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Comprehensive
Curriculum
Free Enterprise
Cecil J. Picard
State Superintendent of Education
© April 2005
Free Enterprise
Table of Contents
Unit 1: Scarcity, Choice, and Opportunity Cost ........................................................................1
Unit 2: Production......................................................................................................................7
Unit 3: Markets and Entrepreneurs ..........................................................................................13
Unit 4: Supply and Demand.....................................................................................................22
Unit 5: Money, Banking and the Federal Reserve...................................................................28
Unit 6: Measuring the Economy ..............................................................................................37
Unit 7: Inflation and Unemployment.......................................................................................42
Unit 8: Government Policy and Taxation ................................................................................48
Unit 9: The Global Economy...................................................................................................56
Unit 10: Personal Economics...................................................................................................63
Free Enterprise
Unit 1: Scarcity, Choice, and Opportunity Cost
Time Frame: Approximately one week
Unit Description
This unit is a study how insufficient resources to meet needs and wants influence economic
decisions based on four fundamental economic questions.
Student Understandings
Students understand that scarcity influences the economic choices at the personal, family,
and societal levels. Students learn how to apply the four basic economic questions in
analyzing economic choices.
Guiding Questions
1. Can students identify an economic choice and its opportunity cost?
2. Can students define scarcity and how the concept of scarcity drives economic
decisions?
3. Can students explain the four fundamental economic questions associated with the
circular flow of goods/services?
Unit 1 Grade Level Expectations (GLEs)
GLE #
GLE Text and Benchmarks
Economics: Fundamental Economic Concepts
1.
Apply fundamental economic concepts to decisions about personal finance
(E-1A-H1)
2.
Define scarcity (E-1A-H1)
3.
Identify factors that drive economic decisions (e.g., incentives, benefits, costs,
trade-offs, consequences) (E-1A-H1)
4.
Analyze an economic choice at the personal, family, or societal level to
determine its opportunity cost (E-1A-H1)
6.
Identify the four basic economic questions (E-1A-H1)
29.
Explain the role of factors of production in the economy. (E-1B-H2)
32.
Analyze the circular flow of goods and services and money payments from a
diagram (E-1B-H2)
Free Enterprise‘Unit 1‘Scarcity, Choice, and Opportunity Cost
1
Sample Activities
Activity 1: Analyzing the Impact of Scarcity (GLE: 2)
Once upon a time we said that air and water were “free” goods. Ask students why water
and air are no longer free goods (e.g., bottled water can cost more per gallon than
gasoline). Ask students to explain how scarcity impacts the price of a good. Define
scarcity with the class (e.g., all things are limited while consumers have unlimited desires
for more goods/services). Trace the history of gold as a scarce element. Have students
take notes on a discussion of the following:
• Why do we demand gold (e.g., jewelry, money, electronics)?
• What happened when we discovered gold in California?
• What happened to the value of gold when the supply of gold increased?
• What happens if people buy gold in large quantities (more jewelry, for
example)?
Have students introduce different products, applying scarcity as a determinate of cost,
price, and the choices buyers have to make. Have students explain how a need is
impacted by scarcity (e.g., the limited supply of fuel oil and families that are dependent
upon fuel oil for heat). Have students explain a want and determine what would happen if
that product became scarce.
Activity 2: “There is No Such Thing as a Free Lunch” (GLE: 2)
Have students name products that they think they might be able to get for free. (Students
may mention coupons for free food or drinks at fast food restaurants or buy-one—getone-free gimmicks). Ask students to think about how a restaurant or other place of
business would be able to pay for that product. Discuss how no product is really free,
how producers may raise the price of other items to pay for the so-called free items.
Introduce the term many economic educators use: TINSTAAFL. TINSTAAFL is an
acronym for There Is No Such Thing As A Free Lunch. Explain that nothing in life is free
because there is scarcity and each society must deal with this scarcity.
Activity 3: The Factors of Production (GLE: 29)
Explain to students that the factors of production are these: land, labor, capital, and
entrepreneurs. Explain how those factors of production are used in making a particular
product. For example in order to make tennis shoes we might need the following factors
of production:
Land: area for the factory
Labor: workers with their physical labor and ideas
Capital: Tools in the factory needed as well as the money needed for the business
Free Enterprise‘Unit 1‘Scarcity, Choice, and Opportunity Cost
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Entrepreneur: An entrepreneur may come up with ideas on how to combine the
above factors of production.
After this discussion, provide students with old magazines and have them cut out
examples of land, labor, and capital. The students should take the role as an entrepreneur
and determine how those three factors of production might be combined to produce a
good or service.
Activity 4: Working with the Circular Flow of Goods and Services (GLE: 32)
Introduce the Circular Flow of Goods and Services graphic that illustrates what happens
in an economic system. Most textbooks have a good example of this graphic, but the site
http://www.socialstudieshelp.com/Economics Circular Flow.htm contains one, if
needed. Go over the graphic carefully with the class, identifying and defining terms (e.g.,
consumers and producers). Have students explain the roles of consumers and producers.
Have students trace the flow of money and goods/services.
Have students describe the market for factors of production and define each factor (i.e.,
labor, land, capital, and management/entrepreneurship). Have each student write an
explanation of the Circular Flow Chart. Then have them exchange explanations with at
least two other students, making additions/corrections to each other’s as needed. Assess
these individually against a class-generated rubric.
Activity 5: Questions Every Economy Must Answer (GLE: 6)
Review these questions carefully with students, illustrating how price impacts money and
goods/service flows in the Circular Flow chart.
• What should the economy produce? Market economies use price to answer
this question. For example, Product X at a very high price may not sell, thus
producers may stop making the product.
• How should goods/services be produced? Producers combine resources
(consumers sell factors of production) to make products they can sell. Price of
factors of production influence producer decisions to make or not to make a
product
• Who should receive the goods/services produced? Incomes limit choices and
decisions of consumers as they respond to price in the marketplace.
Consumers earn incomes based on their contributions (factors of production)
to production of goods/services.
• How should the economy provide for growth? Producers increase the supply
of goods and services in response to price in the marketplace. Consumers earn
increased incomes as they respond (offer their labor or capital) to the price of
factors of production.
Free Enterprise‘Unit 1‘Scarcity, Choice, and Opportunity Cost
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Divide the chart into two sides (a line drawn through both markets.) Ask students to
determine which side is the supply side and which is the demand side. Have students
explain the decisions that are made on the supply side (e.g., producers decide what
factors of production to buy and decide what to produce for sale). Have students explain
the decisions that are made on the demand side (e.g., consumers choose what products to
buy based on their price and their income). Have students note that consumer income is
decided by the price for factors of production. All four questions are answered by prices
in the market. Ask students to use their charts to explain (1) what happens when the price
of goods rises, and (2) what happens when the price of wages declines.
Activity 6: Analyzing Choices and Making Decisions (GLEs: 1, 3)
Divide the class into small groups. Give a dollar figure (e.g., $500) with which they have
to collectively decide on a product for each of them (e.g., athletic shoes). After students
come to a decision, have them discuss what choices they made about what to buy in the
market. Have them discuss how their opportunities change if the dollar figure provided is
cut in half, and/or doubled. Ask students to analyze how the following actions would
impact consumer decisions and/or choices:
• Seller offers a discount (incentive) on something you want to buy
• Advertising informs that a product has special benefits over other products
• One product among similar products has the highest cost
• Buying product A means giving up product B (opportunity cost–trade-off)
• Buying product X (car) places stress on income (consequences)
Ask students to explain how name brands, cheaper alternative products, the difficulty of
the trade-off, and family income influence choices and decisions in the marketplace with
a specific product, either real or imagined. Ask students how they might market both a
name brand and a cheaper alternative product.
