Clickers!

1. Select the best definition of the unemployment rate.

• A) labor force/# unemployed

• B) # unemployed/ labor force

• C) civilian labor force/# unemployed

• D) # unemployed/ civilian labor force

2. Who is unemployed in this list?

• A) a stay-at-home-mom

• B) a ten yr-old kid

• C) a guy who, after looking for a job for 6 months, gave up and moved in with his parents

• D) a retired person

• E) None of the above.

3. Population = 100Employed = 40

Not employed but looking = 10What is the unemployment rate?

• A) 10%• B) 20%• C) 30%• D) 40%

4. Population = 50Employed = 30

Unemployed = 10What is the unemployment rate?

• A) 15%• B) 25%• C) 30%• D) 33%

5. Population = 100Employed = 45

Not employed but looking = 5What is the unemployment rate?

• A) 10%• B) 11%• C) 20%• D) 5%

6. Population = 60Employed = 20

Not employed but looking = 20What is the unemployment rate?

• A) 100%• B) 66%• C) 50%• D) 33%

7. How are discouraged workers (people who want to work but have given up

looking for a job) counted when measuring the unemployment rate?

• A) They count as unemployed but not in the labor force.

• B) They count as unemployed and are part of the labor force.

• C) They are neither in the labor force nor unemployed.

8. Many people have part-time jobs but want full-time work. When measuring the unemployment rate, these people

are counted as

• A) unemployed & in the labor force.

• B) unemployed & not in the labor force.

• C) employed & in the labor force.

• D) employed but not in the labor force.

9. Population = 100Working full time = 60

Children = 5Stay-at-home parents = 5

Prisoners = 10Not working, but looking for a job = 20

What is the unemployment rate?• A) 20%

• B) 25%

• C) 30%

• D) 35%

10. The country of Bagonia has an unemployment rate of 5%. The

country of Krakosia has an unemployment rate of 10%. Which

of the following must be true?

• A) Krakosia has a higher rate of inflation.• B) Krakosia has twice as many unemployed

people as Bagonia.• C) Bagonia has a smaller labor force than

Krakosia.• D) None of these is necessarily true.

2 Countries

• Bagonia

• Employed: 95

• Unemployed: 5

• Labor Force: 100

• U.Rate: 5%

• Krakosia

• Employed: 9

• Unemployed: 1

• Labor Force: 10

• U.Rate: 10%

Assignment

• Take a moment to think of a reason why someone might lose their job.

• Be specific!

Kinds of Unemployment

• Frictional: between jobs (it’s personal)

• Structural: changes in consumer tastes or industry operations; skills don’t match jobs (jobs not coming back)

• Cyclical: changes in business cycle (jobs will come back)

• Seasonal: changes in weather/seasons

Unemployment Worksheet

• Follow all directions on handout.

Monetary Policy

Game Plan

• Interest Rates

• Money Supply and Interest Rates

• Bonds

• Bonds and Money Supply

• Monetary Policy (The Whole Picture)– The Fed-Bonds-Money Supply-Interest Rates-

The Economy

When are we more likely to buy things...

when the price is low or when the price is high???

Interest Rates

• Are the PRICE of money.

• When do we borrow more money…– when interest rates are low or when they’re

high???

• LOW, good!

Interest Rates

• If interest rates are low...

• and people borrow more money...

• then more money is spent...

• and more stuff gets sold and produced.

Picture Time• Divide a sheet of notebook paper into six squares.

Write “Monetary Policy” at very top.

• Number them 1-6 (1,2,3 at top, 4,5,6 at bottom).

• In box 4, draw – a person borrowing money from a bank– OR– a person leaving the bank with borrowed money– OR– a person expressing the intent to borrow money from

the bank

In box 5

• Draw the person who borrowed the money– as they buy something with that borrowed

money.– OR– enjoy the thing they just bought with borrowed

money.

BUT

• More money in circulation can eventually result in…

• INFLATION.

QUIZ

Grab Your Clickers!

