur’s brief phases of the business cycle
(entrepreneur’s brief is the place business people go to learn about the economy) The Stages of the Business Cycle There are four stages that make up the business cycle. At any point in time, the business cycle is in one of these stages:
1. Contraction – When the economy starts slowing down. 2. Trough – When the economy hits bottom, usually in a recession. 3. Expansion – When the economy starts growing again. 4. Peak – When the economy hits it highest point, in terms of growth, before heading lower.
Who Determines the Business Cycle Stages? The National Bureau of Economic Research (NBER), a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works, analyzes economic indicators to determine the phases of the business cycle. The Business Cycle Dating Committee uses quarterly GDP growth rates as the primary indicator of economic activity. In its analysis of economic conditions, the NBER also uses monthly statistics, such as employment reports, real personal income, industrial production, and retail sales.
What GDP Can You Expect in Each Business Cycle Phase? 1. Contraction Phase In the contraction phase, GDP growth rates, as
measured as annual rate usually slow to the 1%-2% level before actually turning negative. The 2008 recession was so nasty because the economy immediately shrank 1.8% in the first quarter 2008, grew just 1.3% in the second quarter, before falling another 3.9% in the third quarter, and then plummeting a whopping 8.9% in the fourth quarter. The economy received another wallop in the first quarter of 2009, when the economy contracted a brutal 6.9%.
2. Trough Phase In the trough phase, GDP growth may still be
negative, but it's not as bad as during a contraction. It's clear that the economy has turned a corner. According to the NBER, this occurred in the second quarter 2009, when GDP contracted a mere .7%.
continued
As the trough turns into the Expansion phase, GDP growth turns positive again. In the 2008 recession, this wasn't until the third quarter of 2009, when the GDP grew 2.2%. In the fourth quarter of 2009, GDP rose an unexpected 5.7% from the third quarter.
3. Expansion Phase As the expansion phase of the business cycle
continued in 2010, GDP fluctuated between a 3.9% growth rate in Quarter 1 and a 2.3% growth rate in Quarter 4. It is hoped the GDP growth rate for the life of the expansion phase will be in the healthy 2-3% growth range. If the economy is managed well, it can stay in the expansion phase for years.
4. Peak Phase The peak phase is when the economy's expansion
slows. It is usually the last healthy growth quarter before the recession starts. You usually don't know you are in the peak phase until it is too late. However, if the GDP growth rate is 4% or higher for two or more quarters in a row, you can bet the peak is not far off. In the 2008 recession, the peak occurred in the fourth quarter 2007, when the GDP growth rate was 1.9%.
continued
http://useconomy.about.com/od/glossary/g/business_cycle.htm?p=1http://www.treasury.gov/resource‐center/data‐chart‐center/Documents/20120502_EconomicGrowth.pdf
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON9:page7 HandoutIII.9.C,“Phases”(continued)Exercise:Basedontheinformationprovidedaboveinthesectiontitled“WhatGDPCanYouExpectinEach
BusinessCyclePhase?”makeagraphofthebusinesscyclefor2008‐2009byplottingtheratesofdeclineandgrowthofGDPforasmanyquartersasthereisinformation.Tohelpyougetstartedwiththisexercise,GDPforboththe1stQuarterof2008and4thQuarterof2009havebeenplottedforyou.(Seethetwo●on
thegraphbelow.)
+10%
+8%
+6%
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+4%
+2%
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-2%
-4%
-6%
-8%
-10%
2008 1st
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2008 2nd
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2008 3rd
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2008 4th
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2009 1st
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2009 2nd
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2009 3rd
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2009 4th
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Year and Quarter
Rat
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DP
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON9:page8
HandoutIII.9.D,“Causes”Directions:Ifyouwrotealettertoaneconomistaskingthequestion“Whatcausesthebusinesscycle?”
heorshemightwritearesponseliketheonebelow.
Dear Student:
You wrote to ask me “What Causes the Business Cycle?” I’ll try to answer as briefly as possible. The business cycle is affected by the forces of supply and demand. When consumers are confident, they buy now, knowing there will be income in the future from better jobs, higher home values, and increasing stock prices. Even a little healthy inflation can trigger demand by spurring shoppers to buy now before prices go up. As demand increases, businesses hire new workers, which further stimulates more demand. This is the Expansion phase.
If demand outstrips supply, then the economy can overheat, leading to inflation—an economic occurrence when the general level of prices rise and our money to loses it value. Overheating created the housing asset bubble in 2005. Even with inflation, we may still be in the expansion phase, but if demand isn't cooled down with higher taxes (fiscal policy) or higher interest rates (monetary policy), then the Peak is not far off.
In the Contraction phase, confidence is replaced by fear or even panic. Consumers sell their homes, and stop buying. Businesses lay off workers and hoard cash. Confidence must be restored to before the Trough can be hit, and the economy re-enters a new Expansion phase.
In addition to demand, the business cycle is also heavily dependent on the availability of capital. This is known as liquidity, which is dependent upon interest rates. Too much capital will turn a healthy expansion into a Peak, at which point greed will bid up the price of assets, often causing inflation. At this point, a stock market correction may indicate that assets are overvalued, creating fear and a Contraction. The Federal Reserve lowers interest rates to spur the economy into Expansion during a Trough. It raises interest rates during an expansion to avoid too much of a Peak.
A Trough usually is accompanied by a recession and a bear market, while an expansion is usually signaled by a bull market and inflation.
Adaptedfrom:http://useconomy.about.com/od/glossary/g/business_cycle.htm?p=1(UpdatedOctober28,2011)
Exercise:Afterreadingthisletter,suggestaquestionyouwouldliketoasktheeconomistbasedonwhathe/shewroteabout“WhatCausestheBusinessCycle?”
QUESTIONTOTHEECONOMIST:
UNITIII/LESSON10
TheEconomicRoleofGovernment
TimeFrame2days
StandardsNES:Economics–Describetherelationshipbetweengovernmentandbusiness
AssesstheimpactofgovernmentactionsonbusinessventuresNES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionAretheAmericanpeoplebetteroffwithmoreorlessgovernmentinvolvementintheeconomy?
MaterialsHandoutsIII.10.A‐D
ObjectivesStudentswillbeableto:
Drawconclusionsastowhatismeantbytheterm“laissez‐faire”andhowitrelatestotheU.S.economy.
Assesstheargumentsfavoringmoregovernmentinvolvementintheeconomy.
Assesstheargumentsfavoringlessgovernmentinvolvementintheeconomy.
TeacherBackground “Laissez‐faire,”meaningtoleavebusinessalone,isaphraseoftenassociatedwithfree‐market
capitalism.However,noeconomycanfunctionproperlywithoutsomegovernmentinvolvementintheeconomy.SincethefoundingoftheU.S.,theissueofhowmuchgovernmentinvolvementisappropriatehasvexedournationalleaders.Todayitisattheheartofthedebatebetweenthetwopoliticalparties.
InHandoutIII.10.A,studentswillrespondtopollquestionsabouttheappropriateroleofgovernmentintheeconomytoday.Theclasswillhavetheopportunitytoexaminethefourmajorrolesplayedbygovernmenttoday.HandoutIII.10.B,presentssomebasicideasdifferentiatinglaissez‐faireand
progressivism.Herestudentsareaskedtoidentifykeydifferencesinthetwoschoolsofthought.Finally,theclassispresentedwithastudyofthedifferentviewsthatAmericanshavetodayabouttheappropriateroleforgovernment.Studentsaregiventhetaskofpresentingevidenceprovidedby
individualswhoholdopposingviewsontheissue.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON10:page2
TeachingStrategies/SupportingActivities DistributeHandoutIII.10.A,“StudentPoll.”Askstudentstofollowthedirectionsonthehandout,
thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatkindsofthingsdidyousaythatthefederalgovernmentisdoingthatitshouldnotbedoing?
– Whatkindsofthingsdidyousaythatthefederalgovernmentisnotdoingthatitshouldbedoing?
– Towhatextentdoyoubelievethatweareallbetteroffifthegovernmentisinvolvedinamajorwayintheeconomy?
– Towhatextentdoyoubelievethatweareallbetteroffifthegovernmentisnotinvolvedor
minimallyinvolvedintheeconomy?
DistributeHandoutIII.10.B,“GovernmentPrograms.”Havestudentscompletetheexerciseatthe
endofthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Howwouldyoudescribethefourareasofgovernmentinvolvementidentifiedonthishandout?
– Inwhatwaysareeachoftheseareasimportanttothewell‐beingofallAmericans?
– Whichoftheseareasrepresentsthemostnecessaryroleofgovernment?Whichoftheseareasistheleastnecessaryroleofgovernment?
Distribute:HandoutIII.10.C,“Laissez‐fairevs.Progressivism.”Havestudentscompletetheexercise
attheendofthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatdidyoulearnabouttheconceptoflaissez‐fairefromthishandout?
– Whatdidyoulearnabouttheconceptofprogressivismfromthishandout?
– Howwouldyoudescribethemostsignificantdifferencesbetweenthetwoideas?
– WoulditbeinthebestinterestsoftheU.S.todaytofollowlaissez‐faireorprogressivepolicies?
DistributeHandoutIII.10.D,“Debate.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Inyourownwords,howwouldyousummarizethemostimportantideasappearinginthisstory?
– WhatarethreepiecesofevidencefromthehandoutthatsupporttheviewthatAmericanswantthegovernmentmoreinvolvedintheeconomy?
– WhatarethreepiecesofevidencefromthehandoutthatsupporttheviewthatAmericanswantthegovernmentlessinvolvedintheeconomy?
– Withwhichofthefollowingargumentsdidyoufindyourselfinmostagreement:thesizeof
governmentistoosmall,toobig,orjustaboutright?
– Topayforthethingsthatgovernmentneedstodo,whichyouwouldprefer:raisingtaxes,cuttingspending,ornotsure?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON10:page3 Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
AretheAmericanpeopleasawholebetteroffwithmoreorlessgovernmentinvolvementinthe
economy?
FollowUpAssignstudentstobringtoclasstwonewsarticlesdealingwiththeissueofhowmucharolethe
governmentshouldplayintheeconomy.Duringtheclassdiscussion,callonstudentswhohavearticlesfavoringeachpointofview.Afterthestudentsdiscusstheirarticles,holdaclassdebateontheissueoftheappropriateroleofgovernmentintheU.S.today.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON10:page4
HandoutIII.10.A,“StudentPoll”
Directions:Recordyourresponsestothetwopollquestionsbelowbyplacingachecknexttothoseanswersyouagreewith.Youcanplaceasmanychecksasyouwouldlikeasresponsestothetwo
questions.
1) WhatissomethingthefederalgovernmentisdoingatthepresenttimethatitshouldNOTbedoing?
____Passinghealthcarelegislationforthosewhocannotaffordit
____Spendingtoomuchmoneyontoomanythings
____Raisingtaxes
____Bailingoutlargecorporations
2) What'ssomethingthefederalgovernmentisNOTdoingatthepresenttimethatitshouldbedoing?
___Creatingjobsandreducingunemployment
___Improvingtheeconomy
___Balancingthebudget/limitingitsownspending
___Stoppingforeclosuresonpeople’shomes
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON10:page5
HandoutIII.10.B,“GovernmentPrograms”Directions:ThegovernmentexercisesitsinfluenceovertheU.S.economythroughfourtypesofprograms.Theseprogramsaredescribedbelow.Infrontofeachofthetypesofprogramslisted,place
oneofthefollowingletterstoindicatehownecessaryyouthinktheyare:AN=absolutelynecessary,N=somewhatnecessary,andU=unnecessary.