Activity 7: Analyzing Economic Choices (GLE: 4)
Simulate a situation where a family or an individual has $100 left over at the end of the
pay period. They have choices to make because they have opportunities to spend or save
the money:
• Option 1: family attends a baseball game—costing $95
• Option 2: family saves the money—costing $100
• Option 3: family can eat out—costing $75
• Option 4: family can purchase DVD player—$98
(If the family saves the money, they give up the opportunity to buy the DVD player—
thus the opportunity cost of saving is $98.) Have students define opportunity cost with a
specific example of their own creation, like the one in the above scenario. Have students
design a scenario in which a parish has a surplus of dollars in the budget at the end of the
fiscal year and some opportunities to spend or save the money that might be present for a
Free Enterprise‘Unit 1‘Scarcity, Choice, and Opportunity Cost
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community. Have students present a case for the option that they could defend as the best
option.
Sample Assessments
General Guidelines
•
•
•
Students should be monitored on all activities via teacher observation, report
writing, class discussion, and journal entries.
Use a variety of performance assessments to determine student comprehension.
Select assessments consistent with the type of products that result from the
student activities.
General Assessments
•
•
•
Students should answer an in-class essay question on how scarcity is seen in our
society and how American society answers the four economic questions to deal
with that scarcity.
Students should write journal issues throughout the unit to write their opinions on
questions posed by teacher as well as for other issues discussed in class.
Students should label the exchange of money and factors of production on a blank
diagram of the circular flow chart.
Activity-Specific Assessments
•
Activity 1: Have students bring in coupons or ads for free products, then have
students write a journal entry on how the company who wrote the ad would pay
for the product.
•
Activity 2: Current Events Article: Have students find a news article which
demonstrates the concept of scarcity. In their summary of the article, they should
write how the concept of scarcity is shown in the article. Use the following rubric
for grading:
Writing—organized, clear, and grammatically correct
10%
Article—current and attached
10%
Summary—Makes specific reference to the concept of
scarcity
40%
Information is accurate and complete
40%
Free Enterprise‘Unit 1‘Scarcity, Choice, and Opportunity Cost
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•
Activity 7: Have students interview a parent or other family member and then
write a short essay on the types of trade-offs this person made in his/her life and
how it has impacted his/her achievement of goals.
Free Enterprise‘Unit 1‘Scarcity, Choice, and Opportunity Cost
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Free Enterprise
Unit 2: Production
Time Frame: Approximately two weeks
Unit Description
Students study the factors of production in an economy and the conditions that affect the
productivity.
Student Understandings
Students understand that production in an economy is affected by factors of production
and by labor and management conditions and practices. Students learn that the
productivity of an economy affects the standard of living.
Guiding Questions
1. Can students explain the relationship between productivity and standard of
living?
2. Can students identify factors of production?
3. Can students explain the importance of labor-management relations and how
labor relations affect the productivity and profits of business?
Unit 2 Grade Level Expectations (GLEs)
GLE #
GLE Text and Benchmarks
Economics: Fundamental Economic Concepts
7.
Define productivity and characterize the relationship between productivity
and standard of living (E-1A-H2)
9.
Identify actions or conditions that increase productivity or output of the
economy (E-1A-H2)
19.
Analyze the importance of labor-management relations and the effects of
given labor and management practices on productivity or business
profitability (E-1A-H6)
Individuals, Households, Businesses, and Governments
29.
Explain the role of factors of production in the economy (E-1B-H2)
30.
Identify factors affecting production/allocation of goods/services and
characterize their effects (E-1B-H2)
The Economy as a Whole
48.
Define productivity and characterize the relationship between productivity
and standard of living (E-1C-H1)
Free Enterprise‘Unit 2‘Production
7
Sample Activities
Activity 1: Relating Productivity to Consumer Incomes (GLEs: 7, 9, 29, 48)
Define producer, production, and productivity with the students to generate working
definitions for all. Inductively, discuss the following conclusions: production is the
process by which the factors of production are employed to make a product; productivity
is the measure (value) of a given factor of production in making a product; a producer
makes decisions about what to make or produce. Review with students that this is the
supply side of the circular flow of goods and services. Ask students to explain how
decisions are made in the following situation:
Product A is being made by combining two workers, a manager, a building, and two
machines:
1. If adding another worker increases production, what will the producer do? What will
happen to wages and worker incomes?
2. If adding one more machine increases production using one less worker, what will the
producer do? What will happen to wages and worker incomes?
Using the Circular Flow of Goods and Services chart, ask students to explain what
happens in each case to money and product flows.
Activity 2: Analyzing the Market for Factors of Production (GLEs: 29, 30)
Review student knowledge of the roles producers and consumers play in the market for
factors of production by returning to the Circular Flow chart. Ask students to articulate
definitions of land, labor, capital, and management. Have students discuss types of
incomes that result from each factor: rent, interest, wages, and profits. Have students
determine numerous examples to ensure student comprehension.
Explain that all factors of production may be employed (used) to produce a product. How
much of a given factor is used depends upon its productivity and its price in the market
for factors of production. Secure copies of the Wall Street Journal or other newspaper
and ask students to examine the numerous markets for raw materials, machinery, laborers
and managers (e.g., soybeans, crude oil, pork bellies, cacao beans).
Using the Circular Flow chart, ask students to do the following (teachers may want to
add more examples):
• Explain how declining prices for a factor of production (e.g., crude oil)
impacts the price of goods/services.
• Explain how declining prices for a factor of production (e.g., wage) impacts
the money flow to consumers.
Free Enterprise‘Unit 2‘Production
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Ask students to summarize by explaining how factors of production produce consumer
incomes and how factors of production are combined to determine the level of output.
Activity 3: Dynamics in Marketplace (GLEs: 7, 9)
Using a specific historical case study, Eli Whitney’s cotton gin, have students work in
small groups or pairs to complete a brainstorming chart after reading or listening to a
summary of this piece of American history. This chart should attempt to explain the
impact of Eli Whitney’s cotton gin on each of the following topics:
• the price of cotton goods and the price of woolen goods
• production of cotton goods and production of woolen goods
• production of cotton
• cost of labor (slavery)
• price of land to grow cotton
• quality of family clothing
After students work in groups to complete the charts, use these charts to facilitate a
whole-class discussion during which students may add to their own charts and make
adjustments in notes for understanding. Next, have students follow the same process of
chart completion as they did with the cotton gin, but this time toward a more recent time
period and invention—the computer chip. Ask students to explain and describe the
impact of the personal computer on the following:
• electric typewriters
• correspondence
• technicians
• print media
• record-keeping in homes and businesses
• home/family environment
Activity 4: Relating Productivity and Labor-Management Relations (GLE: 19)
Ask students to analyze and present their findings on how productivity is impacted when
robotic arms (machines) are employed to weld body parts on automobiles. Have students
address all of the following questions:
• What happens to welders no longer needed on the assembly line
(unemployed)?
• What happens to workers building robotic arms?
• What happens to the price of automobiles?
• Would consumers buy more automobiles?
• Has the output of the economy increased or decreased?
• What happens to the standard of living of welders (labor no longer
employed)?
Free Enterprise‘Unit 2‘Production
9
•
What happens to the productivity and incomes of other workers in the
automobile plant? Use the following case study to examine with the students:
Auto A and Auto Z are being produced. A decides to introduce robotic arms (previous
activity) and increase production of cars at lower costs and selling prices. A’s
workers oppose the decision until management agrees to retrain and keep welders in
other parts of production. Z’s workers successfully oppose the use of robotic arms
and continue production at costs and selling prices higher than A.
