Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Grade: 11 Lesson #12 What is the best financial plan during a recession? SS. 9.12.FL.5.8 Discuss ways that the prices of financial assets are also affected by changes in domestic and international economic conditions, monetary policy, and fiscal policy. LAFS.1112.RL.1.1 Cite strong and thorough textual evidence to support analysis of what the text says explicitly as well as inferences drawn from the text, including determining where the text leaves matters uncertain. 1 SS.9.12.FL.5.8 Discuss ways that the prices of financial assets are also affected by changes in domestic and international economic conditions, monetary policy, and fiscal policy. What Happened? Understanding the Great Recession of 2008 Lesson Number 12: Correlated Florida Standards (See Full Text on Cover page) LAFS.1112.RL.1.1 Essential Question How and why did the United States experience the worst economic downturn since the Great Depression and what were the lessons learned for investors? Learning Goals/Objectives Review the definition of a recession Define Gross Domestic Product and explain its significance as an economic indicator Analyze housing starts as a leading economic indicator Compare and contrast the Great Depression with the Great Recession Assess the value of economic forecasting in developing a personal financial plan Overview This lesson, adapted from the Council for Economic Education’s EconEdLink, The Effects of the Recession lesson plan, provides students with background knowledge of the Great Recession and helps them to develop a financial strategy to protect themselves from the negative personal impact. Materials Federal Reserve Bank of San Francisco’s Video, The Great Recession, Part 1, http://www.frbsf.org/education/teacher-resources/economics-in-person/great-recession-part-one Frontline Video on the origins of the housing crisis http://www.pbs.org/wgbh/pages/frontline/meltdown/interviews/bair.html Chart comparing the Great Depression and Great Recession, http://money.cnn.com/news/storysupplement/economy/recession_depression/ Lessons from the Recession, AARP Magazine, http://www.aarp.org/money/investing/info-082013/lessons-from-the-recession.html http://www.goodhousekeeping.com/life/money/advice/a12403/deal-with-recession/ http://www.pewsocialtrends.org/2009/04/23/luxury-or-necessity-the-public-makes-a-u-turn/ Internet Access Promethean or Smart Board Time 50 minutes Activity Sequence INTRODUCTION/HOOK Ask the students to explain what they think a recession is. After they share their thoughts, tell them that a recession is a period of time when the economy slows down, people lose their jobs, and consumers cut back on buying products. Remind them that they learned about the causes and consequences of the Great Depression earlier in the year in United States History, and will now be comparing the Great Depression with the Great Recession of 2008 – 2009. (2 minutes) 2 ACTIVITY 1. Explain to students that the United States experienced the most severe economic downturn since the Great Depression in 2008-2009 and it had a major impact on many people in the United States and the world. Tell students they will learn how a recession affects them and the people around them and how the federal government responded to the crisis. 2. Show and discuss “The Great Recession, Part 1” from the Federal Reserve Bank of San Francisco’s website, http://www.frbsf.org/education/teacher-resources/economics-inperson/great-recession-part-one (8minutes for steps 1 and 2) 3. Tell students that in hindsight, there were signs that the economy was in trouble. Show and discuss the Frontline interview with Sheila Bair, the chairman of the Federal Deposit Insurance Corporation, http://www.pbs.org/wgbh/pages/frontline/meltdown/interviews/bair.html. 4. Restate that the main reason the United States went into such a severe recession was that the banks had loaned money through adjustable rate mortgages to too many people who really should never have qualified and this led to the housing crisis where the foreclosure rate was a whopping 25% in some communities in the U.S. (3 minutes for steps 3 and 4) 5. Explain to students that the way we know if we are having economic problems is to look at what are called economic indicators and that the most comprehensive of all the economic indicators is Gross Domestic Product. Discuss what GDP means: “GROSS DOMESTIC PRODUCT” is how much the economy produces in a given year. “Gross” here means total. “Domestic” means everything produced