___1.StabilizationandGrowth.Thefederalgovernmentguidestheoverallpaceofeconomicactivity,attemptingtomaintainsteadygrowth,highlevelsofemployment,andpricestability.Byadjustingspendingandtaxrates(fiscalpolicy)ormanagingthemoneysupplyandcontrollingtheuseofcredit(monetarypolicy),itcanslowdownorspeeduptheeconomy'srateofgrowthand,intheprocess,affectthelevelofpricesandemployment.
___2.RegulationandControl.Regulationoftheprivatesectorfallsintotwogeneralcategories:economicregulationandsocialgoals.Economicregulationseeks,eitherdirectlyorindirectly,tocontrolprices.Traditionally,thegovernmenthassoughttopreventmonopoliessuchaselectricutilitiesandotherbusinessesfromraisingpricesbeyondthelevelthatwouldensurethemreasonableprofits.Anotherformofeconomicregulation,antitrustlaw,hasbeenusedtoprohibitpracticesormergersthatwouldundulylimitcompetition.Governmentalsoexercisescontroloverprivatecompaniestoachievesocialgoals,suchasprotectingthepublic'shealthandsafetyormaintainingacleanandhealthyenvironment.TheU.S.FoodandDrugAdministrationbansharmfuldrugs,forexample;theOccupationalSafetyandHealthAdministrationprotectsworkersfromhazardstheymayencounterintheirjobs;andtheEnvironmentalProtectionAgencyseekstocontrolwaterandairpollution.
___3a.DirectServices.Eachlevelofgovernmentprovidesmanydirectservices.Thefederalgovernment,forexample,isresponsiblefornationaldefense,backsresearchthatoftenleadstothedevelopmentofnewproducts,conductsspaceexploration,andrunsnumerousprogramsdesignedtohelpworkersdevelopworkplaceskillsandfindjobs.Governmentspendinghasasignificanteffectonlocalandregionaleconomies‐‐andevenontheoverallpaceofeconomicactivity.Stategovernments,meanwhile,areresponsiblefortheconstructionandmaintenanceofmosthighways.State,county,orcitygovernmentsplaytheleadingroleinfinancingandoperatingpublicschools.Localgovernmentsareprimarilyresponsibleforpoliceandfireprotection.Overall,federal,state,andlocalspendingaccountsforasignificantpartoftheannualGDP.
___3b.DirectAssistance.Governmentalsoprovidesmanykindsofhelptobusinessesandindividuals.Itofferslow‐interestloansandtechnicalassistancetosmallbusinessesanditprovidesloanstohelpstudentsattendcollege.Governmentactionsencouragehomelending.Governmentalsoactivelypromotesexportsandseekstopreventforeigncountriesfrommaintainingtradebarriersthatrestrictimports.Governmentsupportsindividualswhocannotadequatelycareforthemselves.SocialSecurity,whichisfinancedbyataxonemployersandemployees,accountsforthelargestportionofAmericans'retirementincome.TheMedicareprogrampaysformanyofthemedicalcostsoftheelderly.TheMedicaidprogramfinancesmedicalcareforlow‐incomefamilies.Inmanystates,governmentmaintainsinstitutionsforthementallyillorpeoplewithseveredisabilities.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON10:page6 HandoutIII.10.B,“GovernmentPrograms”(continued)
___4.Anti‐PovertyPrograms.AmongtheprogramsinthisgroupareFoodStampstohelppoorfamiliesobtainfood,healthandwellnessinitiatives,andpublichousingefforts.However,advocatesforthepoorpointoutthattheseprogramsrarelycoverallofafamily'sfoodorhealthcareneedsandthatthereisashortageofpublichousing.Besidestheabove,federalandstategovernmentsjointlyprovidewelfaregrantstosupportlow‐incomeparentswithchildren.
Adaptedfrom:http://economics.about.com/od/howtheuseconomyworks/a/government.htm?p=1
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON10:page7
HandoutIII.10.C,“Laissezfairevs.Progressivism”Directions:Laissez‐faireandprogressivismrepresenttwocompetingideasabouthowmuchgovernment
involvementservesthebestinterestsoftheAmericanpeople.Someoftheimportantdifferencesbetweenthetwoideasappearonthishandout.Readthehandoutbelowandcompletetheexercisethatfollows.
1. HistoryofLaissez‐faireWhilethephrase“laissez‐faire”isoftenassociatedwiththeScottisheconomistAdamSmith,ideasaboutindividualismandlimitedgovernmentwerepresentinGreek,Roman,andRenaissancetimes.
Earlylaissez‐faireideasrevolvedaroundtheaccumulationandprotectionofpropertyrightsasameanstofulfillmentinsociety.JohnStuartMill,JohnLocke,andThomasJeffersonallthoughtandwroteabouttheroleoflimitedgovernment.AccordingtoSmith,agovernmentthatleavespeople
alonetolivetheirlivesaccordingtotheirownjudgmentservesthebestinterestsofrichandpooralike.
2. HistoryoftheProgressiveMovementTheProgressivemovementtracesitsrootsfromcollectivismintheScottishEnlightenment,but
AmericanProgressivismreallyemergedinthe19thandearly20thcenturytochampionaninvolvedgovernmenttakingallnecessaryactionstocreateamoreegalitariansociety,includingwealthredistribution(e.g.,welfare)tovaryingdegreesandsocialprograms(e.g.,MedicareandSocial
Security).AmericanpresidentsidentifiedwiththeProgressivemovementincludeTheodoreRoosevelt,WoodrowWilson,FranklinDelanoRoosevelt,andLyndonB.Johnson.
3. FeaturesofLaissez‐faireLaissez‐faireplacesemphasisupontherightsoftheindividualinsocietyandaverylimitedrolefor
government.Economically,theserightsincludetherighttopropertyandtofreeenterprise.Laissez‐fairethinkingjudgespeopleupontheiraccomplishments,andholdsthatallareabletosucceed,thoughnottothesamelevel,accordingtotheirmeritsandwork.
4. FeaturesofProgressivism
TheProgressivemovementtendstofavorgovernmentpoliciesthatenforceegalitarianism.Progressivethoughttendstoemphasizeequalityaboveindividualachievement.ThinkersintheProgressivetraditionrecognizethatculturalandnaturalbarrierspreventsomepeoplefrom
achievingaccordingtotheirworkormerits,andthususesgovernment’sauthoritytoequalizethefoundationforthewholeofsociety.
5. Liberty
PerhapsthestarkestcontrastbetweentheideasoftheProgressiveandLaissez‐fairemovementsdealswithissuesofequalityandindividualliberty.Laissez‐fairesupportertendtoemphasizefreedomfromgovernmentcontrols.Incontrast,Progressivesemphasizetheimportanceofequality
forallthroughgovernmentcontrols.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON10:page8 HandoutIII.10.C,“Laissezfairevs.Progressivism”(continued)
Exercise:Completethechartbelowbyindicatingthreemajordifferencesbetweenlaissez‐faireand
progressivism.
Laissez-faire Progressivism
1.
2.
3.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON10:page9
HandoutIII.10.D,“Debate”Directions:InmanywaysAmericansarestronglydividedonthequestionof“howbigshouldthegovernmentbe?Readthearticlebelowandunderlinetheopiniononthisquestionthatyouagreewithmost.Thencompletetheexercisethatfollows. Six in 10 Americans say the government has too much power, and nearly half agree with this alarming statement: “The federal government poses an immediate threat to the rights and freedom of ordinary citizens. “So what size and scope of government do Americans want?” That issue has fueled the Tea Party movement and defined recent national and local elections. USA TODAY and Gallup are trying to understand the underlying attitudes driving this debate with a national survey and an analysis that charts four groups of public opinion. They range from the 22% of Americans at one end who want government out of their lives—among them many Tea Party supporters—to the 20% at the other end who endorse an expansive government that protects its citizens from life's problems and challenges. No political issue is more fundamental, and no other question divides the electorate more sharply. Rhonda Bryner, 44, of Newark, Ohio, is a small-business owner whose views put her in the midpoint of the USA TODAY analysis. “They've overstepped their authority,” she says of the government. “For sure they've forgotten about the Constitution and what our forefathers set up.” Like Bryner, 58% of those surveyed say the government is doing too many things that should be left to individuals and businesses. That's the highest percentage who say the government is doing too much in more than a decade.
Thirty-six percent say the government should do more to solve the country's problems. The analysis reveals a complicated landscape of beliefs: Most Americans endorse government activism on a range of issues—not only national defense but also the environment, civil rights, and consumer protection—but doubt the competence of government to deliver results effectively and efficiently. Brian Pyle, 45, a truck driver and Teamsters Union member from Battle Creek, Mich., struggles to describe where he stands. “It's too big, the federal government, and too involved in regulation as far as businesses are concerned, because that tends to stifle economic growth,” he begins. “But it's kind of a Catch-22 situation, in my mind. I think unregulated business to some degree can be a bad thing, too. That's what got us into this recession in the first place.” Here are some of the warning flags for politicians when Americans consider the subject of how big should the government be: • The government-is-the-problem refrain of conservatives draws only about one in five voters. There is a
broad consensus that the government ought to build transportation systems, protect consumers from unsafe products, preserve the environment, and combat discrimination.
• Nearly six in 10 say the government should make sure all Americans have adequate health care, despite qualms about the health care overhaul President Obama signed into law in 2010.
• “They aren't doing enough for the right people, for the poor,” says Yvette Chappell, 47, a mother of three from Hawthorne, Calif., who falls in the bigger-is-better category of views toward government. She wants more public help for the homeless in her community, especially families with children.
• The government-is-the-solution message of liberals also draws only about one in five voters. Half of those surveyed say there's too much government regulation of business, a new high. Three in four say business can do things more efficiently than the government.
• Six in 10 even disagree with the notion that the government generally does things in a way that is fairer than business, a traditional reason for government activism.
(continued)
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON10:page10 HandoutIII.10.D,“Debate”(continued)
Looking for What Works There's no question that there has been a backlash to steps the government took in 2008 and 2009 in the face of a possible financial meltdown—from the Wall Street bailout signed by President George W. Bush to the stimulus package and auto-rescue plan signed by Obama. Some voters fear billions of taxpayer dollars have been spent to little effect while their families still deal with hard times. “This spending like a madman was just incredible to me,” says Trace Oliver, 53, of Eagle, Idaho, a conservative who counts himself as a Tea Party sympathizer. His earnings as a salesman of high-end RVs has dropped by half since the recession hit. “We're Americans. We like the great country we live in but, damn it, you're giving it away.”
A Deficit of Trust “Americans historically have been skeptical of government and of concentrations of power generally... but there are two other more recent factors at work,” says William Galston of the Brookings Institution, a White House adviser to President Clinton and co-author of Democracy At Risk. “Trust in government is at a very low ebb... and the perception that spending is out of control and is not achieving its intended purposes is the central feature of the political landscape right now. It absolutely trumps everything else.”
“It's expanding too fast, and it's too large—the health care bill for one,” Robert Durden, 68, a retired elementary-school principal from San Antonio, says of the government. “We are quickly moving into becoming a socialist state, and that's something I definitely do not want to see happen.” A USA TODAY analysis of polling data used responses about the government to divide Americans into these four groups with distinct points of view. 1. Keep it small: This cohesive group wants government to stay away from regulating the free market.
They trust private enterprise over public institutions. Many support the Tea Party movement. They are the wealthiest, the most conservative, and the most predominantly white and male of any of the groups.
2. The mushy middle: Ninety-five percent of them end up somewhere in the middle when asked to place themselves on a five-point scale on the proper role of government — “1” meaning the government should provide only the most basic functions and “5” meaning the government should take active steps in every area it could.
3. The liberals: This group wants the government to take a big role in addressing economic disparities. It is the most suspicious of business: Six in 10 say business will harm society unless regulated by the government. They are the youngest group.