Have students determine the following and present their ideas either in writing or via
class discussion:
• What happens to the selling price of Z cars?
• What happens to total production in both cases?
• What happens to wages in each situation?
• Which company would experience the greater profit and the greater
productivity?
Ask students to use the Circular Flow as they respond to these questions.
As a class, define labor-management relations. Give students in pairs or in small groups
a specific conflict to examine between labor and management in American history:
Pullman Strike, rise of unions, lockouts, strikes, open and closed shops, and working
conditions. Ask students to explain in writing why management opposes formation of
labor unions and why labor unions form. Ask them to explain how some states with
“right-to-work” laws that require open shops (e.g., plant has both union and non-union
workers) would impact labor-management relations. Ask students to present their
findings.
Activity 5: Simulating Labor and Management Relations (GLE: 19)
Ask students: Do producers (companies) benefit from good labor-management relations?
Why or why not? Record their answers on the board/overhead projector/chart.
In small groups, pairs, or individually, have students consider all of the following
questions and take notes on their ideas/discussion:
• What if management expects too much of laborers (e.g., sets productivity
levels too high)?
• How might laborers respond (e.g., work slowdowns)?
• What is likely to be the result of a situation where workers are unhappy (labor
unrest) with working conditions?
• If labor unrest occurs, what will be the impact on productivity and total
output?
• If management has alternatives (introducing new machines to replace
laborers), how might labor unrest influence employment of workers?
Free Enterprise‘Unit 2‘Production
10
Divide students into two groups—workers and managers. (It may be appropriate to make
the workers the larger of the two groups.) Simulate an environment where workers are
unhappy with their working conditions and wages. Assign students to roles as workers
and managers confronting this problem. Ask students to come to a consensus or
compromise to resolve conflict by a specific time deadline, or explain why a conflict
resolution is not possible by the deadline and give a specific plan for continuing attempts
at resolution.
Activity 6: Relating Productivity to Incomes (GLE: 30)
Return to the Circular Flow, asking students to explain how goods/services are allocated
to consumers by their price (what they are willing to pay) in the marketplace. Ask
students to explain why consumers spend (or save) their incomes to buy what they need
and want. Ask students to explain why consumer incomes are determined by the amount
of factors of production that producers offer for sale and consumers are willing to
purchase.
Ask students to explain how the allocation of goods/services (price of goods and
incomes) is correlated to the productivity of factors of production (price of factors and
incomes). Ask students to explain this with a specific example(s) of goods/services.
Ask students to explain the proposition that “as productivity increases so do incomes and
the availability of goods/services.” Ask students to determine a specific industry that
supports this proposition (e.g., auto industry, Microsoft, etc.)
Sample Assessments
General Guidelines
•
•
•
Students should be monitored on all activities via teacher observation, report
writing, class discussion, and journal entries.
Use a variety or performance assessments to determine student comprehension.
Select assessments consistent with the type of products that result from the
student activities.
General Assessments
•
•
Students should write a report explaining how productivity, income, and standard
of living are related.
Students should complete journal entries on teacher-selected topics during the
unit.
Free Enterprise‘Unit 2‘Production
11
•
Students should find a current events article on labor-management relations,
productivity, or standard of living. The students should summarize the article and
write how this article is related to what they have learned in class.
Activity-Specific Assessments
•
Activity 1: In groups or pairs, ask students to come up with a definition of
standard of living and explain in a statement or two how it is related to incomes
and wages. Ask students to apply this definition as they explain how the standard
of living of Americans is linked to the productivity of each factor of production
(e.g., land, labor, capital, and management).
•
Activity 3: Ask students to review what they have learned from examining the
cotton gin and the computer chip and then formulate a thorough summary
statement of how a new product impacts the sale of similar products, production
of the new and similar products, and the prices of the new and similar products.
Have students present these summary statements to the class.
•
Activity 4: Ask students to choose a new invention, either real or imagined, and
create a forecasting chart that addresses the possible effects the new invention
might have on productivity and standard of living. Allow students to use poster
boards or large sheets of bulletin board paper to complete this assessment activity.
Use the following rubric for reference:
20%
10%
35%
35%
Name of Invention/ Explanation of what the new
invention will do
Picture of Invention
Explanation of how the new invention might increase
productivity
Three (3) ways in which the new invention might affect
standard of living.
Free Enterprise‘Unit 2‘Production
12
Free Enterprise
Unit 3: Markets and Entrepreneurs
Time Frame: Approximately two weeks
Unit Description
Students study the market economy system and the role entrepreneurs play in making it
work.
Student Understandings
Students understand that a market economy depends on a free enterprise system where
entrepreneurs make economic decisions. Students evaluate economic systems in the past
and present for their advantages, disadvantages, and effectiveness in achieving given
social goals. Students learn how economic incentives can change economic behavior and
the role of competition in making a market economy work. Students understand how an
economy works through the study of the flow of goods and services and money
payments.
Guiding Questions
1. Can students explain why interdependence is linked to scarcity of natural
resources?
2. Can students explain the purpose and importance of marketing in the
economy?
3. Can students explain factors that affect competition and why competition is
important to the economy?
4. Can students identify different types of business ownership and the
importance of each?
Unit 3 Grade-Level Expectations (GLEs)
GLE #
GLE Text and Benchmarks
Economics: Fundamental Economic Concepts
5.
Explain how the scarcity of natural resources leads to economic
interdependence (E-1A-H1)
8.
Explain the role of marketing and channels of distribution in economic
decisions (E-1A-H)
Free Enterprise‘Unit 3‘Markets and Entrepreneurs
13
GLE #
13.
GLE Text and Benchmarks
Compare contemporary and historic economic systems (e.g., ownership
and control of production and distribution, determination of wages)
(E-1A-H4)
14.
Explain the advantages and disadvantages of given market structures
(E-1A-H5)
15.
Explain factors affecting levels of competition in a market (e.g., number of
buyers and sellers, profit motive, collusion among buyers or sellers,
presence of cartels) (E-1A-H5)
16.
Explain the effects of competition on producers and consumers
(E-1A-H5)
20.
Compare and contrast characteristics of various forms of business
ownership (E-1A-H6)
26.
Interpret information about a current economic system undergoing change
from a largely command or traditional system to a more mixed system
(e.g., Eastern European countries, China, other developing economies) (E1A-H8)
Individuals, Households, Businesses, and Governments
31.
Identify the difference between monetary and non-monetary incentives
and how changes in incentives cause changes in behavior (E-1B-H2)
32.
Analyze the circular flow of goods and services and money payments from
a diagram (E-1B-H2)
Sample Activities
Activity 1: Introducing Different Economic Systems (GLE: 13)
Students take notes on the following concepts delivered orally with appropriate visuals
created by instructor:
a. All economies are driven by economic wants and needs (e.g., consumer
demand). Humans have needs and wants that are unlimited. At the same time,
resources to make products and provide services are limited (scarce).
Producers in every society try to meet the demand of its members.
b. All economic systems must answer four basic questions for society:
1. What goods and services will the economy produce?
2. How are goods and services produced?
3. How are goods and services distributed in the economy?
4. How does the economy expand?
c. How these questions are answered defines differences between free market
and command economies. See chart on next page.
Free Enterprise‘Unit 3‘Markets and Entrepreneurs
14
BASIC
QUESTIONS
What goods and services
will the economy
produce?
FREE MARKET
ECONOMY
MIXED
ECONOMY
COMMAND
ECONOMY
Prices of goods and
services provide
incentives to producers
to supply goods.
Taxes and price
supports might be used
at times to encourage
the production of a
good or to discourage
the production of a
good.
