Roll Call Question: Which of your 5 senses would you decide to lose? Sight, Smell, Taste, Hearing, Touch Mental Floss Objectives 7.4 Identify the role of money in the economy Identify the economic indicators of the business cycle Questions 1. What is an example of a regressive tax? 2. What is an example of an excise tax? vocab is on the next slide Vocabulary Medium of exchange Barter Unit of Account Store of value Currency Deposits Interest Inflation Consumer Price Index Deflation Gross Domestic Product Real GDP Per Capita GDP Peak Contraction Recession Depression Trough Expansion Reminders Unit 7 Test is next Wednesday Budget Project is due Monday! I will not be answerings this weekend regarding your budget projects. I have gingerbread houses to make If you are missing an assignment, quiz or test in the grade book, you need to come see me ASAP to work out a plan to make up. If you have missed more than 10 days of school, you only have 6 days left to complete recovery. SOT Adopt a Marine Care Package Project- I turned in my stuff this morning Characteristics of Money Durable: means that the item must be able to withstand being used repeatedly A cow is fairly durable, but a long trip to market runs the risk of sickness or death for the cow and can severely reduce its value. Twenty-dollar bills are fairly durable and can be easily replaced if they become worn. Even better, a long trip to market does not threaten the health or value of the bill. Portable: means that individuals are able to carry money with them and transfer it easily to other individuals While the cow is difficult to transport & to the store, the currency can be easily put in my pocket. 3. Divisible: means that the money can easily be divided into smaller units of value A 20-dollar bill can be exchanged for other denominations, say a 10, a 5, four 1s, and 4 quarters. A cow, on the other hand, is not very divisible. 4. Limited in Supply: means that restrictions on the amount of money in circulation ensure that values remain relatively construct for the currency How do Blind People Use Money?qqR50qqR50 7.4 Economic Indicators Identify the role of money in the economy I. Three Uses of Money A.Medium of Exchange 1.Any object that is accepted for goods and services 2.Barter- w/o money, goods and services are traded for others B.Unit of Account- means that prices of goods and services are quoted in a standardized manner 1. Allows us to compare similar offers for goods and services to determine the best value C.Store of Value 1.Money keeps its value in two forms: currency (bills and coins) and deposits (money in financial institutions) 2.Interest- cost of borrowing money II. Value of Money A. Inflation- value of money goes down, prices go up 1.Determined by the Consumer Price Index (CPI)- change in prices of essential goods/services 2.Deflation- value of money goes up, prices down InflationqSere0qSere0m_fqYRMm_fqYRM HUH?!? Suppose that an ice-cream cone that costs you a dollar doubles in price. This price increase causes the purchasing power of your dollar to fall because you have to use twice as many dollars to buy the same item. This is why inflation is particularly hard on people who have fixed incomes people who get pensions or other fixed amounts of money. B. GDP (Gross Domestic Product) value of all final goods and services produced w/in a countrys borders in a year GDP 10 Bicycles10 Computers10 $200 each = $1,500 each = $100 each = $1,000 GDP = $18,000 C. Gross National Product (GNP)- goods and services produced by Americans Think ABOUT IT! Even if a country produces the same amount of goods and services from one year to the next, the GDP could go up simply because prices increase. That would make it seem like the economy was growing even though it wasnt D. Real GDP- adjusted for inflation E. Per capita GDP- average per person 7.5 Business Cycle and Government Intervention identify the economic indicators of the business cycle I. Phases in Business Cycle A.Peak- when GDP stops rising, the height of economic expansion B.Contraction- an economic decline marked by falling GDP, rising unemployment 1.Recession- prolonged contraction (6-18 months) 2.Depression- long and severe recession with high unemployment, low output C.Trough- economy at lowest point in economic contraction D.Expansion 1.Period of economic recovery and growth as measured by rise in GDP 2.Business prosperity, falling unemployment Lets draw it! Business Cycle Analysis Feel free to work with a partner Your group will look at several images and descriptions. You must determine what part of the business cycle it falls under Peak Contraction Trough Expansion A: Rising house construction B: The number of job vacancies rises G: Rising quantity of mail C: Increasing hours of overtime D: Rising homelessness H: Slower delivery times K: Falling share prices E: Rising demand for steel M: Rising real income L: Rising lipstick sales F: More people use pawnbrokers I: Home delivered pizza becomes more popular J: Rising air traffic N. Rising car sales O: More rental housing available P: Growing mountain of unsold bricks Q: Fast food shops cut their prices T: The cost of shipping goods around the world starts to rise U: More skips start appearing on the streets V: Sales of milk chocolate start to decline X: Oil refineries report a reduction in stocks Y: Citizens Advice Bureau gets more callers W: Shops delivering lunchtime sandwiches to offices raise their