Interest rates are the price of

• A) money

• B) inflation

• C) unemployment

• D) real GDP

Consumers like

• A) low prices

• B) high prices

Borrowers like

• A) low interest rates.

• B) high interest rates.

Lower interest rates mean

• A) more money in circulation.

• B) less money in circulation.

If rates are kept too low...

• A) inflation could result.

• B) deflation could result.

A Question

Bankers and Money

The money supply and interest rates

• Story Time!– The farmer who had a healthy crop.

• Story Time!– The banker with too much money.

The money supply and interest rates

• When the money supply goes up, interest rates go down.

• …and vice versa!

QUIZ

When the supply of something rises, the price of it usually goes

• A) up.

• B) down.

When the supply of money increases, interest rates

• A) rise.

• B) fall.

Interest rates go up when

• A) the money supply goes up.

• B) the money supply goes down.

Picture Time

• In box 2, draw – a banker, looking inside his vault, which is filled with

money.– He should look sad/worried/anxious.– Draw a thought-bubble in which he expresses his

frustration, &– …his intent to lower his interest rates.

In box 3

• Draw a picture to show interest rates falling.

Bonds

• Bonds are loans.*****

• Treasury bonds are loans to…– the Federal Government.

• The government issues bonds whenever it spends more money than it collects in taxes.– (Which is pretty much every year.)

Bonds

• The government will borrow money from anybody, so…– Americans hold bonds.– The Federal Reserve holds (a lot of) bonds.– Foreigners hold bonds.– Private banks hold bonds.

After loaning the government $$$

• You are left holding a bond.

• If it’s a 10 year bond, you’ll get paid interest each year.

• And receive the “purchase amount” back in 10 years.

OR...

• Maybe you don’t want to wait 10 years.

• Something comes up, and you want your cash now!

• In that case you could sell that bond to someone else.

How the Fed controls the money supply...

(drum roll)

The Fed buys or sells bonds in the open market

• Hence the name (Federal Open Market Committee).

• Remember, people can sell their bonds to other people, or to the Fed.

• OR buy bonds from other people or the Fed.

What can the Fed do to increase the money supply??

Buy or sell bonds??

Draw it in box #1.

In box 1

• Draw the Fed buying bonds.– Money leaving the Fed– Bonds going towards the Fed– This could be shown with hands/arrows/etc.

The Fed buys or sells bonds in the open market

• The Fed can print money, and BUY bonds from the public.

• This INCREASES the money supply.

• Which makes interest rates go ___

• which makes people/businesses borrow MORE

• AND spend MORE (C & I go up)

• so AD increases, and Real GDP increases

• and recession ends (yay!!)

In box 6

• Draw an increase in production– everybody’s working– unemployment’s low– recession’s over– things are generally better– people are generally happier– it’s a happy ending!

But, as more money gets printed...

• And people start spending those extra dollars…

• inflation can result (boo).

Think of a dam…

• A dam controls the flow of water downriver.

• Releasing too much water would cause flooding.

• Too little water would cause a drought.

The Fed is like a dam...

• & the river is the $ supply.

• Too much $ causes inflation.

• Too little $ causes a recession.

Federal Reserve

Money Supply

Strong-Like-Bull Rule

• To get the economy going, Bu.L.L.

• (Buy bonds, Lower federal funds rate, Lower discount rate)

So, to fight inflation, the Fed should...

• Sell bonds.

• Which will shrink the money supply,

• and make dollars more valuable.

Run the Fed Game

Google “fed chairman game”

• You must be re-appointed 3 times.

• At first, Mr. Cook will be the only verifier.

• As students finish the challenge, they will be made verifiers.

• The first two students to finish the challenge will get candy!

Relationship between unemployment, inflation, and

Real GDP.

Assignment

• Compose a skit in which someone is losing their job.

• You will act out your skits in front of the class.

• The class will identify which type of unemployment your skit represents.

• Each group will compose one skit. • You will have about ten minutes to write your

short skits.