Central authority
decides what goods and
services will be
produced and how they
will be priced.
Prices of goods and
services provide
incentives to
consumers to choose
goods.
How are goods and
services produced in the
economy?
How does the economy
provide for growth?
How are goods and
services distributed to
members of the society?
Market prices
determine what goods
will be produced and
sold.
Market prices for
factors of production
shape the decisions
that producers make.
When the price of one
factor (resource)
increases in value,
producers find ways to
use other factors to
make the good.
Consumers save and
invest in production to
make more goods and
services.
Consumer incomes are
determined by their
contribution of factors
of production.
Consumer incomes
determine what goods
and how much goods
individuals receive.
Market prices provide
incentives for the
production and
purchase of goods and
services.
Market prices
determine most of the
goods that are produced
and sold.
The government may
act to protect the value
of a resource (e.g.,
minimum wage).
Generally prices in the
market for factors of
production determine
how goods are
produced.
Central authority
decides how factors of
production will be used
to make products.
Government stimulates
production by offering
incentives, and
subsidies.
Growth depends on the
ability of the central
authority to encourage
worker productivity and
producer efficiency.
Incentives may be
directed.
Government increases
the money supply
increasing buyer
incomes and demand
for goods and services.
Government may use
taxes and transfer
payments to influence
the distribution of
incomes (e.g., social
security).
Most of the time the
free market determines
how goods and services
are distributed.
Free Enterprise‘Unit 3‘Markets and Entrepreneurs
Central authority
decides the price of
factors of production
and the price of goods
and services.
Central authority
creates markets to
distribute goods they
have decided should be
produced.
15
Ask students to perform a quick check for understanding following the 3-2-1 strategy.
They should write down three things they know they understand, two questions they
have, and one way in which they can apply this information. Use student-generated 32-1 as a basis for class discussion and adjustment of student comprehension as needed.
Ask students to identify and describe two economies throughout world history—one as
an example of free market and one as an example of command economies. Have the
students use a Venn diagram to compare/contrast the different economies. Next, guide the
discussion to include the following:
• theocracies (traditional economies) such as ancient Egypt.
• totalitarian regimes such as the former Soviet Union.
• socialist economies such as Sweden and France.
Ask the students to present their findings to the class or to each other. (If available, have
students use PowerPoint® presentations to show their findings.)
Activity 2: Comparing Economic Systems (GLEs: 13, 14)
Revisit Activity 1, asking students to explain how market, mixed, and command
economies compare. Ask them to compare these economies regarding the following
factors:
• ownership of property
• control of production
• control of distribution
• determination of wages
• determination of prices
After students demonstrate knowledge of the different economic systems, ask students to
decide which system provides the greater freedom of choice and the greater likelihood
that consumers will be satisfied. Ask them to defend their decision in an oral or written
argument as an individual, pair, or group.
Ask students to assess how free market and command economies achieve or fail to
achieve the following social and economic goals via a comparison chart:
• Equity (How does the economic system deliver goods/services that people
want? How does the economic system produce what people want? Do people
share equally in the economic system?)
• Efficiency (Which economic system is most efficient in the use of factors of
production? Which economic system allocates goods/services most
efficiently?)
• Security (Which economic system guarantees workers employment? Which
economic system guarantees production to producers?)
• Growth (Compare how each system deals with growth.)
• Protection of the Environment
Free Enterprise‘Unit 3‘Markets and Entrepreneurs
16
Ask students to explain how and why the free market economy champions efficiency
while command economies champion security in a summary statement to their
comparison chart.
Activity 3: Command Economies Undergoing Change (GLE: 26)
Present a scenario where Czechoslovakia has just emerged from Soviet domination
(1990) and a command economy. Communism dominated the Czechs for about 50 years
during which time there was no unemployment and competition in the marketplace.
What did the Czechs have to learn when the country shifted to a free market economy?
Ask students, in groups or as a whole class, to take turns analyzing what they would need
to learn about the following:
• employment (competition for jobs)
• prices (competition among buyers)
• risk (investments and savings)
• banking (writing checks)
• competition
Provide readings from news accounts, regional geography textbooks, and/or the Internet
describing how the People’s Republic of China under a command economy has created
free enterprise zones with free markets. Distribute the readings and ask students to
describe what is likely to happen in China in a detailed statement about each of the
following:
• As producers expand their factories in free enterprise zones, what will happen
to wages?
• What happens to workers laboring in state-owned factories?
• Explain why workers would/would not migrate to free enterprise zones.
• How will incomes differ between free enterprise zones and the command
economy? With increased incomes how will workers impact free markets and
command markets?
Ask students to write an opinion paper predicting how China will be changed through the
use of free enterprise zones.
Activity 4: Incentives and Market Behavior (GLE: 31)
Define market incentives with the class. Ask students to identify examples of monetary
incentives (e.g., subsidy, coupons, discounts) for consumers and producers. Ask them to
draw upon their family’s experience with coupons, rebates, and discounts to explain how
monetary incentives influence consumer behavior.
Free Enterprise‘Unit 3‘Markets and Entrepreneurs
17
Ask students to explain three to five examples of how incentives can occur without the
use of money. Ask students to draft a summary statement about how incentives affect
market behavior.
Activity 5: Natural Resources and Availability of Products (GLEs: 5, 32)
Have students review a written definition of land as a factor of production (Unit 2.)
Provide an example of a country and its natural resources. Have students explain how
natural resources are a vital part of the production process.
Model Example: Production of electricity in the United States depends upon coal,
oil, natural gas, and/or nuclear fuels. If oil and natural gas are not available (foreign
supplies), electricity production requires an increase in coal fired (pollution costs),
and nuclear (storage costs) generators. The result would be increased costs of
electricity production to producers and increased prices of electricity to consumers.
Ask the class to explain how increased costs and prices of electricity would impact the
flow of goods and money on the Circular Flow chart. After going over the example, ask
students to explain how countries become dependent on scarce natural resources to
increase the availability of products.
Ask students to list natural resources that are not available (or are in short supply) in the
United States and that lead our import list (e.g., cocoa beans, diamonds, and vanadium).
Ask students to explain how that affects the availability of certain products and the cost
of those products, domestic versus import.
Activity 6: Analyzing Competition in the Economy (GLE: 15)
Ask students to explain what happens in the marketplace when:
• The number of buyers is very low (What happens to price?)
• The number of sellers is very low (What happens to price?)
• Buyers collude to avoid competition (What happens to price?)
• Sellers collude to avoid competition (What happens to price?)
• What if there is only one seller (monopoly)? One buyer (monopsony)?
• What if a group of sellers limits supply (e.g., OPEC)?
Ask students to explain this statement: “Free market and mixed economies depend upon
competition among buyers and sellers to clear the marketplace of goods/services at the
most equitable price.” Ask them to comment on the reliability of this statement.
Activity 7: Analyzing Marketing and Distribution of Goods (GLE: 8)
Free Enterprise‘Unit 3‘Markets and Entrepreneurs
18
Have students create a list of 3 examples of how producers (entrepreneurs) decide what to
produce in response to price and anticipated wants of consumers. Ask students to
examine three to five different print ads and explain how advertising provides
information to consumers and creates demand (wants) for goods and services.
Simulate a marketing and distribution situation and ask student teams to form a
marketing plan for a new product, a Woggle. The Woggle is similar to some other
products, but it has unique qualities that might interest consumers. Have students
determine exactly what their Woggle is—what it does, how it works, who needs it, and
why—in order to know their product. Have students develop a marketing plan for
Woggle, Inc., that creates and expands the market for Woggles to cover its manufacturing
costs (e.g., costs of the factors of production). Guide their work so that their plans include
the following:
• advertising (Is this a cost of production?)