4. The bigger the better: The members of this group are the most likely of any to trust government and to endorse its involvement in addressing income inequality. This group is the most racially and ethnically diverse of any—45% of its members are Hispanic, African-American, or another racial minority—and has the lowest income levels. In their ranks, nine in 10 think the government should take a major role in ensuring adequate health care and a minimum standard of living for all Americans.
Most of those surveyed acknowledge a disconnect: 56% say most Americans demand more from the government than they are willing to pay for with taxes. More than three of four also see a day of reckoning approaching. They predict that the costs of entitlement programs will create major economic problems for the United States in the next 25 years if no changes are made. Recognizing the issue isn't the same as reconciling it, however. Raise taxes to address it? Fifty-six percent say no. Cut benefits instead? Sixty-six percent say no. Just 12% say both steps should be taken.
Adaptedfrom:http://www.usatoday.com/news/washington/2010‐10‐11‐1Abiggovernment11_CV_N.htm
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON10:page11 HandoutIII.10.D,“Debate”(continued)
Exercise:Basedonthehandout,listthreepiecesofevidencethatAmericanswantthegovernmenttobe
moreinvolvedandthreepiecesofevidencethatAmericanswantthegovernmentlessinvolvedintheeconomy.
More involvement in the economy Less involvement in the economy
1.
2.
3.
UNITIII/LESSON 11
Taxation
TimeFrame2days
StandardsNES:Economics–Describehowthegovernment’suseoftaxationandspendingaffectstheeconomy
NES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionHowwelldoesoursystemoftaxationwork?
MaterialsHandoutsIII.11.A‐E
ObjectivesStudentswillbeableto:
Identify,define,andgiveexamplesofthevarioustypesoftaxesthatexistinourcountry.
Explainhowasocietycanusetaxestobothsupportgovernmentactivitiesandtoshapesocietalnorms.
Drawconclusionsastowhytaxesareconsidereda“necessaryevil”inAmerica.
Differentiatebetweenprogressiveandregressivetaxes.
TeacherBackground
Oneofthemostcontroversialissuesrelatedtooureconomyistaxation.Somepeoplecontendthattherearetoomanytaxesimposedoncitizensandthattheytaketoomuchmoneyfromus.Othersarguethatsuchtaxesarerequiredtosupportnecessarygovernment‐providedservicesandthattaxesdonot
takeenoughfromtheaffluent.Eventhosewhosupportcurrentlevelsoftaxationquestionthefairnessorprogressivenessofthetaxsystem.
HandoutAcallsforthestudentstointerpretacartoonaboutthetaxissue.InHandoutIII.11.B,theclass
willreadapassageprovidingsomeofthereasonsforpayingtaxes.Therelatedexercisehasthemexaminesomeofthestatementstakenfromthereadinganddeterminewhichofthosestatementsare
factsandwhichareopinions.Next,inHandoutIII.11.C,theclasswillevaluatebothsidesoftheargumentaboutwhetherwepaytoomuchortoolittleintaxes.HandoutIII.11.Dcallsfortheclasstodifferentiatebetweenthefollowingfourtaxeskindsoftaxes:income,corporate,property,andsales.
Finally,inHandoutIII.11.E,studentswillidentifythedifferencebetweenprogressiveandregressivetaxes.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON11:page2
TeachingStrategies/SupportingActivities
DistributeHandoutIII.11.A,“Cartoon.”Askstudentstofollowthedirectionsonthehandout,then
havethemexplaintheiranswerstothefollowingquestion:
– Whatishappeninginthiscartoon?
– Whatdoesthecartoonistmeanwhenhehasthecharacterwhoisstandingsaytotheother,“Comfy”?
– WhatistheopinionofthecartoonistaboutthetaxsystemintheU.S.?
DistributeHandoutIII.11.B,“ReasonsforTaxes.”Havestudentscompletetheexerciseattheendofthehandout,thenhavethemexplaintheiranswerstothefollowingquestion:
– Whatisthisreadingabout?
– Intheexercise,whichstatementsdidyouidentifyasfacts?Whichstatementsdidyouidentifyasopinions?
– Whichoftheargumentsexplainingthenecessityfortaxeswasmostpersuasive?
Distribute:HandoutIII.11.C,“TooMuchinTaxes.”Havestudentscompletetheexerciseattheend
ofthehandout,thenhavethemexplaintheiranswerstothefollowingquestion:
– Whatisthisreadingabout?
– Howdoestheauthoranswerthequestion“Aretaxestoohigh?”Howdoesheanswerthe
question“Aretaxestoolow?”
– Withwhichofthefollowingopinionsdoyouagree:taxesaretoohigh,taxesaretoolow,ortaxesarejustaboutright?
Distribute:HandoutIII.11.D,“Chart.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestion:
– Whatarethemajordifferencesbetweenthefourtaxeslisted?
– Whichofthesetaxesaremostjustified?
– Ifyouwereataxpayer,whichofthesetaxeswouldyoubemostinfavorofeliminating?
Distribute:HandoutIII.11.E,“Q&A.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestion:
– Whatarethemajordifferencesbetweenprogressiveandregressivetaxes?
– Howdidyouanswertheexerciseattheendofthehandout?
– Whatargumentscanyoumakeforandagainstkeepingprogressivetaxes?
– Whatargumentscanyoumakeforandagainstkeepingregressivetaxes?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON11:page3
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
Inlightofwhatwelearnedabouttaxesfromthislesson,howwouldyouexplainthecartoononHandoutIII.11.A?Doyouagreewithcartoonist’sviewpoint?
FollowUpConductadebateinclassonthefollowingresolution:“Resolved:ThetaxationsysteminAmericaworksaboutaswellasitcan.”Assignthreedebaterstotheproandthreetotheconsideofthedebate.Aftergivingthedebatersasufficientnumberofdaystoresearchthetopicandpreparetheirpresentations,
havestudentsadheretothefollowingagendaonthedayofthedebate:
Openingstatements(1‐2minuteseach,maximum)
1.Proside
2.Conside
Mainarguments(5minuteseach,maximum)
1.Proside
2.Conside
Rebuttal(2minuteseach,maximum)
1.Conside
2.Proside
Closingstatements(1‐2minuteseach,maximum)
1.Conside
2.Proside
Questionsfromtheclassandgeneraldiscussion(remainderoftheclassperiod)
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON11:page4
HandoutIII.11.A,“Cartoon”Directions:Studythecartoonbelowandcompletetheexercisethatfollows.
http://www.graphicshunt.com/funny/images/tax_cartoon‐12607.htm
Exercise:Answerthequestionsbelowaboutthecartoononthishandout.
1. Whoisthepersontiedtothesignsupposedtorepresent?___________________________
2. Whodoestheotherperson,withthesmilingface,inthecartoonrepresent?
____________________________________________________________________________
3. WhatisthecartoonistsayingaboutthetaxsystemintheU.S.?
_____________________________________________________________________________
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON11:page5
HandoutIII.11.B,“ReasonsforTaxes”Directions:Readthearticlebelowandcompletetheexercisethatfollows.
Some Reasons Why We Pay Taxes NANCY CZERWINSKI, Yahoo! Contributor Network, Apr 15, 2009
s hard as it is to believe, there are good reasons for paying taxes. I thought now would be a good time to review them. Our libraries are priceless to most of us and they are the center of activities, whether in person or online, during the months that school is in session. Children receive
assignments and sometimes they require research. What better place to go than where there's a learning atmosphere. Our libraries are safe, well-lighted, and the staff is always very knowledgeable. During the summer most libraries have reading programs. Children enjoy these programs but it does cost money to keep our libraries open. There are electric bills and gas bills and the wages of our librarians. They purchase new books when they become available. There’s always a display of magazines for us to read and a daily newspaper. Libraries have videos, CDs, and e-books. This is where some of our hard-earned tax dollars go and I believe we definitely benefit from our libraries.
The roads we travel on each day must be kept up and repaired. When you see the orange barrels on the highway you will know our tax dollars are at work. Can you imagine the way our roads would be if they weren't repaired on a routine basis? If the road crews were not out working we'd be in a sad state of affairs. Our food is transported by the truckers and our groceries are delivered to our stores every week. If our food is not delivered the grocery store shelves will empty out fast. Our school buses need safe roads to transport our children from home to school and back again. We also need safe roads to go to work and to complete our errands. There are a lot of factors involved in transportation and the upkeep of our city streets and highways. When you think about paying taxes remember the amount of money it takes to keep our roads safe for our families.
Lastly I'd like to mention our schools. Education is very important for our children. Children are our future and they will need as much knowledge as we can give them. I cannot think of a better way to spend our tax dollars than on the children of America. We will have space programs, scientific studies, health advances, financial markets, and different languages to learn and to teach. This is just a small list of ways that we will advance into the future and our children must be prepared. It is our duty as American citizens to prepare our young adults for what the future holds. Can you think of a better way to spend our tax dollars?
When it's time to pay your taxes remember the highlights that I have pointed out in this article. I believe that although it may be a bit of a struggle sometimes we must do what is best for our country. http://www.associatedcontent.com/article/1637409/some_good_reasons_why_we_pay_taxes_pg2.html?cat=27
Exercise:Indicatewhichofstatementsbelow,takenfromthehandoutarefactsandwhichareopinions.
Statement Fact Opinion Not Sure
As hard as it is to believe, there are good reasons for paying taxes.
The roads we travel on each day must be kept up and repaired.
I cannot think of a better way to spend our tax dollars than on the children of America.
A
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON11:page6
HandoutIII.11.C,“TooMuchinTaxes?”Directions:Underlinethreeargumentsthattheauthorusesinthereadingbelowtoanswerthe
question:“Dowepaytoomuchintaxes?”
Do Americans Pay Too Much in Taxes?
By Mark Willen, May 31, 2010
obody likes paying taxes, but it’s the only way to pay for those basic government services that everyone agrees are necessary, such as defense. There is no agreement, however, on a host of other government services that push up spending, which means there is no consensus
on how high taxes need to be. In fact, the Tea Party movement grew out of a sense that taxes are too high. “Tea” is actually an acronym for Taxed Enough Already.
But are we? Historically, taxes are actually fairly low as a percentage of personal income, according to the Bureau of Economic Analysis, and as a percentage of GDP, according to the Organization of Economic Development. They’re also low in comparison with the rest of the world. Of 30 developed countries across the world, including all of western Europe plus South Korea, Canada, Mexico, Japan, and a handful of eastern European countries, the U.S. ranks fifth lowest measuring as a percentage of GDP. And that includes state and local taxes plus payroll taxes for unemployment, etc., as well as federal income taxes.
Though 2006 is the latest year for which data are available, the rankings don’t shift much from year to year—just one or two spots. Which raises the opposite question: Are U.S. taxes too low?
Should they be raised to help close the budget deficit?
Not necessarily. Keep in mind that low taxes typically correlate well with high productivity gains. Ireland, Poland, South Korea, and Slovakia, for example, enjoyed strong growth in labor productivity in the last expansion. All have subpar tax burdens. So higher taxes could have a negative effect on productivity, which would slow growth.
It's something to think about as Congress searches for tax hikes in order to offset spending and reduce the deficit.
http://www.kiplinger.com/gateway/corporate_sales/#Reprints
N
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON11:page7
HandoutIII.11.D,“Chart”Directions:ThechartbelowdescribesfourofthetaxespaidbyAmericanstovariouslevelsofgovernment.Afterstudyingthechart,completetheexercisebelow.
Name of Tax and Description 1) Income Taxes Many states, some cities, and the federal government impose an income tax. Americans pay up to
35% of their paychecks on income taxes. People with higher incomes generally pay not only a greater amount of money, but a higher percentage of their income in taxes than people with lower incomes.
2) Corporates Taxes Such taxes are levied on the profits of businesses. Businesses with higher earnings generally pay,
not only a greater amount of money, but a higher percentage of their earnings in taxes than people with lower earnings.
