Transcript Economics Unit Presentation

Economics Unit
Consumer Economics
Unit Overview
I.
Types of Economic Systems
II.
Microeconomics
III. Macroeconomics
I. Types of Economic Systems
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Traditional
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Command
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Decisions made by central government
Market
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Decisions based on traditional customs and beliefs
Rare today
Decisions made by individuals in their self-interest
Mixed
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Combination of command and market systems
II. Microeconomics
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Competition
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Encourages efficient use of resources
Consumers benefit - low prices and improvements
Supply and Demand (video)
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Central relationship to all economic theory
Demand and supply curve components
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Price
Quantity
Equilibrium
Monopoly
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Single company controls supply of a good/service
Illegal except in certain situations
Microeconomics (cont’d)
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Law of Scarcity
• Not enough resources to satisfy all wants
• Societies must make choices (opportunity costs)
Economic Resources (Factors of Production)
 Land
• Labor
• Capital
• Entrepreneurship
• Technology
III. Macroeconomics
• Measuring the Economy
• Market Conditions
• Government & its Effect on the Economy
• International Trade
Macroeconomics –
Measuring the Economy
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Standard of Living
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Consumer Price Index (CPI)
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Measured by kinds and quality of goods and services you
can afford
Measures change in prices of goods and services over time
Base year = 1982 (100)
Nov, 2010 CPI = 218.8 (what does that mean?)
Gross Domestic Product (GDP)
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Total dollar value of all goods & services produced in one
country during one year
U.S. GDP (2010) = $14,660,000,000,000 (link)
Macroeconomics –
Market Conditions (6.1)
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Recession
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Depression
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Period of economic decline (usually 6-12 months)
Producers produce more than public can consume
Profits decrease, people laid off & buy less
What a recession can turn into
Longer lasting and more devastating
Prices plummet, businesses fail, unemployment soars
Inflation
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Prices increase too quickly for consumers
Wages/income don’t increase proportionately
Macroeconomics –
Government & its Effect on the Economy
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Fiscal/Monetary Policy Video
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Fiscal Policy - Government adjusts taxes or spending to assist the economy
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Monetary Policy – Government adjusts amount of money in circulation to
assist the economy
Federal Reserve System
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Main function is to set monetary policy Video
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Comprised of 12 districts (Chicago is one) Video
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Current Chairman of the Fed is Ben Bernanke
Federal Reserve Operations
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Sets Reserve Requirement for banks-% of money banks deposit that must
be kept on hand (link)
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Discount Rate – Interest Rate % the banks pay to the Fed to borrow money
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Federal Funds Rate – Interest Rate at which banks lend money to one
another
Macroeconomics –
Government & its Effect on the Economy
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Federal Reserve Operations (cont’d)
• Open Market Operations – Most frequently
used tool by the Fed Reserve to control the
supply of money through securities
• BUY securities = more money in circulation
• SELL securities = less money in circulation
• Securities are guaranteed by the U.S.
Government and exempt from state and local
income taxes
Macroeconomics –
Government & its Effect on the Economy
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Federal Reserve Operations (cont’d)
Securities Include:
• Treasury Bills
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Treasury Notes
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issued at a discount & repaid value at final maturity
Shortest maturation 91, 182, or 364 days
10,000 minimum investment
mature 2-10 yrs./$1,000 minimum/most sold in $5,000
denominations
Treasury Bonds
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mature 10+ yrs./denominations include: $1,000, $5,000,
$10,000, $100,000 and $1,000,000/sensitive to int. rate change
Microeconomics
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Opportunity Cost
• The value of giving up one choice for another
(after school job vs. playing sports)
Wants/Needs
• Wants– items you desire but don’t need to live
• Needs– items essential to survival
(food, water, clothes, shelter)
• Some items may be either (car, money, sunglasses)
Anti-trust Laws
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Designed to promote competition and the
economy
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Sherman Antitrust Act 1890--prohibits monopolies
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Clayton Antitrust Act 1914--prohibits price fixing
and unfair trade
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FTC was created in 1914
Macroeconomics –
International Trade
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Import/Export
• Import - goods or services (examples?) brought into
a country for sale
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Why not make our own?
Export – goods or services (examples?) sent to a
foreign country for sale there
Trade Deficit/Surplus
• U.S. has been running a deficit since 1977
• Current (June 2015) U.S. trade deficit: $43.8 billion
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Why do some people think a deficit is good?
Macroeconomics –
International Trade (cont’d)
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Trade Agreements
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Used to expand trade opportunities with other countries
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Can be helpful but also hurtful to American workers (why?)
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NAFTA (North American Free Trade Agreement) (link)
• Eliminates barriers between U.S., Canada, and Mexico
• Implemented in 1994
• Has created the world’s largest free trade area
• Why are many Americans against NAFTA?
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EU (European Union) (link)
• Over two dozen countries in Europe with no trade
barriers
• Common currency is the euro