• transportation routes to reach markets (consider speed, cost, and reliability)
• packaging the product
Have teams present their marketing plans in class for peer evaluation.
Activity 8: Competition and Consumers and Producers (GLE: 16)
Ask students to explain why they would choose a certain product from a variety of
competitive products: Coke vs. Pepsi, Dell vs. Macintosh, Ford vs. Chevrolet, etc.
Ask students to explain how competition for goods/services forces consumers to make
wise choices as they expend their incomes in a list of ways, using the products they have
already discussed. Ask students to explain how, at the same time, competition for factors
of production forces producers to combine factors in the most efficient way, using the
producers they have already discussed. Ask students to describe how competition forces
choices by consumers and producers and explain how competition results in the most
efficient allocation of resources.
Activity 9: Comparing Business Organizations (GLE: 20)
Provide readings illustrating the characteristics of single proprietors, partnerships, and
corporations as business organizations, using specific examples of these types. Have
students record data about each type on a graphic organizer.
Ask students to explain how each type of business organization:
• distributes risk
• makes decisions
• treats competition
• influences markets (factors and products)
Free Enterprise‘Unit 3‘Markets and Entrepreneurs
19
Ask students in a small group to come up with a list of 5-7 items that they would like to
see available to them as a consumer. Then, have students use these lists to “go into
business” for themselves and articulate which type of organization they would use and
why. Students may choose to form one corporation for all of these products, partnerships,
or be single proprietors. It is up to them to determine outcome, but it must be based on
their explanation of how they plan to do the following:
• distribute risk
• make decisions
• treat competition
• influence markets (factors and products)
Sample Assessments
General Guidelines
•
•
Students should be monitored on all activities via teacher observation, report
writing, class discussion, and journal entries.
Use a variety of performance assessments to determine student understanding of
content. Select assessments that are consistent with the types of products that
result from the student activities and develop a scoring rubric collaboratively with
other teachers or students. The following are samples of assessments that could be
used for the unit:
General Assessments
•
•
•
Students will complete journal entries on teacher-selected topics.
Students will write or give an oral explanation of how a lack of certain natural
resources affects the availability of certain products and the costs of those
products.
Students will bring examples of market incentives cut out from the local
newspaper. This may include sale papers, coupons, and rebates. Have students
explain to the class how each one of their examples might affect consumer
behavior.
Activity-Specific Assessments
•
Activity 1: Have students write summary statements on the strengths/weaknesses
of a free market economy versus the strengths/weaknesses of a command
economy. Students should explain why a free market economy champions
efficiency while command economies champion security.
•
Activity 6: Ask students to define cartel and monopoly. Ask students to explain
how each impact the marketplace. Ask students to write a rationale to explain why
Free Enterprise‘Unit 3‘Markets and Entrepreneurs
20
(1) collusion and cartels are illegal and (2) monopolies are regulated by
government.
•
Activity 8: Give the students the following scenario:
Your favorite store at which you purchase ________________ has decided to
stock only one brand of that item.
Have students decide what that particular item is and draft a letter to the manager
of that store explaining why, from an economic perspective, this might be a poor
decision. Use the following rubric for providing guidelines and for grading this
assessment:
10%
20%
25%
45%
Letter identifies product
Letter is clear, organized, and grammatically correct
Correct business letter format is used; letter is typed and signed
Reasons for not stocking only one brand are based on economic
theory
Free Enterprise‘Unit 3‘Markets and Entrepreneurs
21
Free Enterprise
Unit 4: Supply and Demand
Time Frame: Approximately two weeks
Unit Description
Students study how the principles of supply and demand determine price in a market
economy.
Student Understandings
Students will understand that supply and demand determines price. Students use economic
tools to explain and analyze how changes in supply and demand impact price, incentives and
profit.
Guiding Question
1. Can students explain the factors that affect supply and demand?
Unit 4 Grade Level Expectations (GLEs)
GLE #
GLE Text and Benchmarks
Individuals, Households, Businesses, and Governments
27.
Explain, analyze, and apply principles of supply and demand, including
concepts of price, equilibrium point, incentives, and profit (E-1B-H1)
28.
Identify factors that cause changes in supply or demand for a product (e.g.,
complements, substitutes) (E-1B-H1)
Sample Activities
Activity 1: Supply and Demand (GLE: 27)
Have students explain supply and demand sides of the Circular Flow. Ask students to explain
how competition among producers (supply side) leads to efficient use of factors of
production and determines the sellers’ price in the marketplace. Ask students to explain how
competition and consumer incomes (demand side) determine what buyers are willing to pay
(price) in the marketplace.
Free Enterprise‘Unit 5‘Supply and Demand
22
Without graphs, ask students to reason out via a clear statement, written or orally delivered,
what happens if the selling price of a good is too high (e.g., inventories, sellers lower prices,
inefficient producers reduce production or leave the market, buyers’ demand is not adequate
to clear the market). Students must address the following:
• What do they think will happen to prices?
• What happens if a market price is too low (e.g., sellers reduce production, price
encourages (incentive) buyers to demand more goods)?
• Competition by buyers and sellers force an equilibrium price (anticipated price) in
the marketplace.
Give students historical information about the gas lines and skyrocketing prices of gasoline
during the Carter administration and have them explain supply and demand.
Have students examine prices of gas in three different geographical locations over a period of
time and come to some conclusions about fluctuations in pricing, applying what they
understand about supply and demand. Have students articulate a prediction about what would
happen to the market should an alternative fuel source be made readily available to
consumers.
Activity 2: Supply and Demand (GLE: 27)
Help students get a clear definition of what demand is by first having them give their own
definitions of demand; write those definitions on the board or overhead. Then tell students
that demand is defined as the desire, willingness, and ability to purchase something. Have
students give examples of items they might have a desire for, yet they do not have the ability
to purchase those items.
Create a chart on the board or overhead and allow students to answer the following.
How many of you would have the desire, willingness, and ability to purchase a slice of pizza
during lunch if the price were $.25? $.50? $1? $1.50? $2? $2.50? $3? $3.50? Have the
students respond by raising their hands. (The student should raise his hand for every price he
would demand the slice of pizza; if at $.25, he would purchase 2 slices, then account for
those extra slices in your tally.) The following is an example of what should be placed on
board or overhead.
Price
$.25
$.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
Quantity Demanded
Free Enterprise‘Unit 5‘Supply and Demand
23
Note to students that there is an inverse relationship between price and quantity demanded.
As price goes up, quantity demanded goes down, and vice versa. Next have students graph
this curve, with price on the vertical axis and quantity on the horizontal axis.
Next, introduce the concept of supply to students. Have students take on the role as a pizza
supplier. Ask them how many slices of pizza would they be willing to supply for the
following prices. Explain the amount of work and expenses that might go in to making the
pizza, then ask student how many slices they would supply at the following prices. Use the
following graphic to demonstrate.
Price
Quantity Supplied
$.25
$.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
Note to students that there is a direct relationship between price and quantity supplied.
Have students graph the results on the same graph they used for their demand results.
Define equilibrium price, and point out to students that the equilibrium price is where the two
lines intersect.
Define incentive. Ask students to explain what incentive they might have for buying or
supplying (selling) more pizza.
Activity 3: Applying Principles of Supply and Demand (GLE: 27)
Define demand, demand schedule, supply, supply schedule, surplus, and shortage with the
students.
Provide the premise that the principles of demand and supply are abstract laws governing
human behavior and that we cannot know exact values of demand or supply at any given
time. Provide imaginary demand and supply schedules for a product and ask students to
graph the data using a vertical axis for price and a horizontal axis for supply. After they have
plotted two intersecting lines, ask them to explain why the lines slope as they do (e.g., the
supply line slopes upward to the right while the demand line slopes downward to the right).