3) Property Taxes These taxes are imposed mostly on real estate owners. Because everyone in the same locality pays
the same tax rate on their property, poorer people tend to spend a larger percentage of their income on housing than wealthier people.
4) Sales Taxes Such taxes are levied by state and local governments (there is no federal sales tax) at the point of
purchase for specific goods and services. The level of government charging the tax determines the tax rate. Because everyone who buys the same item (e.g., a television set) pays the same amount of money as a tax, people with lower incomes pay a higher percentage of their income in sales taxes than wealthier people.
http://www.granthammond.comhttp://everythingfinanceblog.com/read/42
Exercise:Identifytwodifferencesandtwosimilaritiesamongthetaxesdescribedabove.Listthose
similaritiesanddifferencesinthefollowingchart:
Differences Similarities 1.
1.
2.
2.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON11:page8
HandoutIII.11.E,“Q&A”Directions:ReadtheQ&Ahandoutbelow.Thencompletetheexercisethatfollows.
Question: Canyouexplainthedifferencesbetweenaprogressiveandregressivetax?
Answer: Aprogressivetaxisdefinedasataxwhoserateincreasesasthetaxpayer'sincome
increases.Thatis,individualswhoearnhighincomeshaveagreaterproportionoftheirincomestakentopaythetax.
Aregressivetax,ontheotherhand,isonewhoserateincreasesasthepayer'sincomedecreases.
IncometaxistheonlytaxintheU.S.whoserateistieddirectlytoincome.Itisaprogressive
tax,accordingtothedefinitionabove;individualsandfamilieswithhighincomesaretaxedatahigherratethanindividualsandfamilieswithlowincomes.
Othertaxeslikesalestaxareoftencalledregressivetaxesinthatindividualsorfamiliesat
thelowendoftheincomespectrumspendahigherproportionoftheirincomethanthoseatthehighend.Combinedwiththefactthatsalestaxistiedtoconsumptionratherthanincome,thisleadssometotheconclusionthatlow‐incomeindividualsandfamiliespaya
greaterproportionoftheirmoneyonsalestaxesthanwealthierpeople.
Exercise:ReviewHandoutIII.11.D,“Chart,”thencompletetheexercisebelowbyplacinganXinthe
appropriateboxtoindicatewhetherthetwotaxeslistedbelowareprogressiveorregressivetaxes.Intheboxmarked“Reasons,”explainthereasonsforyouranswer.
Tax Progressive Regressive Not Sure Reasons
Property tax
Corporate tax
UNITIII/LESSON12
TheFederalReserveandtheBankingSystem
TimeFrame1day
StandardsNES:Economics–DescribetheFederalReserve’sroleasthecentralbankoftheU.S.
NES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionHowdoestheFederalReserveoperateasthecentralbankfortheUnitedStates?
MaterialsHandoutsIII.12.A‐D
ObjectivesStudentswillbeableto:
DescribethepurposesandstructureoftheFederalReserveastheU.S.centralbank.
ExplaintherelationshipbetweentheFederalReserveandthebankingsystem.
ExaminetheFederalReserve’sroleinthefinancialcrisisof2008.
TeacherBackground
TheFederalReserveistheUnitedStates’centralbank.Inthiscapacity,theFedisthegovernment’s
bank,abankforbankers,andabankregulator,withavarietyofresponsibilitiesrangingfromsupervisingbankstodistributingcurrency.Inordertoperformthesedutieseffectively,CongresshasgiventheFedanextraordinaryamountofindependence,allowingittoraiseitsownfundsandestablish
acentralarm(theBoardofGovernors)toworkwiththegovernmentand12regionalbankstoworkwithprivatefinancialinstitutions.
InHandoutIII.12.A,theclasswillexamineabookcoverabouttheFederalReserve.Thisbookcoverwill
serveasaspringboardtodeterminestudents’priorknowledgeabouttheFed.HandoutIII.12.BallowsstudentstoexaminesomeoftheFed’stasksasthecentralbankoftheU.S.Finally,inHandoutIII.12.C,studentswilllookattheorganizationoftheFedtodeterminewhetherornotthecentralbankistoo
independentfromgovernment.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON12:page2
TeachingStrategies/SupportingActivities
DistributeHandoutIII.12.A,“BookCover.”Askstudentstofollowthedirectionsonthehandout,
thenhavethemexplaintheiranswerstothefollowingquestions:
– WhatdoyouknowabouttheFederalReserve?
– WhydoyoulearnabouttheFederalReservefromthisbookcover?
– IfwehadaFederalReserveexpertwithusinclasstoday,whatquestionwouldyouwanttoaskhimorherabouttheU.S.centralbank?
DistributeHandoutIII.12.B,“CentralBank.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatdidyouwriteintheexerciseasyourconclusiontothishandout?
– Basedonwhatyouread,whatisacentralbank?
– Whydomostcountrieshavecentralbanks?
– Whydomanypeoplebelieveitisimportantforacentralbanktohaveitsindependencefromcommercialbanksandpoliticalleaders?
– Inwhatwaysarecentralbanksamongthemostpowerfulinstitutionsintheircountries?
DistributeHandoutIII.12.C,“MajorRoles.”Havestudentsexplaintheiranswerstothefollowingquestions:
– WhatdidyoulearnabouttheFederalReservefromthischart?
– HowwouldyoudescribeinyourownwordsthefollowingFederalReserveroles:bankregulator,abank’sbank,andthegovernment’sbank?
– Whichofthesethreeismostimportantroleinyouropinion?
Distribute:HandoutIII.12.D,“HowtheFedIsOrganized.”Havestudentscompletetheexerciseon
thehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– WhatdidyoulearnabouttheFed’sorganizationfromthishandout?
– WhyistheFedcalleda“decentralized”centralbank?
– WhatevidenceistherethattheFedisindependentwithingovernment?
– WhydoyouthinktheCongressgivestheFederalReservesomuchindependence?
– WoulditbeabetterideaiftheFedwasnotsoindependent?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON12:page3
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
BasedonwhatyoulearnedabouttheFedinthislesson,whataresometopicsthatshouldbeincludedinthebook(TheFederalReserve:OurCentralBank)whosecoveryoulookedatinHandoutIII.12.A?
FollowUpSomepeopleblametheFed,inpart,forthefinancialcrisisof2008,accusingtheinstitutionofnotproperlyregulatingbanksunderitscontrol.Havestudentsresearchthisissueandwriteaone‐pageeditorialunderthetitle,“DidOurCentralBankDoAllItCouldtoPreventtheFinancialCrisisof2008?”
Forthiseditorial,studentsshoulddevotesometimetoanexaminationoftheroleandpowersavailabletoacentralbank.(Remindthestudentsthataneditorialexpressesanopinionandthatanyopinionmustbesupportedbyevidence,whichcanonlybeobtainedafterconsultingavarietyofsources.)
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON12:page4
HandoutIII.12.A,“BookCover”Directions:Studythebookcoverbelowandcompletetheexercisethatfollows.
http://4closurefraud.org/wp‐content/uploads/2010/06/federal‐reserve.jpg
Exercise:Inthespacebelow,writethreethingsyoueitherknowabouttheFederalReserve(theFed)orlearnedaboutitfromlookingatthisbookcover.
1.
2.
3.
The Federal Reserve – Our Central Bank –
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON12:page5
HandoutIII.12.B,“CentralBanks”Directions:NowthatyouknowthattheFedisourcentralbank,youprobablywanttoknowwhatcentralbanksare.Readthehandoutbelowtolearnmoreaboutcentralbanking.Baseduponwhatyoureadonthehandout,completethe“Conclusion”below.
What Are Central Banks? June 05, 2010
The central bank has been described as "the lender of last resort," which means that it is responsible for providing its economy with funds when commercial banks cannot cover a supply shortage. In other words, the central bank prevents the country's banking system from failing. However, the primary goal of central banks is to provide their countries' currencies with price stability by controlling inflation. A central bank also acts a regulator of commercial banks and is the sole distributor of currency and coins in circulation. Time has proved that the central bank can best function in these capacities by remaining independent from government fiscal policy and therefore uninfluenced by the politicians who run a country. The central bank should also be completely divested of any commercial banking interests.
How the Central Bank Influences an Economy A central bank has two main kinds of functions: (1) macroeconomic functions – in which, the central bank regulates the level of inflation by controlling money supplies and (2) microeconomic functions – in which the central bank acts as a lender of last resort, which most often occurs when a commercial bank does not have enough funds to meet its clients' demands. (Commercial banks typically do not hold reserves equal to the needs of the entire market.) When this happens the commercial bank can turn to the central bank to borrow additional funds at an interest rate set by the central bank. At times when the central bank wants to encourage borrowing (e.g., to stimulate an economy in recession) it will set lower rates. By raising rates, the central bank discourages borrowing, thereby keeping spending down, which prevents an economy from overheating.
Conclusion Central banks are responsible for
_____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ They can do this by
_____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ For these reasons, central banks are considered very powerful. Adaptedfromhttp://www.investopedia.com/articles/ViewArticlePrintable.aspx?url=%2farticles%2f03%2f050703.asp
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ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON12:page8 HandoutIII.12.D,“HowtheFedIsOrganized”(continued)
DistrictDirectorsEachofthe12ReserveBankshasninedirectorsonitsboard.Thedirectorsareresponsibleforthe
overalloperationsoftheirbanksandreporttotheBoardofGovernors.Thedirectorsaredividedintothreegroupsthatrepresentacross‐sectionofideasandinterestsfortheregion.ThesegroupsarecalledClassA,ClassBandClassC.ClassArepresentscommercialbanksthataremembersoftheFederal
ReserveSystem.ThesememberbankselectboththeClassAandClassBdirectors.ClassBandClassCdirectorsdonotcomefromthebankingindustry.Theyrepresenttheeconomicinterestsofthelocaldistrict,includingagriculture,manufacturing,labor,consumers,andnonprofits,andareelectedbythe
BoardofGovernors.Thisallowsboththeprivatesectorandthegovernment/publicsectortohaverepresentation.
RegionalReserveBanksEachregionalReserveBankpresidentisappointedtoafive‐yeartermbythebank'sBoardofDirectors,buttheBoardofGovernorsgetsthefinalsay‐sointheappointment.
Takenfrom:http://money.howstuffworks.com/fed.htm/printable
UNITIII/LESSON13
FiscalPolicy
TimeFrame1day
StandardsNES:Economics–Describehowthegovernment’suseoftaxationandspendingaffectstheeconomy
ExplainhowthegovernmentusesfiscalpoliciestoachievemacroeconomicgoalsNES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionHowdoestheUnitedStatesgovernmentusefiscalpolicytohelpshapetheeconomy?
MaterialsHandoutsIII.13.A‐E
ObjectivesStudentswillbeableto:
Definefiscalpolicy.
Provideexamplesillustratingthegovernment’suseoffiscalpolicyeitherthroughraisingorloweringtaxesorincreasingordecreasingspending.
Identifytheproblemsinvolvedinusingfiscalpoliciestostabilizetheeconomy.
TeacherBackground
Fiscalpolicyistheuseofgovernmentexpenditureandtaxationtoinfluencetheeconomy.Changesin
thelevelandcompositionofgovernmentspendingandtaxationcanimpactthefollowingvariablesintheeconomy:
Aggregatedemandandthelevelofeconomicactivity;
Thepatternofresourceallocation;
Thedistributionofincome.
