Transcript Economics
Economics OGT Review Study of Economics Economics - study of how people use their limited resources to satisfy their unlimited wants. 3 Basic Economic Questions Every Society Must Answer • What to produce? • How to produce? • For whom to produce it for? ECONOMIC SYSTEMS Lets look at a couple samples of how questions look on the OGT that will test your knowledge of economic systems In a certain country, decisions regarding production and consumption of goods are based upon customs, beliefs, rituals, and habits. Over time, the economic system changes to one in which production decisions are based on competition and consumer choice. How has the economic system of this country changed? A. from a mixed economy to a command economy B. from a command economy to a mixed economy C. from a traditional economy to a market economy D. from a market economy to a traditional economy ECONOMIC SYSTEMS Lets look at a couple samples of how questions look on the OGT that will test your knowledge of economic systems In a certain country, all decisions concerning the production of goods and services are made by the government. However, following a political revolution, a new economic system is set up in which some decisions regarding production of goods and services are made by the government and others are made by individuals and private companies. How has the economy of this country changed? A. from a mixed economy to a market economy B. from a command economy to a mixed economy C. from a market economy to a traditional economy D. from a traditional economy to a command economy ECONOMIC SYSTEMS Lets look at a couple samples of how questions look on the OGT that will test your knowledge of economic systems A. if the government takes control of family-owned farms Economic systems answer the question of how goods and services are produced. What is one way a country could change from a command economy to a market economy? B. if privately owned banks become subject to stricter regulation C. if agricultural and factory workers are required to join labor unions D. if industries that had been owned by the government become privately owned TRADE IMPORTANT TERMS TO KNOW 1. Imports: products entering into a country from a different location 2. Exports: products leaving a country for a different destination 3. Tariff: tax on imported goods 4. Embargo/Blockade: a country refuses to trade with another nation for political or economic reasons 5. Trading Blocs: Countries from the same region of the world who will work together to conduct trade with other nations. They do this because they are likely to get more for their products as a group than competing against one another. Example: Countries in the Middle East pooling their oil and selling it as one organization: OPEC TARIFF INFORMATION ***A country will raise tariffs on foreign imports to help companies in their nation sell more goods to consumers If a foreign company has to pay a higher tax to sell their good in the United States they will have to charge consumers more for that product. ***A country will lower tariffs on foreign imports if there is a product in high demand in their nation that cannot be produced by their own companies Trade Lets look at a couple samples of how questions look on the OGT that will test your knowledge of Trade A. increase taxes on the production of U.S. automobiles Which action could the U.S. government employ to protect U.S. automobile manufacturers from foreign competition? B. create free trade agreements with automobile-producing countries C. increase tariffs and import restrictions on foreign automobiles D. implement stricter control of competition among U.S. automobile manufacturers TAXES TAX Effects *16th Amendment: granted Congress the right to raise money (revenue) by collecting taxes from people’s income (money earned from work) Tax money is used to pay for schools, public service projects, military, aide to foreign nations, etc. How much the government taxes workers and business owners can have a HUGE impact on the economy ***If the government raises taxes on money made by BUSINESSES it takes away from business owners profits If business owners are losing money to high taxes they are going to look for things to cut to make up for the money loss….Number ONE CUT— JOBS! ***If workers are seeing more of their hard earned paycheck taken away by taxes they are going to buy fewer products. This means businesses make less money and risk going out of business or having to lay off workers! Taxes Lets look at a couple samples of how questions look on the OGT that will test your knowledge of Taxes. The following is an example of a 2 point writing question on the OGT. POTENTIAL WRITTEN RESPONSE What would be the expected effect on consumer spending and on the unemployment rate if the United States government were to increase personal income tax rates? Write your answer in the Answer Document. (2 points) If the U.S. government were to increase income taxes consumer spending would go down because people would be getting to keep less of the money they earn with each paycheck. Because people are buying fewer products businesses will be making less money and will have to lay workers off leading to a HIGHER unemployment rate. Cleaning up the Banking System FEDERAL RESERVE SYSTEM Improved the nation’s monetary and banking system by allowing banks to control the money supply. The Federal Reserve Board was created to monitor spending/lending and determine the amount of money made available to banks for loans. Level OneFederal Reserve Board (FED)…members are appointed by the President. They control the money supply to the banks by raising/lowering interest rates I II III Level Two 12 Federal Reserve Banks across the U.S. that provide and collect money from local banks within their region. (Cleveland) Level ThreeThe millions of member banks found in every community across the U.S. HOW DOES THE FED WORK? ESSAYThe country is in a state of economic depression. Money is scarce, unemployment is high, bankruptcy/foreclosures are rising, and businesses are failing. What can the FED do to fix this economic problem and what impact will the FED’s decision have on consumers, businesses, and the government. *IT ALL COMES DOWN TO INTERST RATES!-A rate which is charged or paid for the use of money The Fed should…….. Lower Interest rates to increase the amount of money banks have available for loan and make it easier for people and businesses to get access to that money. Impact of Lowering Interest Rates?…… Consumers: The money in circulation will rise encouraging consumers to spend more money Business: As people spend more, business will hire more workers, increase production, and expand. Government: More people spending money, more people making income, business making hire profits EQUALS greater TAX REVENUES!