Ask them why price is an important influence on the lines (e.g., that buyers buy less as price
increases). Demonstrate surplus and shortage on the graph.
In small groups or as individuals, ask students to explain what happens if there is interference
in the market as follows:
Free Enterprise‘Unit 5‘Supply and Demand
24
• Sellers collude and fix prices at a high level (How does this impact consumption?
Would consumers be satisfied? Would there be a surplus or shortage of product?
Would the collusion work? Explain your answer.)
• Government gives a subsidy to sellers (How does this impact consumption?
Would consumers be satisfied? Would there be a surplus or shortage of product?
Explain your answer.)
• Government sets price above the equilibrium price (Would there be a surplus or
shortage of product? How does this impact consumption?)
• Government sets price below the equilibrium price (Would there be a surplus or
shortage of product? How does this impact consumption?)
Activity 4: Characteristics of Demand and Supply Curves (GLE: 27)
Ask students to explain how they probably know the equilibrium price of a soft drink (e.g.,
the price is known to most consumers and does not change much over time). Define
equilibrium price. Ask students to imagine a situation where consumers would demand
(purchase) a product regardless of its price (e.g., batteries during a hurricane; insulin for a
diabetic). Ask students to think of other products where inelastic demand may apply (e.g.,
emergency medical services, liability auto insurance). Have students place outline graphs on
their own paper, following a whole-class model via projector, etc. Draw an extremely
inelastic demand curve and ask students to imagine a situation where producers would supply
(sell) a product almost regardless of price (e.g., tomato farmer when tomatoes are fully ripe).
Ask them to think about what happens to the price of tomatoes in the growing season versus
the winter. Draw an extremely elastic demand curve and ask students why substitute products
(see above) have elastic demand (e.g., a small change in price encourages consumers to
substitute products). Draw an extremely elastic supply curve and ask students to explain why
suppliers would be so sensitive to price (e.g., little profitability and producers leave the
industry).
Activity 5: Complementary and Substitute Goods (GLE: 28)
Ask students to explain what happens to the demand, supply, price, and sale of cars if the
price of tires increases or decreases and record/have them record their responses. (Note that
every new car sold has five new tires.) Define complementary goods. Point out to students
that they have probably seen producers take advantage of their knowledge of complementary
goods in the sale of razor handles and razor blades. Ask students if they ever noticed that the
price of razor handles is relatively inexpensive, yet the price of the blades is usually
expensive. Explain to students that the two are complementary goods and that the demand for
razor blades goes up when the price for razor handles drops. Ask students to consider what
happens to the price of butter if the price of margarine decreases. Butter and margarine are
substitute goods. What happens if the price of butter decreases? Define substitute goods.
With the graphical analyses in the previous activity in mind, ask students to consider what
effect complementary goods would have on demand and supply. Ask them to note that the
Free Enterprise‘Unit 5‘Supply and Demand
25
prices of complementary goods move in the same directions. The prices of substitutes move
in opposite directions. Provide graphic examples so students can manipulate the data.
Sample Assessments
General Guidelines
•
•
Use a variety of performance assessments to determine student comprehension.
Select assessments consistent with the type of products that result from the student
activities.
General Assessments
•
•
•
Students will verbally state their conclusions about the nature of supply and demand
through the activities in this unit.
Students will create graphs of supply and demand given a list of prices and quantity
supplied or demanded at each price.
Students will write journal entries throughout this unit on their understanding of
supply and demand.
Activity-Specific Assessments
•
•
Activity 1: Students should find a current events article that illustrates the law(s) of
supply and/or demand. Use the following rubric for assessment.
Title and date of article
Article attached to paper
10%
10 %
Summary of article
Explanation of how article
relates to law(s) of supply and
or demand.
30%
50%
Activity 2: In small groups or as individuals, students will create a cause and effect
graphic on the effects of the following scenarios. If possible, students should use
computers to generate the graphics.
Sellers collude and fix prices at a high level (How does this impact
consumption? Would consumers be satisfied? Would there be a surplus or
shortage of product? Would the collusion work? Explain your answer.)
Government gives a subsidy to sellers (How does this impact consumption?
Would consumers be satisfied? Would there be a surplus or shortage of
product? Explain your answer.)
Free Enterprise‘Unit 5‘Supply and Demand
26
Government sets price above the equilibrium price (Would there be a surplus
or shortage of product? How does this impact consumption?)
Government sets price below the equilibrium price (Would there be a surplus
or shortage of product? How does this impact consumption?)
•
Activity 4: Have students find examples from newspapers or magazines of
complementary and substitute goods. Students should write an explanation for each
pair why they are substitute or complimentary goods and how the price of one affects
the demand for the other.
Free Enterprise‘Unit 5‘Supply and Demand
27
Free Enterprise
Unit 5: Money, Banking and the Federal Reserve
Time Frame: Approximately three weeks
Unit Description
Students study the role of economic institutions in the U.S. economy.
Student Understandings
Students will understand that the banking system regulates the supply of money and provides
services to consumers. Students will learn that financial markets provide capital for economic
growth. Students will learn that interest rates impact both business and consumers. Students
will understand the role of regulatory agencies in managing the U.S. economy. Students will
apply their knowledge of the role of economic institutions to an historical economic issue or
situation.
Guiding Questions
1.
2.
3.
4.
5.
Can students explain the purpose and importance of banks to economic systems?
Can students identify the purpose and importance of financial markets?
Can students explain the role and importance of the Federal Reserve System?
Can students identify the purpose and importance of the FDIC?
Can students explain the role of interest and interest rates on the economy?
Unit 5 Grade-Level Expectations (GLEs)
GLE #
GLE Text and Benchmarks
Economics: Fundamental Economic Concepts
17.
Analyze the role of various economic institutions in economic systems
(E-1A-H6)
22.
Analyze the role of banks in economic systems (e.g., increasing the money
supply by making loans) (E-1A-H7)
23.
Describe the functions and purposes of the financial markets (E-1A-H7)
24.
Compare and contrast credit, savings, and investment services available to the
consumer from financial institutions (E-1A-H7)
25.
Apply an economic concept to analyze or evaluate a given economic issue or
situation (e.g., causes of the Great Depression, how the New Deal changed the
role of the federal government) (E-1A-H8)
Free Enterprise‘Unit 5‘Money, Banking, and the Federal Reserve
28
GLE #
GLE Text and Benchmarks
The Economy as a Whole
53.
Describe the effects of interest rates on businesses and consumers (E-1C-H2)
63.
Explain the role of the Federal Reserve System as the central banking system
of the United States (E-1C-H4)
64.
Explain the role of regulatory agencies in the U.S. economy (E-1C-H4)
65.
Explain the role of the Federal Deposit Insurance Corporation (FDIC) (E-1CH4)
Sample Activities
Activity 1: Financial Institutions (GLE: 17)
Introduce the class to the Stock Market Game operated under the direction of the Securities
and Exchange Commission and the Joint Council for Economic Education.
Explain to students what the Securities and Exchange Commission is, then assign students in
pairs to research the role of the following institutions in the American economy: [add others]
• Department of the Treasury
• Local banks
• Federal Reserve System
• Securities and Exchange Commission
• Rural Electrification Association
• Interstate Commerce Commission
• Federal Trade Commission
Have students present their information in class discussion. Relate how each institution
promotes money and product flows in the economy.
Activity 2: Analyzing Banks and the Supply of Money (GLE: 22)
Ask students to explain what happens when a bank loans money (credit) to a customer to
purchase a new car.