Thethreemainpossiblestancesoffiscalpolicyareneutral,expansionary,andcontractionary.Aneutral
stanceoffiscalpolicyimpliesahealthyeconomicenvironment,inwhichgovernmentspendingisfullyfundedbytaxrevenueand,overall,thebudgetoutcomehasaneutraleffectonthelevelofeconomic
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON13:page2 activity.Anexpansionarystanceoffiscalpolicyusemeansthatgovernmentspendingisexceedingtax
revenue.Finally,acontractionaryfiscalpolicyusuallyoccurswhengovernmentspendingislowerthantaxrevenue.Typically,thisfiscalpolicyisassociatedwithaperiodofseriousinflation.
StudentswillanswertwopollquestionsinHandoutIII.13.Atodeterminetheirattitudestowards
governmenttaxingandspendingpolicies,InHandoutIII.13.B,theclasswillcreateillustrationstoaccompanyPowerPointslidesforalessonexplainingthebasicsoffiscalpolicy.SelectedstudentswillactoutoninterviewwithaneconomicsexperttalkingaboutautomaticstabilizersinHandoutIII.13.C.The
relatedexerciseaskstheclasstoposeonequestionaboutautomaticstabilizerstotheexpert.Supply‐sideeconomicfiscalpolicyisthefocusofHandoutIII.13.D.Finally,HandoutIII.13.Ecallsuponstudentstoexamineproblemsinherentinusingfiscalpolicytostabilizetheeconomy.
TeachingStrategies/SupportingActivities
DistributeHandoutIII.13.A,“Poll.”Askstudentstofollowthedirectionsonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– HowdidyourespondtoQuestion#1?
– HowdidyourespondtoQuestion#2?
– Whyistheresomuchdisagreementovertaxingandspendingpoliciesofthegovernment?
DistributeHandoutIII.13.B,“SlidePresentations.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Inyourownwords,howwouldyoudefinefiscalpolicy?
– Whyiscuttingtaxesandraisinggovernmentspendingthefiscalpolicythatisoftenfollowedduringeconomicdownturns?
– Whyisraisingtaxesandcuttinggovernmentspendingthefiscalpolicythatisoftenfollowedduringtimesofinflation?
– Howcanyouexplainwhythesefiscalpoliciesdonotalwaysworkastheyaresupposedtoduring
economicdownturnsorperiodsofinflation?
Distribute:HandoutIII.13.C,“AutomaticFiscalPolicies.”Assignsixstudentsthefollowingroles:
Interviewer#1(I‐1);Interviewer#2(I‐2);Interviewer#3(I‐3);Interviewer#4(I‐4);Interviewer#5(I‐5);andEconomist(E).Havethesixstudentsactouttheinterviewaccordingtothescriptonthehandout.Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheir
answerstothefollowingquestions:
– Whatdidyoulearnaboutautomaticfiscalpoliciesfromthisinterview?
– Whyareunemploymentinsurance,welfare,andincometaxprogramscalledautomaticstabilizers?
– Howaretheseautomaticstabilizerssupposedtowork?
– Whatquestionwouldyouhaveaskedoftheeconomicsexpertaboutautomaticfiscalpolicies?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON13:page3 Distribute:HandoutIII.13.D,“Supply‐SideEconomics.”Havestudentscompletetheexerciseonthe
handout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Inyourownwords,howwouldyoudescribesupply‐sideeconomics?
– Howissupply‐sideeconomicssupposedtowork?
– Whataresomeofthereasonsthatanumberofeconomistsopposethesupply‐sideapproach?
– Towhatextentdoyoubelieve,assupply‐sidersdo,thatinaneconomicdownturnitisbetterto
cuttaxestostimulatetheeconomy,ratherthantoincreasegovernmentspending?
Distribute:HandoutIII.13.E,“Editorial.”Havestudentscompletetheexerciseonthehandout,then
havethemexplaintheiranswerstothefollowingquestions:
– Whatisthiseditorialabout?
– Howwouldyousummarizeinyourownwordseachofthefourproblemsassociatedwithusing
fiscalpolicythatareidentifiedinthiseditorial?
– Whichoftheseproblemsdoyouthinkisthemostdifficulttoovercome?
Summary/AssessmentsAskstudentstoexplaintheiranswerstothefollowingquestion:
Whatsuggestionswouldyouofferaboutfiscalpolicytomakeitamoreeffectivetoolinkeepingtheeconomystableandhealthy?
FollowUpPresenttotheclassthemostcurrentdataaboutthefollowingindicators:Economicgrowth(GDP),theemploymentsituation(unemploymentrateandnon‐farmpayrolljobscreated),andpricelevels(CPI).Afterallowingthestudentssometimetostudythisdata,havethemexplaintheiranswerstothe
following:
Accordingtothedatapresentedhere,whatwouldbeyourdiagnosisaboutthehealthofthe
economyatthepresenttime?
Basedonthisdiagnosis,whatfiscalpolicyshouldgovernmentofficialsbepursuingatthepresenttime(e.g.,shouldthegovernmentbeincreasing/decreasingspending/raising/lowers
taxes/nothing?)?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON13:page4
HandoutIII.13.A,“Poll”Directions:Indicatewhatyourresponsetothetwostatementsbelowbyplacingacheckmarknextto
choicesA,B,C,orD.
1. GovernmentSpending
____A.TheU.S.governmentshouldspendmoremoneyonprogramstopromoteahigherstandardoflivingforpeopleinneed(e.g.,thepoor,theelderly,andtheunemployed).
____B.TheU.S.governmentshouldspendlessmoneyonprogramstopromoteahigherstandardoflivingforpeopleinneed(e.g.,thepoor,theelderly,andtheunemployed).
____C.TheU.S.governmentspendsjusttherightamountofmoneyonprogramstopromotea
higherstandardoflivingforpeopleinneed(e.g.,thepoor,theelderly,andtheunemployed).
____D.I’mnotsurewhetherthegovernmentspendstoomuchornotenoughmoneyonprogramstopromoteahigherstandardoflivingforpeopleinneed(e.g.,thepoor,theelderly,andthe
unemployed).
2. Taxes
____A.TheU.S.governmentshouldraisetaxestopayforprogramstopromoteahigherstandardoflivingforpeopleinneed(e.g.,thepoor,theelderly,andtheunemployed).
____B.TheU.S.governmentshouldlowertaxes,evenifitmeansthatitwillnotbeabletopayforprogramsthatpromoteahigherstandardoflivingforpeopleinneed(e.g.,thepoor,the
elderly,andtheunemployed).
____C.TheU.S.governmentshouldkeeptaxesastheyarenowbecausethatitisallAmericanscanaffordtopay.
____D.I’mnotsurewhetherthegovernmentshouldtaxmore,taxless,orkeeptaxesastheyaretopayforprogramsthatpromoteahigherstandardoflivingforpeopleinneed(e.g.,thepoor,
theelderly,andtheunemployed).
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON13:page5
HandoutIII.13.B,“SlidePresentation”Directions:Assumethatthethreeslidesbelow,whichcontainwordsbutnoillustrations,arebeingpreparedtoexplainfiscalpolicy,thesubject
oftoday’slesson.Undereachspacemarked“illustration,”createapicturethatyouthinkwouldgowellwiththewordsaboveit.Usestickfigurestorepresentpeople,ifyouprefer.
Slide #1 Slide #2 Slide #3 Wording: Fiscal policy – Definition: Using government spending and taxation to influence the economy
Wording: Fiscal policy – Purpose: To change or reverse the direction of the business cycle
Wording: Fiscal policy – Examples: 1. During recessions, spending is
increased and taxes are cut 2. During inflation spending is cut
and taxes are increased
Illustration: Illustration: Illustration:
Wordingtakenfrom:http://www.econlib.org/cgi‐bin/printcee.pl
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON13:page6
HandoutIII.13.C,“AutomaticFiscalPolicies”Directions:Fiscalpoliciescomeaboutwhenthegovernmenttakescertainactions,likepassinglawsthat
increase/decreasespendingorraise/lowertaxes.Suchpoliciesalsoresultfrom“automaticstabilizers”takingeffect.Afterhearingtheinterviewbelowactedout,writeaquestionthatyouwouldhaveaskedaboutautomaticstabilizerstotheexpertwhoappearsinthisinterview.
I‐1: Todaywearehonoredtohavewithusanexpertonautomaticfiscalpoliciesorautomaticstabilizers.Let’sbeginbyaskingwhysuchpoliciesarecalled“automatic.”
E: AsopposedtoactionsrequiringavotebyCongress,automaticfiscalpoliciestakeplacemostofthetimewhetherornotlawmakerstakeanyaction.
I‐2: Canyougiveussomeexamples?E: Threeautomaticfiscalpoliciesthatwehearalotaboutare:1)unemploymentinsurance,
2)welfare,and3)incometaxprograms.
I‐3: Tellusaboutunemploymentinsurancefirst,please.E: Sure.Throughunemploymentinsurance,statesprovidepaymentstoeligibleworkerswhohave
losttheirjobs.Duringarecession,whenlargenumbersofpeopleareoutofwork,thenumberofpeoplereceivingpaymentsincreases,automatically.Inthisway,additionalfundsarepumpedintotheeconomytofighttherecession.Whenthingsgetbetterintheeconomyandpeoplereturntowork,theamountofpaymentsgoingtotheunemployeddeclines.Whileunemploymentinsuranceautomaticallygoestopeopleduringtheirfirstmonthswithoutajob,sometimesCongressmustpasslawstoextendthenumberofweeksanindividualmayreceiveunemployment.Theseextensionsusuallyareneededduringverydeeprecessions,whenhighunemploymentratesexist.
I‐4: Howdoeswelfareactasanautomaticfiscalpolicy?E: Welfaregoestopoorindividualsandfamilies.Someofitcomesintheformofcashpayments.
Otherformsofwelfarecomeasin‐kindservices(e.g.,foodstamps).Likeunemploymentbenefits,welfarepaymentsautomaticallyincreaseineconomichardtimes.Theseincreasedpaymentscanleadtomorespendingthathelpsbringusoutoftheeconomicdownturns.Duringexpansions,welfarepaymentstendtoshrink.
I‐5: Finally,tellushowincometaxprogramsactasautomaticstabilizers.E: Duringgoodeconomictimes,moretaxmoneyistakenoutofpeople’spaychecksastheirearnings
increase.Asaresult,peoplecannotspendasmuchastheymight,preventingtheeconomyfromoverheating,causinginflation.Ontheotherhand,ifwesufferthrougharecession,incomestendtofallandsodotheamountpaidintaxes—thisleavestaxpayerswithmoremoneytospend.Theincreasedspendinghelpsfighttherecession.
Letmeconcludebysayingthattheautomaticstabilizersdonotalwaysdoenoughtofightrecessionsorinflation,whichexplainswhyCongresssometimeshastotakeadditionalactionstokeeptheeconomyhealthy.
Question:
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON13:page7
HandoutIII.13.D,“SupplySideEconomics”Directions:Supply‐sideeconomistsfavoradifferentapproachtofiscalpolicyfromwhathasbeenpresentedthusfarinthislesson.Afterreadingthedescriptionbelow(takenfromanInternetsiteonSupply‐Sideeconomics),completetheexercisethatfollows.
WhatIsSupplySideEconomics?Supply‐sideeconomicsistheorythatthecorrectapproachtoremedyaneconomicdownturnistoreducetaxes,notincreasegovernmentspending.Supplysideadvocatesbelievethatreducingtaxesduringadownturnwillstimulatetheeconomybecauseitwillleadtoincreasedconsumerpurchasing.Accordingtothesupply‐sideargument,theboosttoeconomicgrowthwillgeneratealargetaxbaseovertime,morethanmakingupfortherevenuelostfromthetaxcut.
HowIsSupplySideEconomicsSupposedtoWork?Bycuttingincometaxes,moremoneywillgointoworkers'paychecks,whichtheywillspend.Thisincreaseinconsumerdemandmeansbusinessescanproducemoregoodsandservices,whichwillleadtomorejobs.Workerscanthenbargainforhigherwages,whichwilltranslatebackintohighertaxrevenues.