inside the country, no matter by whom. (So cars being made by a Japanese firm in Ohio count – minus the parts that were shipped from Japan or elsewhere) “Product” means goods and services – everything that has a price and is recorded as sold that year. The President’s salary is included. So is a prison guard’s. But a parent’s hours caring for a baby – or doing the housework – is not, unless someone is paying for it. Another way of putting it: GDP is the total legal sales of the economy in a 12-month period.” http://www.pbs.org/newshour/extra/lessons_plans/the-housing-crisis-gdp-housing-bubblerecession/ 6. Show the chart comparing the Great Depression and the Great Recession. Ask students to compare the two time periods. Are there any similarities or differences? http://money.cnn.com/news/storysupplement/economy/recession_depression/ (5 minutes for steps 5 and 6) 7. Have students use their tablets or computers to visit both the Bureau of Labor Statistics, www.bls.gov and the Bureau of Economic Analysis, www.bea.gov to find the current GDP and Unemployment Rate and compare and contrast them to the Great Depression and Great Recession. Explain that policies were implemented by the Federal Government and Federal Reserve Bank to help the economy recover, but it was a long recovery and came at a substantial cost. (5 minutes) 8. Tell students they will now learn strategies that will help them if this ever happens again. Have students use their tablets to review the following articles (10 minutes): o Lessons from the Recession, AARP Magazine, http://www.aarp.org/money/investing/info-082013/lessons-from-the-recession.html 3 o http://www.goodhousekeeping.com/life/money/advice/a12403/deal-with-recession/ o http://www.pewsocialtrends.org/2009/04/23/luxury-or-necessity-the-public-makes-a-u-turn/ 9. Have students work with a partner to create a list of personal financial strategies to handle a severe recession.(12 minutes) CLOSURE Ask students to share and discuss their strategies which should include ideas like never borrow more money than you really need, save money in case of emergency (at least 6 months of living expenses), diversify investments, get a good education and always remember that needs and wants are not the same thing. (5 minutes). OPTIONAL EXTENSION SUGGESTION/HOME LEARNING Each student will interview one adult who experienced the 2008 Recession. The student will ask ten questions about the interviewee’s experience. Students will type a reflection of the interview and present to a partner or the class the following week. Sources/Bibliographic Information that contributed to this lesson: “The Effects of the Recession” Lesson Plan, from the Council for Economic Education’s EconEdLink, http://www.econedlink.org/lessons/index.php?lid=859&type=educator http://www.aarp.org/money/investing/info-08-2013/lessons-from-the-recession.html http://money.cnn.com/2009/03/25/news/economy/depression_comparisons/index.htm http://sffed-education.org/econanswers/crisis.htm http://www.frbsf.org/education/teacher-resources/economics-in-person/great-recession-part-one http://learning.blogs.nytimes.com/2008/10/06/a-tale-of-two-economies/ http://www.pbs.org/newshour/extra/lessons_plans/the-housing-crisis-gdp-housing-bubble-recession/ 4 Great Depression vs. 'Great Recession' Comparisons between this economic recession and the Great Depression are common, but the granddaddy of all downturns was far worse. By David Goldman, CNNMoney.com staff writer CONTENT Great Depression Bank failures Unemployment rate 9,096 – 50% of banks (Jan. 1930 March 1933) 25% Great Recession 57 – 0.6% of banks (Dec. 2007 May 2009) 8.5% -3.3% (Second quarter 2008 - first quarter 2009) Economic decline1 -26.5% (1929 - 1933) Biggest decline in Dow Jones industrial average -89.2% (Sept. 3, 1929 July 8, 1932) -53.8% (Oct. 9, 2007- March 9, 2009) Change in prices -25% (1929 1933) Emergency spending programs 1.5% of GDP for 1 year (Increase in 1934 budget deficit) States response Raise taxes, cut spending +0.5% (Dec. 2007-March 2009) 2.5% of GDP for 2 years2 (2009 American Reinvestment and Recovery Act) Federal stimulus plan gives fiscal relief to states to lessen impact of tax increases Increase in money supply by Federal Reserve 17% (1933) 125% (September 2008 May 2009) Source: FDIC, Federal Reserve; Commerce Department; Dow Jones; Christina Romer, Obama economic adviser, Lessons from the Great Depression for Economic Recovery in 2009 (March 9) and JEC testimony 1 2 Inflation adjusted GDP, peak to trough Romer estimate (April 30) 5