The supply of money has been expanded since the demand deposit is still a matter
of record and the car dealer has a check equaling the purchase. At the same time
banks can reduce the supply of money by calling loans—e.g., demanding
repayment of a loan. Banks also exchange foreign monies for a fee facilitating
foreign trade and tourism. Note: Recent legislation has permitted insurance
companies and other financial institutions to perform banking functions
Have the whole class define money.
Free Enterprise‘Unit 5‘Money, Banking, and the Federal Reserve
29
Discuss money as something accepted as a medium of exchange and have students note
that banks began as a place to deposit money for safekeeping. Deposits could be claimed
on demand. Banks loaned demand deposits to individuals needing money to purchase
products or to invest—a fee was charged called interest.
Review the impact of Andrew Jackson’s war against the National Bank to illustrate the
impact banks can have in the economy. Ask students to recall what Jackson did and how it
impacted the supply of money, inflation, and ultimately recession. Return to the Circular
Flow, asking students to consider what happens in the markets for goods/services and factors
of production when the supply of money exceeds the amount of products available for sale.
Have students explain what happens to the price of goods. What happens to the cost of
wages? Define inflation as a persistent rise in prices. How did Jackson’s bank policies create
an inflationary spiral in the western states? When the state banks called loans to pay
depositors, what happened to the supply of money? If there is too little money for purchasing
goods, what happens to prices and wages?
Divide students into pairs. One partner will be the knowledgeable member of the banking
establishment. One partner will be the savvy consumer inquiring about the following:
• competition in bank services
• online banking
• electronic transfers
• coin and currency
• credit (bank loans)
• credit cards
• checks
Students should come up with a list of questions for each other. Allow students to use
sources, such as the Internet, to complete their list of questions. Students should ask each
other these questions and record the details of their conversation.
Activity 3: Exploring Financial Markets (GLE: 23)
Ask students to list the stock markets in the United States. Ask them to explain if stock is
traded on small local markets. Have students explain why demand for shares and the supply
of shares offered for sale establish the market price. Ask students to follow the Dow Jones
average for a few days to determine the answer to the following question:
• What does it tell us about the value of corporate stock? [If you have your class
playing the Stock Market Game, they will learn how to use this information as
they play.]
Ask students to review the founding of Jamestown colony by a joint-stock company. Ask
students to discuss the following:
• Why people invested (purchased stock) in the Jamestown adventure?
• Why did the company spread risk among several investors?
Free Enterprise‘Unit 5‘Money, Banking, and the Federal Reserve
30
Ask students to explain how, considering the large number of corporations (joint-stock
companies) today, investors know when and at what price shares are available?
Like all commodities and goods, there is a market for buying and selling shares in corporations.
Have students examine markets for currencies (see foreign exchange rates in a national
paper) handled by banks and articulate a “90-second report” on the World Markets.
Activity 4: Financial Institutions and Savings (GLE: 24)
Ask students to recall, with guided reading, what happened during the run on banks that
precipitated the Great Depression.
• Why did the banks have to close when they ran out of money to pay out demand
deposits?
• Did they fail to have adequate money in reserve?
• Did they have too much money on loan?
Ask students to explain differences between demand and savings deposits.
Demand deposits mean that the customer can write a check demanding use of any or all monies in
that account. Banks keep reserves of money to meet customer demand for their money.
Savings deposits are considered long-term deposits. That is you have to give notice of your
intention to withdraw funds (this is changing today). Banks can more safely loan these funds (keep
less funds in reserve) to earn interest thus they pay a small rate of interest to the depositor.
Ask students to research and articulate what Savings and Loan institutions do. Guiding
Questions:
• Why is it important to have consumer savings available to be loaned to other
consumers?
• How does this process maintain an adequate supply of money?
• How does it improve demand for goods/services?
• How does the process stimulate production?
Have students explain why corporations and businesses borrow money. Have students
explain why proprietorships and partnerships borrow money from lenders (banks) while
corporations are more likely to issue and sell stock (shares) to finance expansion through
stock markets. Have students explain why investors purchase stock.
Activity 5: Other Financial Institutions (GLE: 24)
Free Enterprise‘Unit 5‘Money, Banking, and the Federal Reserve
31
Invite an insurance broker or agent to visit class and explain services they offer consumers
and investors. Have students prepare written questions in advance.
Ask students to make comparisons between new financial institutions (credit, savings, and
investment institutions) and traditional banks through a chart or Venn diagram.
Have every student assume that they have a sum of money (determined by the class) for
which they have to make a decision between financial institutions. Have the students
articulate what their decision would be at this time and why in a statement of intent and
rationale.
Activity 6: Analyzing Business Cycles (GLEs: 25, 65)
Review historical events that produced the Great Depression in 1929. Discuss the following:
• Why did the supply of money (credit) continue to grow?
• Why did stock prices rapidly escalate and what was the role of banks in that
escalation?
• Why did the stock market crash (rapidly falling prices)?
• Why were banks forced to close their doors?
• What happened to bank deposits?
• What happened to the supply of money after 1929?
Have students define recession and depression. Have students explain how a depression can
happen.
Ask students to construct graphic models of a business cycle using economic terms
appropriately: inflation, boom, prosperity, high employment, deflation, recession, bust, and
high unemployment. Ask each student to explain stages in the business cycle model. The
failure of banks in 1929 caused many depositors to lose their money. People became
skeptical of bank safety. Ask students to research the origin and purpose of the Federal
Deposit Insurance Corporation (FDIC) created under the New Deal. The law was established
that the government insures (guarantees) all demand deposits up to $100,000 in any one
bank. Ask students to explain how an individual could insure more than $100,000. Should
these limits be changed? Articulate a rationale for why or why not.
Activity 7: Judging the Impact of Interest Rates (GLE: 53)
Create a simulated company and ask students what happens if interest rates rise:
• Will the company be more or less likely to borrow?
• Will the company be more or less likely to increase the price of their product?
• Will the economy be more or less likely to expand or contract?
• How will consumption of the product be altered?
Free Enterprise‘Unit 5‘Money, Banking, and the Federal Reserve
32
Ask students to answer the same questions if interest declines. Define interest and capital
with the class.
American businesses combine factors of production in making a
good/service. The productivity of capital goods is rewarded by the
payment of interest. If a business procures a bank loan to purchase
capital, the loan becomes a cost (factor) in making a good. The level of
the interest rate (cost of capital) influences the price of the good in the
marketplace.
Ask students what types of goods are too large to buy outright with the average income (e.g.,
houses, cars, and boats)? Ask them what consumers do in order to purchase such large items
(e.g., borrow from a financial institution such as a bank or savings and loan).
Simulate a case study of a family borrowing $100,000 at prevailing interest rates and
compute monthly payments and the cost of the loan over 15 and 30 years. Students can
compute these elements using the Internet. Ask students to compute and describe the impact
of increases and decreases in the interest rate. Have students articulate how increased interest
rates influence the family’s desire to purchase other goods/services.
Activity 8: The Federal Reserve System (GLE: 63)
Return to previous discussions of Andrew Jackson’s war on the National Bank. Jackson
deposited the national treasury in state banks without banking controls, thus banks were able
to make loans without adequate reserves. The result was a rapid increase in the supply of
money, inflated prices, and expansion of individual debt. Lacking adequate reserves, banks
were unable to pay and depositors demanded their money. Debtors defaulted as loans were
recalled and deflated prices followed. Provide the class with a graphic display of business
cycles in American history. Ask students to identify and describe the causes for booms and
panics. Have students note the following: The Federal Reserve System (FRS) was created in
1913 to provide stability in banking practices (e.g., require members to hold fractional
reserves, serve as the banker’s bank by providing loans at discounted rates). After the Great
Depression, the New Deal increased the powers of the FRS. Federal Reserve Banks provide
free copies detailing their history, influence on the supply of money, discount rates, open
market operations, and the history of money.