HowWellDoesSupplySideEconomicsActuallyWork?Economistsdisagreewhethersupply‐sideeconomicsreallyworksbecauseitisdifficulttofindreal‐worldproof.That'sbecauseitisnearlyimpossibletoisolatetheimpactoftaxcutsaloneoneconomicgrowthandonrevenue.Forexample,PresidentGeorgeW.Bushcuttaxesin2001and2003.Theeconomygrew,andrevenuesincreased.Supply‐siders,includingthePresident,saidthatwasbecauseofthetaxcuts.OthereconomistspointtolowerinterestratesinstitutedbytheFederalReserveastherealstimulatoroftheeconomy,notthetaxcuts.
STUDY SUPPORTING SUPPLY-SIDE:
Under President George W. Bush, the U.S. Treasury Department developed a model that showed that the Bush tax cuts would ultimately increase production by .7%. However, it is important to note that the model makes certain assumptions that some economists would not agree with.
STUDY THAT DOES NOT SUPPORT SUPPLY-SIDE:
A study by the National Bureau of Economic Research found that, rather than generating large amounts of money for the government, cutting taxes will result in 17% less income tax and 50% less corporate tax revenues going to the government. This study shows that, over the long-term, the revenue lost by tax cuts will be only partially regained. Without a decrease in spending, the study concludes, tax cuts will lead to an increase in the budget deficit, which will harm the economy over time.
Exercise:Aftercompletingthereadingabove,writewhatyoubelievewouldbeanappropriateconclusiontothisreadingaboutsupply‐sideeconomics.Conclusion:_________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
Adaptedfrom:http://useconomy.about.com/od/fiscalpolicy/p/supply_side.htm?p=1
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON13:page8
HandoutIII.13.E,“Editorial”Directions:Readtheeditorialbelowandcirclethemostseriousproblemassociatedwithusingfiscal
policytostabilizetheeconomy.
Editorial: The Problem with Fiscal Policy
he difficulty with fiscal policy as a cure for our economic ills is that government measures do not always work as they are supposed to. One of the problems is that the success of fiscal programs is often tied to effective forecasting about the economy. While
economists can determine if the economy is doing well or doing poorly, predicting which way and when the economy will turn in the future is much more difficult. Very often, the government does not recognize we are in recession until many months after the recession has begun. With such poor forecasting, it is difficult to apply fiscal policy cures effectively. Even when forecasts are more accurate and timely, Congress and the president get in each other’s way, preventing the appropriate action from being taken when it is needed.
Second, politics often prevents effective fiscal policy actions from being taken. For example, since lowering taxes and increasing spending is generally more popular than the opposite, lawmakers tend to favor the former. On the other hand, politicians are reluctant to raise taxes and cut spending on programs that go to needy people. It is for these reasons that fiscal policies to fight recessions are easier to enact that those that used against inflation.
Next, fiscal policies are limited by the rigidity of the budget. Certain large budget items, like defense needs, interest payments, and social security, must be met and are difficult or impossible to limit, regardless of the economic conditions that exist. After these expenses are allotted for, Congress has only a limited amount of funding it can cut.
Finally, there is often a lack of coordination between the fiscal policies of the federal government on one hand and those of states and localities on the other, Often states and localities are spending money at time when they should be showing restraint, and cutting spending when it should be increased. Unlike the Federal government, which, by printing more money, can spend more than it takes in through taxes, states and localities cannot spend more than they take in when attempting to fight economic downturns.
T
UNITIII/LESSON14
BusinessintheGlobalEconomy
TimeFrame1day
StandardsNES:Economics–Describethenatureofinternationaltrade
DeterminetheimpactofculturalandsocialenvironmentsonworldtradeNES:Skills–FollowdirectionsApplyeffectivelisteningskills
MakeoralpresentationsPreparewrittenreports
GuidingQuestionHowisglobalizationaffectingtheU.S.economy?
MaterialsHandoutsIII.14.A‐D
ObjectivesStudentswillbeableto:
Definetheterm“globalization.”
ExaminesomeofthepositiveandnegativeeffectsofglobalizationonAmericanbusinessesandtheU.S.economy.
Discusswhetherornotglobalizationisgoodforsmallbusinesses.
TeacherBackground
Globalizationisaprocessofinteractionandintegrationamongthepeople,companies,andgovernments
ofdifferentnations,aprocessdrivenbyinternationaltradeandinvestmentandaidedbyinformationtechnology.Thisprocesshaseffectsontheenvironment,onculture,onpoliticalsystems,oneconomic
developmentandprosperity,andonhumanphysicalwellbeinginsocietiesaroundtheworld.
Inthefirstactivity,studentsareaskedtoformulateadefinitionoftheterm“globalization.”InHandoutIII.14.A,studentswillcomparetheirdefinitionofglobalizationwithonepresentedonapopularwebsite.
HandoutIII.14.Boffersachartdealingwiththechangesininternationaltradethathavecoincidedwithglobalization.IntheexerciseforHandoutIII.14.B,studentsareaskedtodrawconclusionsaboutwhattheylearnedfromthechartaboutexpansionoftradeandglobalization.HandoutIII.14.Clooksat
globalizationthroughtheeyesofasmallbusinessowner.Finally,HandoutIII.14.Dcallsuponstudentstocreateatitleforareadingdealingwithsomethechallengesthatglobalizationpresents,especiallythoseconfrontingworkingpeople.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page2
TeachingStrategies/SupportingActivities
Writetheword“globalization”ontheboard.Askstudentstoexplaintheiranswerstothefollowingquestions:
– Whatdoesthistermmeantoyou?
– WhatdoesglobalizationmeantotheU.S.economy?
– Whatevidencecanyoushowthatglobalizationaffectsoureverydaylives?
DistributeHandoutIII.14.A,“Blog.”Havestudentsexplaintheiranswerstothefollowingquestions:
– Whatdidyoulearnaboutglobalizationfromthisblog?
– Howdotheideasaboutglobalizationexpressedinthisblogcomparetotheideasaboutthesubjectthatyouexpressedinanattempttodefinetheterm?
– Accordingtothedefinitionappearinginthisblog,globalizationhaseffects“oneconomic
developmentandprosperity.”Whataresomeofthoseeffects?HowimportantaretheseeffectsonAmericans:significantformostpeople,itdependsonwhoyouare,ornotverygreat?
Distribute:HandoutIII.14.B,“Chart.”Havestudentscompletetheexerciseonthehandout,then
havethemexplaintheiranswerstothefollowingquestions:
– Whatinformationappearsinthischart?
– Whatisthemostimportantconclusionyoucandrawfromthischartaboutglobalizationandinternationaltrade?
– Isitbetterifimportsoutnumberexports,exportsoutnumberimports,ordoesitdependonother
factors?
Distribute:HandoutIII.14.C,“SmallBusinesses.”Havestudentscompletetheexerciseonthe
handout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatisthishandoutabout?
– Whatargumentsdoesthishandoutpresenttosupportthebeliefthatglobalizationisgoodfor
smallbusiness?
– Howconvincingaretheargumentspresentedheretosupporttheclaimthatglobalizationisgoodforsmallbusinesses?
DistributeHandoutIII.14.D,“Reading.”Havestudentscompletetheexerciseonthehandout,thenhavethemexplaintheiranswerstothefollowingquestions:
– Whatdidyoulearnfromthisreading?
– Whatdidyousuggestasatitleforthereading?
– WhatargumentscanbemadethatglobalizationisdoingmoreharmthangoodfortheAmerican
worker?Whatargumentscanmadefortheoppositepointofview?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page3
– Inadditiontoitseffectsonworkers,whataresomeotherchallengesthatglobalizationhascreatedfortheU.S.economy?
– DiscusswhatyouthinkJosephSchumpetermeantbytheterm“creativedestruction”?Howdoes
creativedestructionapplytowhat’shappeningtotheU.S.economyasaresultofglobalization?
– DoyouagreewithSchumpeter’sbeliefthatweshouldacceptthedestructionofoldeconomicwaysasapositivehappeningbecauseitclearsthewayfornewandbetterwaysofdoingthings,
likeglobalization?
Summary/AssessmentAskstudentstoexplaintheiranswerstothefollowingquestion:
Basedonwhatwehavelearnedaboutglobalizationinthislesson,whatadvicewouldyougive
entrepreneursabouthowtopreparethemselvestosucceedintheglobaleconomy?
FollowUp
Havestudentsinterviewthreebusinesspeoplewhooperateintheircommunities,askingeachthese
questions:
– Howmuch,ifany,hasyourbusinessbeenaffectedbyglobalization?
– Doyouthinkglobalizationisagoodorbadthingforentrepreneurs?
– Whatshouldafuturebusinesspersondotopreparetoworkintheglobaleconomy?
Haveaclassdiscussiononglobalizationfocusingonthequestionsthatstudentsusedintheir
interviews.
CulminatingActivity:“EconomicsJeopardy”
Drawthefollowingpointchartontheboard:
POINTCHART
EconomicSystems
U.S.EconomicSystem
BusinessCycleandEconomicIndicators
MonetaryandFiscalPolicy
GlobalEconomyandInternational
Trade
5Points 5Points 5Points 5Points 5Points
10Points 10Points 10Points 10Points 10Points
15Points 15Points 15Points 15Points 15Points
20Points 20Points 20Points 20Points 20Points
25Points 25Points 25Points 25Points 25Points
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page4
Herearetherulesfor“EconomicsJeopardy”:
1. Dividetheclassintotwoteams.
2. Tossacointodeterminewhichteamgoesfirst.
3. ThestudentseatedinthefirstseatinthefirstrowforTeamOnebeginsbyselectinganyofthefivepointboxesunderoneofthefivecategoriesthatappearonthe“PointChart.”Aseach
studentselectsapointbox,crossoffthatboxfromthe“PointChart.”
4. Refertothe“AnswerChart”(below)togettheanswerthatcorrespondstothepointboxselected.Then,readthatansweraloud.Inordertoearnthenumberofpointsattachedtothe
box,thestudentmustrespondwiththecorrectquestion(Forexamplefortheanswer“HewasthefirstPresidentoftheU.S.,”thecorrectquestionwouldbe“WhowasGeorgeWashington?”)Thecorrectquestionsforall25boxesappearinthe“AnswerChart.”
5. KeepgoingdowntherowofTeamOne,awardingpointsforeachcorrectresponse,untilastudentrespondsincorrectly.Foreachincorrectresponsethatastudentprovides,hisorherteamlosesthenumberofpointsoftheboxselected.ThencallonanystudentfromTeamTwo
whoraiseshisorherhand.IfthestudentcalledfromTeamTwodoesnotprovidethecorrectresponse,TeamTwolosesnopoints.Telltheclassthecorrectquestion.
6. NowitisTeamTwo’sopportunitytoselectfromthepointboxes.Beginwiththestudentsittingin
thefirstseatinthefirstrowforTeamTwo.Followthesamepatterndescribedaboveuntilall25boxeshavebeenselected.
7. Afterall25boxeshavebeenselected,theteamwiththemostpointswins.
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page5
ANSWERCHART
EconomicSystems U.S.EconomicSystemBusinessCycleandEconomicIndicators
MonetaryandFiscalPolicy
GlobalEconomyandInternationalTrade
A:Thebasiceconomicproblemallsocieties
face.
A:Thetwofactorsthatdeterminethepricesofgoodsandservicesinthe
U.S.economy.
A:Thisindicatormeasuresthetotal
marketvalueofgoodsandservicesproducedbyacountryinoneyear.
A:ThenameofthecentralbankoftheU.S.,whichmakesmonetary
policy.
A:Thenameofonecompanythatsellsitselectronicproducts
allovertheworld.
5PointsQ:Whatisscarcity?(Or,Whatismeetingunlimitedneedsandwantswithlimited
resources?)