prices R: Imports of sewing machines rise S: Increasing supply of credit Z: Rising government spending b. The Crash (1). Black Tuesday (1929) huge sell off of all stocks that led to fear that all banks would fail (2). Massive amounts of people began emptying their bank accounts, caused banks to fail Welcome C&E Students! Grab your handouts and settle in Roll Call Question: What would you rather have as a pet; a mini horse, a pygmy goat or a teacup pig? Bell Work: What is CPI? How are GDP and GNP different? What are the four characteristics all money should have? Great depression Speculation Black Tuesday Federal Reserve Act of 1913 Monetary Policy Fiscal Policy Reserve Requirement Discount rate Loose Money Tight Money Bell Work Answers Consumer Price Index determines inflation rate by tracking change in price of essential goods and services Gross Domestic Product determines value of all goods and services produced within a countrys borders Gross National Product determines value of all goods and services produced by a country Durable, Portable, Divisible and Limited in Supply Reminders Unit 7 Test is Thursday! Recovery is Every Monday, Tuesday and Thursday If you have more than 10 absences you must recover these to pass this class!!! Start reviewing powerschool and turn in your missing assignments Unit Opp Karl Marx v. Adam Smith due Friday Unit Opp - Chicagos teacher strike due Tuesday II. Economic Low Points A. The Great Depression deepest and longest-lasting economic downturn in the history of the Western world. 1. Signs of Trouble a. large gap between rich and poor b. large portion of Americans were going into debt to buy consumer goods 2. Other Causes a. Investing (1) stocks tripled in value (2). Climb encouraged speculation making investments with borrowed money (3). Unfortunately most speculators ended up losing all the borrowed money and then some 3. Aftermath a. Falling prices led to deflation and eventually massive unemployment b. Large trade tariffs are placed on all foreign goods to protect domestic industry II. Creation of The Fed A.Federal Reserve Act of created the Federal Reserve 1.After getting off gold standard, needed federal bank to respond to economy 2.Purpose is to regulate/support banks, control money supply, and stabilize economic growth B.Operates mostly independently from the government C.Chairman, Board of Governors, 12 Districts A.Monetary Policy- actions The Fed takes to influence level of GDP (value of economic activity in the country) and rate of inflation B.Fiscal Policy the federal governments use of spending and taxation policies to affect our economy C.Reserve requirement- amount of money banks must keep in Fed banks as a reserve II. Monetary Policies D. Discount rate- cost for banks borrowing from the Fed 1.Reducing the rate- encourages banks to borrow more money so they lend more to other people 2.Increasing the rate- slows down economy by discouraging borrowing E. Fed Policies 1.Loose-money policy- reduce rates, lower reserve requirement, print currency= more money in economy 2.Tight-money policy- increase rates, raise reserve requirement= less money in the economy Quiz Prep Taxes (7.2) Labor Unions (7.3) Economic Indicators (7.4) Business Cycle & Govt Intervention (7.5) Fill out a note card and use it on the quiz!!! SPLAT! Excise TaxInflationGDPExpansionCollective Bargaining LockoutLoose- Money Policy Monetary Policy Estate TaxCPI GNPCapital Gains Tax The FedStrikeTrough Fiscal PolicyDiscount Rate ContractionTight-Money Policy Corporate Income Tax Password Traditional economy Revenue Capital Gains Tax GDP Quota Password Excise Tax Capitalism Karl Marx Entitlement Programs Strike Password Protectionism Tariff Adam Smith Expansion Loose-Money Policy Password GNP Subsidy European Union Corporate Income Tax Office of Management & Budget Password Invisible Hand Command Economy Progressive Tax Strike Trade Surplus Password Socialism Laissez-Faire Estate Tax Deficit Upton Sinclair Inside the Fed We will be watching a film on the Federal Reserve You will complete a for this activity 3 things you learned 2 questions you still have 1 interesting fact from the film Economics BINGO! Homework Find and print an article about inflation, deflation, monetary policy, or the Federal Reserve Underline/highlight any economics terms you know Circle any terms or concepts you dont understand Desk Work Read p and answer the following questions: 1.What does the Federal Reserve do? 2.How does monetary policy affect the economy? 3.What do you think the Fed is doing or should be doing to help our current economy? Welcome C&E Students! Grab todays handout and settle in Roll Call Question: Would you rather be a hamster the size of a Rhino or a Rhino the size of a hamster? Bell Work How can we identify the 4 phases of the business cycle? What were the main causes of the Great Depression? Bell Work Answers Peak height of economic expansion GDP stops rising Contraction falling GDP, rising unemployment Trough lowest point of contraction Expansion economic recovery and rising GDP People going into debt to by consumer goods, speculation in stock market and eventually the stock market crash Reminders Unit 7 Test is next Wednesday! Study Guide Recovery is Every Monday, Tuesday and Thursday If you have more than 10 absences you must recover these to pass this class!!! Start reviewing powerschool and turn in your missing assignments Extra credit due Next Wednesday!