Q:Whataresupplyanddemand?
Q:WhatistheGrossDomesticProductor
GDP?
Q:WhatistheFederalReserve?
Q:WhatisApple/Microsoft/Samsung/Panasonic?
A:AdamSmithissaidtobethefatherofthiseconomicsystem.
A:ManypeoplerefertotheU.S.asamixed,ratherthanapurely
capitalist,economyforthisreason.
A:Thenumberofphasesinthebusinesscycle.
A:Thetwobodiesofgovernmentthatmake
U.S.fiscalpolicy.
A:Thetermusedininternationaltradetodescribe
ataxonimportedgoods.
10Points
Q:Whatiscapitalism?Q:Whatisthefactthatthegovernmentplaysaroleintheeconomy?
Q:Whatisfour?
Q:WhoarethePresidentandCongress?
(Or,WhoaretheExecutiveandLegislative
branches?)
Q:Whatisatariff?
A:Inthiseconomicsystem,thegovernment
makesalmostalldecisionsaboutwhatgoodsandservicesare
produced.
A:Onekindofactivityorserviceperformedby
government,ratherthanprivateindustry,inthis
country.
A:Thenameoneofthephasesofthebusiness
cycle.
A:Inmakingfiscalpolicy,thegovernmentusesthesetwopowers.
A:Thisfactwasamajorcauseoftheglobalizationofthe
economy.
15Points
Q:Whatisacommandorcommunisteconomy?
Q:Whatisthepostoffice/roadbuilding,etc.?
Q:Whatisexpansion,peak,trough,or
recession?
Q:Whatarethepowerstotaxandspend?
Q:Whataretechnologicalbreakthroughsinscience,
technology,andtransportation?
(continued)
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page6
ANSWERCHART(continued)
EconomicSystems U.S.EconomicSystemBusinessCycleandEconomicIndicators
MonetaryandFiscalPolicyGlobalEconomyandInternationalTrade
A:Oneofthethreebasicquestionsalleconomicsystemsmustanswer.
A:Thephraseusedtodescribethestreamoffundsandeconomic
activitiesthatgobackandforthamongthe
government,businesses,andpublicinthiscountry.
A:Thistypeofindicatorisgivenitsname
becauseitmovesaheadoftheeconomy.
A:WhentheFedwantstofightinflation,itusually
takesthisaction.
A:Thenameforthetradeagreementthatwentintoeffectin1994,involvingtheU.S.,Canada,and
Mexico.20Points
Q:WhatisWhattoproduce?/Howtoproduce
it?/Howtodistributewhatisproduced?
Q:Whatisthecircularflow?
Q:Whatisaleadingindicator?
Q:Whatisraisingshort‐terminterestrates?
Q:WhatwasNAFTA?
A:Inthiskindofeconomicsystem
people'seconomicrolesarethesameasthoseof
theirparentsandgrandparents.
A:TherightU.Sconsumershaveto
decideforthemselveswhichgoodstheywill
buy.
A:Thisphaseofthebusinesscycleoccurswhentheeconomyhitsbottom,immediatelypriortotheexpansion
phase.
A:Thisisoneexampleofanautomaticfiscalpolicy
stabilizer.
A:Ininternationaltrade,thetermgiventothesituationinwhicha
countrycanproduceagoodatalower
opportunitycostthananothercountry.25Points
Q:Whatisatraditionaleconomicsystem?
Q:Whatisconsumersovereignty?
Q:Whatisthetroughphase?
Q:Whatisunemploymentinsurance/welfare/income
taxprograms?
Q:Whatiscomparativeadvantage?
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page7
HandoutIII.14.A,“Blog”Directions:Readthedefinitionofglobalizationthatappearsintheblogbelowandcompareittothe
definitionyouofferedatthebeginningofthelesson.
Globalization 101
Ihavesaidfrombeginningofthisblogthatitsprincipalconcernistheissueofglobalizationanditsimplicationsforthepeopleoftheworldandimpactontheplanetitself.
DefiningGlobalization
Nouniversaldefinitionofglobalization.
Economicdefinition:It’sabouttrade,financeandcommunications.
Broaderdefinition:TomFriedman–anInternationalSystemthatreplacedtheColdWar.
AgooddefinitionIhavefound(LevinInstitute,SUNY):
“Globalizationisaprocessofinteractionandintegrationamongthepeople,companies,and
governmentsofdifferentnations,aprocessdrivenbyinternationaltradeandinvestmentandaidedbyinformationtechnology.Thisprocesshaseffectsontheenvironment,onculture,onpolitical
systems,oneconomicdevelopmentandprosperity,andonhumanphysicalwell‐beinginsocietiesaroundtheworld.”(www.globalization101.org)
Adaptedfrom:http://the‐visionist.blogspot.com/2009/03/globalization‐101.html
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ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page9
HandoutIII.14.C,“SmallBusinesses”Directions:ReadtheQ&Aonthispage.Underlinethreeargumentsthatappearbelowthatsupportthebeliefthatglobalizationis“especiallygoodforsmallbusiness.”
Q: Asasmallbusinessowner,Iamfrustratedbyhowglobalizationhasaffectedmybusiness.Iam
especiallyupsetbytheincreasingoutsourcingofjobsoverseasbymylargecorporatecompetitors.Theyseemtohavesomanyadvantagesalready;now,byoutsourcingworkoverseas,theyaremakingitevenharderforussmallbusinesses.HowamIsupposedtocompetewhentheycannow
hirepeopleinIndia?—SmallBusinessOwner,Somewhere,USA
A: LetmefirstsaythatIhaven'tlostmyjobbecauseithasbeenoutsourcedoverseas,andIfeelbadforthosewhohave.Thatsaid,however,inthebiggerpicture,Ithinkfreetradeandglobalizationgetabadrap.Thefactis,globalizationisgoodfortheworld,andit'sespeciallygoodforsmallbusiness.
Whentalkingaboutglobalization,Iamreferringtoincreasingfreetrade,theoutsourcingofjobsoverseas,theopeningofnewmarkets,fewertradebarriers,andglobaleconomicintegration.Inafragmentedworld,globalizationcreatesbonds.Inaworldwheretoomanypeopleyearnfor
freedom,globalizationoffershope.Inaworldwheretotalitarianismisalltoopresent,globalizationfostersdemocracy.Andinaworldwheresmallbusinessesfaceincreasingcompetition,globalizationcreatesmarketsandopportunities.
Freetradeandglobalizationoftengetabadrapbecausethereisabeliefthattheyallowhugemultinationalcorporationstoactwithoutconcernforhumanrightsordemocraticvalues.Butthefactisfreetradehelpssmallbusinessfarmorethananyoneelse.Here'sanexample:Iworkwitha
companythatmakesaproductthatitsellstocompaniesacrossthecountry.TheproductismanufacturedinChinaandimportedtotheU.S.becauseitisfarlessexpensivetohaveitmadethere.Yetbydoingso,byridingtheglobalizationwave,mycolleagueshavebeenabletocreatea
businessthatemploysmanypeopleintheUSAandcreateswealthforitsowners.Iftheymanufacturedtheproducthere,theywouldn'tbeabletocompete.
Sothefirstthingtonoteisthatglobalizationcreatesjobs.Here'sanotherexample:AccordingtoHowardShatz,inhistestimonybeforetheHouseCommitteeonSmallBusiness(September2003),betweenmanufacturers,wholesalers,andother"tradefacilitators,"fully94%ofexportersin
Californiaaresmall‐andmedium‐sizebusinesses.Thatisanamazingstatistic;morethan9outof10exportersaresmallbusinesses.Whyisthat?Byopeningnewmarketswithfewerbarriers,freetradeandglobalizationmakeiteasierforU.S.smallbusinesstomanufactureandselltheirgoods
overseas.TheInternetalonehasopenedawholenewavenueofmarketsforthosesmallbusinessessmartenoughtotakeadvantageofit.
(continued)
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page10HandoutIII.14.C,“SmallBusinesses”(continued)
Muchofthistradegoestoourlargesttradingpartner,Mexico,whereagrowingnumberofsmall
businesseshavecroppeduptoimportU.S.goods.AccordingtoaUniversityofMiamistudy,"99%ofMexico'sprivatesectoriscomposedofsmallbusinessesthatgenerateover80%ofemploymentinMexico."Andthatnew,boomingmarketawaitsthesmallbusinesssavvyenoughtotapit.Sothe
secondbenefitisthatglobalizationcreatesmarkets.Freetradeandglobalizationnotonlyfostersmallbusinessgrowthathome,itfostersbusinessgrowthabroad,andthat,inturn,accordingtothestudy,"fuels…demandwithinMexicoforU.S.‐madegoodsandservices."It'sawin‐winrelationship,
wherebothsidesbenefit.
Thesedays,maybethemostpositiveoffshootofglobalization,accordingtoDanGriswoldinhis
paper,"TradingTyrannyforFreedom:HowOpenMarketsTilltheSoilforDemocracy,"isthat"economicintegrationpromotescivilandpoliticalfreedomsdirectlybyopeningasocietytonewtechnology,communications,anddemocraticideas....Bypromotingfastergrowth,freetrade
promotespoliticalfreedomindirectlybycreatinganeconomicallyindependentandpoliticallyawaremiddleclass."
Significantly,Griswoldnotes,"nationsthathave[opened]themselvestotheglobaleconomyare
significantlymorelikelytohaveexpandedtheircitizens'politicalandcivilfreedoms."
Bycreatingjobsathome,bynurturingamiddleclassabroad,byfosteringdemocraticideals,bydevelopingnewmarkets,bytearingdownbordersandbarriers,globalizationhasaverypositive
impactontheworldatlarge,anditistheU.S.smallbusinessthatisattheforefrontofthisrevolution.Americansmallbusinessescancontinuetochangetheworldforthebetterbyridingtheglobalization/freetradewaveandsellingtheirgoodstoemergingmarketsoverseas.
http://www.usatoday.com/money/smallbusiness/columnist/strauss/2004‐05‐17‐globalization_x.htm#
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page11
HandoutIII.14.D,“Reading”Directions:Afterreadingthepassagebelow,suggestatitleandwriteitonthelineprovided. _________________________________________________________________________________ (title)
hangesresultingfromglobalproductionandtradehavebeendifficultforcertainsectorsoftheU.S.economy,especiallyforworkersintheseaffectedsectors.Asothercountrieshavedevelopednewmanufacturingcapacities,thelowerwagesofworkersinthosecountrieshavegiventhema
costadvantagerelativetomanufacturingintheUnitedStates.ThishasledtoasteadyincreaseinU.S.importsofmanufacturedgoodsthatarecheaperthanequivalentdomesticgoods.IthasalsopromptedanumberofU.S.companiestoclosefactoriesintheUnitedStatesandbuildnewonesindevelopingcountries,wheretheycantakeadvantageoflowerwagesandimprovedmanufacturingskills.Combinedwithtechnologicalchangesandotherfactors,thesedevelopmentsintradehave:
1. ContributedtoagradualshrinkageintheshareoftheU.S.workforceholdingsecure,manufacturingjobswithdecentwages;and
2. Spurredalong‐termdeclineintheinflation‐adjustedincomeofworkersinthemanufacturingsector.
Americanworkerswithalowdegreeofskillshavebeenhithardestbyforeignimportsandplantclosings,becausetheytendtoworkintheindustriesinwhichemergingindustrialcountriesaremostcompetitive.Overthepastfewdecades,asemploymentandwageshavedeclinedintraditionalU.S.manufacturingsectors,manymorejobshavebeencreatedinhighertechmanufacturingindustriesandintheservicesector.Thesejobsareoftenhigherpayingthanthemanufacturingjobsthathavebeeneliminated.Manyworkerswithmanufacturingbackgroundslackthetrainingandeducationnecessarytotransitionintothesenewfields.
ThechangingstructureofAmericantradeoverthepastfewdecadesisinmanyrespectsareflectionofalargersetofchangesinthestructureoftheU.S.economy.TherelativesharesofU.S.economicoutputaccountedforbyeachofthethreemajorformsofeconomicactivity(manufacturing,services,andagriculture)areconstantlychanging.Atthebeginningofthe20thcentury,thedominanttrendwasthedeclineofagriculturalproductionandtheriseofmanufacturing.Inrecentdecades,thedominanttrendhasbeenthedeclineofmanufacturingandtheriseofthehightechnologyandservicesectors.
Theselong‐termchangesinthestructureofaneconomycanbemarginallyshapedbypolicy.Toalargeextent,though,theyaretheinevitableresultoftheroutineoperationofacapitalisteconomy.
TheAustrianeconomist,JosephSchumpeter,inhisbookCapitalism,SocialismandDemocracy,famouslycharacterizedcapitalismasaprocessof"creativedestruction."Thatis,afreemarketeconomywillnaturallyeliminatefirmsandindustriesthatarelessefficientorproduceinferiorgoods.Whenthesecompaniesareeliminated,theirmoreefficientcompetitorsareallowedtomaximizetheadvantagestheybringtothemarket.Effortstokeeptheseoldindustriesproppedupnotonlyinhibittheoperationsofbetterfirms,buttheyusuallycomeatthegreatexpenseoftaxpayers.
Ratherthantryingtodelayorpreventsuchtrends,thealternativewouldbetoofferassistancetothoseindividualsorcommunitiesthatexperiencedifficulty.
http://www.globalization101.org/uploads/File/Trade/tradeall2011.pdf
C
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page7
HandoutIII.14.A,“Blog”Directions:Readthedefinitionofglobalizationthatappearsintheblogbelowandcompareittothe
definitionyouofferedatthebeginningofthelesson.
Globalization 101
Ihavesaidfrombeginningofthisblogthatitsprincipalconcernistheissueofglobalizationanditsimplicationsforthepeopleoftheworldandimpactontheplanetitself.
DefiningGlobalization
Nouniversaldefinitionofglobalization.
Economicdefinition:It’sabouttrade,financeandcommunications.
Broaderdefinition:TomFriedman–anInternationalSystemthatreplacedtheColdWar.
AgooddefinitionIhavefound(LevinInstitute,SUNY):
“Globalizationisaprocessofinteractionandintegrationamongthepeople,companies,and
governmentsofdifferentnations,aprocessdrivenbyinternationaltradeandinvestmentandaidedbyinformationtechnology.Thisprocesshaseffectsontheenvironment,onculture,onpolitical
systems,oneconomicdevelopmentandprosperity,andonhumanphysicalwell‐beinginsocietiesaroundtheworld.”(www.globalization101.org)
Adaptedfrom:http://the‐visionist.blogspot.com/2009/03/globalization‐101.html
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VVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVV!
!
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page9
HandoutIII.14.C,“SmallBusinesses”Directions:ReadtheQ&Aonthispage.Underlinethreeargumentsthatappearbelowthatsupportthebeliefthatglobalizationis“especiallygoodforsmallbusiness.”
Q: Asasmallbusinessowner,Iamfrustratedbyhowglobalizationhasaffectedmybusiness.Iam
especiallyupsetbytheincreasingoutsourcingofjobsoverseasbymylargecorporatecompetitors.Theyseemtohavesomanyadvantagesalready;now,byoutsourcingworkoverseas,theyaremakingitevenharderforussmallbusinesses.HowamIsupposedtocompetewhentheycannow
hirepeopleinIndia?—SmallBusinessOwner,Somewhere,USA
A: LetmefirstsaythatIhaven'tlostmyjobbecauseithasbeenoutsourcedoverseas,andIfeelbadforthosewhohave.Thatsaid,however,inthebiggerpicture,Ithinkfreetradeandglobalizationgetabadrap.Thefactis,globalizationisgoodfortheworld,andit'sespeciallygoodforsmallbusiness.
Whentalkingaboutglobalization,Iamreferringtoincreasingfreetrade,theoutsourcingofjobsoverseas,theopeningofnewmarkets,fewertradebarriers,andglobaleconomicintegration.Inafragmentedworld,globalizationcreatesbonds.Inaworldwheretoomanypeopleyearnfor
freedom,globalizationoffershope.Inaworldwheretotalitarianismisalltoopresent,globalizationfostersdemocracy.Andinaworldwheresmallbusinessesfaceincreasingcompetition,globalizationcreatesmarketsandopportunities.
Freetradeandglobalizationoftengetabadrapbecausethereisabeliefthattheyallowhugemultinationalcorporationstoactwithoutconcernforhumanrightsordemocraticvalues.Butthefactisfreetradehelpssmallbusinessfarmorethananyoneelse.Here'sanexample:Iworkwitha
companythatmakesaproductthatitsellstocompaniesacrossthecountry.TheproductismanufacturedinChinaandimportedtotheU.S.becauseitisfarlessexpensivetohaveitmadethere.Yetbydoingso,byridingtheglobalizationwave,mycolleagueshavebeenabletocreatea
businessthatemploysmanypeopleintheUSAandcreateswealthforitsowners.Iftheymanufacturedtheproducthere,theywouldn'tbeabletocompete.
Sothefirstthingtonoteisthatglobalizationcreatesjobs.Here'sanotherexample:AccordingtoHowardShatz,inhistestimonybeforetheHouseCommitteeonSmallBusiness(September2003),betweenmanufacturers,wholesalers,andother"tradefacilitators,"fully94%ofexportersin
Californiaaresmall‐andmedium‐sizebusinesses.Thatisanamazingstatistic;morethan9outof10exportersaresmallbusinesses.Whyisthat?Byopeningnewmarketswithfewerbarriers,freetradeandglobalizationmakeiteasierforU.S.smallbusinesstomanufactureandselltheirgoods
overseas.TheInternetalonehasopenedawholenewavenueofmarketsforthosesmallbusinessessmartenoughtotakeadvantageofit.
(continued)
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page10HandoutIII.14.C,“SmallBusinesses”(continued)
Muchofthistradegoestoourlargesttradingpartner,Mexico,whereagrowingnumberofsmall
businesseshavecroppeduptoimportU.S.goods.AccordingtoaUniversityofMiamistudy,"99%ofMexico'sprivatesectoriscomposedofsmallbusinessesthatgenerateover80%ofemploymentinMexico."Andthatnew,boomingmarketawaitsthesmallbusinesssavvyenoughtotapit.Sothe
secondbenefitisthatglobalizationcreatesmarkets.Freetradeandglobalizationnotonlyfostersmallbusinessgrowthathome,itfostersbusinessgrowthabroad,andthat,inturn,accordingtothestudy,"fuels…demandwithinMexicoforU.S.‐madegoodsandservices."It'sawin‐winrelationship,
wherebothsidesbenefit.
Thesedays,maybethemostpositiveoffshootofglobalization,accordingtoDanGriswoldinhis
paper,"TradingTyrannyforFreedom:HowOpenMarketsTilltheSoilforDemocracy,"isthat"economicintegrationpromotescivilandpoliticalfreedomsdirectlybyopeningasocietytonewtechnology,communications,anddemocraticideas....Bypromotingfastergrowth,freetrade
promotespoliticalfreedomindirectlybycreatinganeconomicallyindependentandpoliticallyawaremiddleclass."
Significantly,Griswoldnotes,"nationsthathave[opened]themselvestotheglobaleconomyare
significantlymorelikelytohaveexpandedtheircitizens'politicalandcivilfreedoms."
Bycreatingjobsathome,bynurturingamiddleclassabroad,byfosteringdemocraticideals,bydevelopingnewmarkets,bytearingdownbordersandbarriers,globalizationhasaverypositive
impactontheworldatlarge,anditistheU.S.smallbusinessthatisattheforefrontofthisrevolution.Americansmallbusinessescancontinuetochangetheworldforthebetterbyridingtheglobalization/freetradewaveandsellingtheirgoodstoemergingmarketsoverseas.
http://www.usatoday.com/money/smallbusiness/columnist/strauss/2004‐05‐17‐globalization_x.htm#
ECONOMICS“ThebusinessofAmericaisbusiness”–CalvinCoolidge
UNITIII/LESSON14:page11
HandoutIII.14.D,“Reading”Directions:Afterreadingthepassagebelow,suggestatitleandwriteitonthelineprovided. _________________________________________________________________________________ (title)
hangesresultingfromglobalproductionandtradehavebeendifficultforcertainsectorsoftheU.S.economy,especiallyforworkersintheseaffectedsectors.Asothercountrieshavedevelopednewmanufacturingcapacities,thelowerwagesofworkersinthosecountrieshavegiventhema
costadvantagerelativetomanufacturingintheUnitedStates.ThishasledtoasteadyincreaseinU.S.importsofmanufacturedgoodsthatarecheaperthanequivalentdomesticgoods.IthasalsopromptedanumberofU.S.companiestoclosefactoriesintheUnitedStatesandbuildnewonesindevelopingcountries,wheretheycantakeadvantageoflowerwagesandimprovedmanufacturingskills.Combinedwithtechnologicalchangesandotherfactors,thesedevelopmentsintradehave:
1. ContributedtoagradualshrinkageintheshareoftheU.S.workforceholdingsecure,manufacturingjobswithdecentwages;and
2. Spurredalong‐termdeclineintheinflation‐adjustedincomeofworkersinthemanufacturingsector.
Americanworkerswithalowdegreeofskillshavebeenhithardestbyforeignimportsandplantclosings,becausetheytendtoworkintheindustriesinwhichemergingindustrialcountriesaremostcompetitive.Overthepastfewdecades,asemploymentandwageshavedeclinedintraditionalU.S.manufacturingsectors,manymorejobshavebeencreatedinhighertechmanufacturingindustriesandintheservicesector.Thesejobsareoftenhigherpayingthanthemanufacturingjobsthathavebeeneliminated.Manyworkerswithmanufacturingbackgroundslackthetrainingandeducationnecessarytotransitionintothesenewfields.
ThechangingstructureofAmericantradeoverthepastfewdecadesisinmanyrespectsareflectionofalargersetofchangesinthestructureoftheU.S.economy.TherelativesharesofU.S.economicoutputaccountedforbyeachofthethreemajorformsofeconomicactivity(manufacturing,services,andagriculture)areconstantlychanging.Atthebeginningofthe20thcentury,thedominanttrendwasthedeclineofagriculturalproductionandtheriseofmanufacturing.Inrecentdecades,thedominanttrendhasbeenthedeclineofmanufacturingandtheriseofthehightechnologyandservicesectors.
Theselong‐termchangesinthestructureofaneconomycanbemarginallyshapedbypolicy.Toalargeextent,though,theyaretheinevitableresultoftheroutineoperationofacapitalisteconomy.
TheAustrianeconomist,JosephSchumpeter,inhisbookCapitalism,SocialismandDemocracy,famouslycharacterizedcapitalismasaprocessof"creativedestruction."Thatis,afreemarketeconomywillnaturallyeliminatefirmsandindustriesthatarelessefficientorproduceinferiorgoods.Whenthesecompaniesareeliminated,theirmoreefficientcompetitorsareallowedtomaximizetheadvantagestheybringtothemarket.Effortstokeeptheseoldindustriesproppedupnotonlyinhibittheoperationsofbetterfirms,buttheyusuallycomeatthegreatexpenseoftaxpayers.
Ratherthantryingtodelayorpreventsuchtrends,thealternativewouldbetoofferassistancetothoseindividualsorcommunitiesthatexperiencedifficulty.
http://www.globalization101.org/uploads/File/Trade/tradeall2011.pdf
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