Lead a discussion on what happens to the supply of money if banks must hold specific
reserves for each dollar in deposits. Ask students to consider how bank loans are held in
check with high reserve requirements (50%) and how bank loans expand with low reserve
requirements (10%.) The FRS sets the reserve requirements for all member banks. Illustrate
this with chalkboard models. Define fractional reserves together. Lead a discussion on what
happens when banks do not have adequate reserves, they must borrow to replace the reserves.
FRS banks (12 districts) loan funds to member banks to cover reserves at an established
interest rate (discount rate). Define discount rate together. Provide a series of simulated
situations:
Free Enterprise‘Unit 5‘Money, Banking, and the Federal Reserve
33
Situation A
Situation B
Situation C
FRB rate=4%
FRB rate=8%
FRB rate=6%
Bank Loan Market rate=8%
Bank Loan Market rate=8%
Bank Loan Market rate=7%
Ask students to explain what the bank will do in each situation (e.g., borrow reserves and
continue to make loans, maintain reserves and reduce loan amounts, maintain loans but loan
only to the very best customers). Explain how banks make loans (e.g., best customers get
lowest (prime) rate, high-risk borrowers pay high interest rates). Is this a fair practice? What
does credit rating mean? Why is a good credit rating worth money to a consumer? Lead a
discussion on how the FRS is also the country’s banker. The federal government receives tax
and fee income and expends monies to pay bills. When the federal government borrows
money to pay its bills, the government issues treasury bills (borrows) that it sells at a
discount to the FRB, banks, businesses and/or individuals. Explain what happens if the FRS
controls the purchase of all treasury bills (i.e., only FRS banks can purchase the treasury
bills). Is the money supply expanded? Illustrate this using the Circular Flow model. Define
open market operations together. Lead a discussion about what happens if individuals and
banks are permitted to purchase treasury bills (i.e., they withdraw deposits to buy
government paper reducing the supply of money). Ask students to explain conditions that
would encourage the FRS to increase the supply of money (e.g., inadequate demand (not
enough money to purchase goods/services) and when they would act to reduce the supply of
money).
Reviewing the previous activity, ask students to explain the difference between the discount
rate the FRS charges banks to borrow and the prime rate banks charge their best customers.
Activity 9: Analyzing Regulatory Processes and Utilities (GLE: 64)
Review inelastic demand for basic needs such as water and electricity. Identify agencies that
regulate such public utilities in Louisiana and in your parish. Why is it important to control
prices when a necessity is controlled by a monopoly or near monopoly?
Invite a public utility representative (they normally have public information officers) to
appear in class. Students ask questions about monopolies, inelastic demand, profits, and
prices. Invite someone from a regulatory agency to explain how that agency determines
prices of the good when competition among suppliers is absent.
Ask students to research several federal regulatory agencies—include the EPA, FCC, ICC,
SEC. Have students report their findings to the class:
• Why was the agency created?
• How does the agency protect businesses and/or consumers?
• Does the work of the agency enhance or weaken the circular flow?
• Does the work of the agency provide equity in the economy?
Activity 10: Investigating Regulatory Costs (GLE: 64)
Free Enterprise‘Unit 5‘Money, Banking, and the Federal Reserve
34
Ask students to explain the impact of an EPA regulation requiring all coal-fired electric
plants to place expensive scrubbers on smokestacks to clean the air. What happens to the cost
of producing electricity at that plant?
Have students explain what the company can do, if a state commission, to recover costs,
controls the price of electricity. Have students explain how consumers are impacted by this
action.
Have students articulate a position statement and rationale on this topic: “Is reducing
pollution at old coal-fired plants a good thing?”
Sample Assessments
General Guidelines
•
•
•
Use a variety of performance assessments to determine student understanding of
content.
Select assessments that are consistent with the types of products that result from the
student activities.
Develop a scoring rubric collaboratively with other teachers or students.
General Assessments
•
•
•
Students should complete journal entries throughout the unit in which they relate the
topics discussed to their own personal experiences. These journals may also be
reflections of what they learned by the end of the period. For instance, students might
answer, “What I learned,” “What I would like to know more about,” and “What I
don’t understand” after a concept has been taught in order to better evaluate student
understanding.
Students should work in pairs to teach a particular concept from the unit to the class.
The group should be knowledgeable on their assigned topic. They should provide
visuals to aid their classmates in learning, and they should make a short quiz for the
class to take on that particular topic.
Students should contact one of the financial institutions discussed in class by email,
telephone, or regular mail. Students should request information from one of these
institutions then present their findings to the class.
Activity-Specific Assessments
Free Enterprise‘Unit 5‘Money, Banking, and the Federal Reserve
35
•
Activity 4: Have students complete a report in which they research a particular stock
and decide whether or not they would invest in it. Have them articulate what they feel
the risks and the potential profits might be. In this report, students should state what
percentage of their available investment dollars would be invested and what
percentage they would hold back for another source. Have them articulate why they
would invest as such.
Risks of stock listed, explained, and analyzed
50%
Reasons for choosing this particular stock
15%
Percentage of available investment dollars
invested
Explanation and analysis of other use of
investment dollars
15%
20%
•
Activity 7: Simulate a case study family borrowing $100,000 at prevailing interest
rates and compute monthly payments and the cost of the loan over 15 and 30 years.
Ask students to compute and describe the impact of increases and decreases in the
interest rate. Have students articulate how increased interest rates influence the
families desire to purchase other goods/services.
•
Activity 8: Working in pairs or small groups, students should create their own
graphics or cartoon to show how the Federal Reserve can affect the money supply in
the economy. Students should also show in this graphic what happens to interest rates
when money supply expands or contracts. Students should explain their graphics to
the class.
Free Enterprise‘Unit 5‘Money, Banking, and the Federal Reserve
36
Unit 6: Measuring the Economy
Time Frame: Approximately one week
Unit Description
This unit is a study of how economic measurement tools are used to interpret and explain the
condition of the U.S. and international economy.
Student Understandings
Students will understand that economic indicators are used to measure the well being of an
economy. Students will learn to use economic indicators in charts, tables, or graphs to
compare different economies, interpret income distributions, and explain economic concepts
such as inflation and deflation.
Guiding Questions
1. Can students identify the purpose and importance of economic indicators and how
they provide information on different types of economies?
2. Can students define inflation and deflation?
3. Can students interpret economic information from charts and graphs?
Unit 6 Grade-Level Expectations (GLEs)
GLE #
GLE Text and Benchmarks
The Economy as a Whole
47.
Explain the meaning or use of various economic indicators and their
implications as measures of economic well-being (E-1C-H1)
49.
Interpret various economic indicators used in a chart, table, or news article
(E-1C-H1)
50.
Draw conclusions about two different economies based on given economic
indicators (E-1C-H1)
51.
Explain how inflation and deflation are reflected in the Consumer Price Index
(E-1C-H2)
61.
Interpret a chart or graph displaying various income distributions (e.g., in the
United States vs. the Third World, various groups within a country)
(E-1C-H3)
Free Enterprise‘Unit 6‘Measuring the Economy
37
Sample Activities
Activity 1: Measuring Economic Performance (GLEs: 47, 49, 50)
Provide articles published in the local newspaper or newsmagazines that report on the health
of the American or world economy. Have students read the articles to detect political bias.
Guide discussion of the materials by asking students to identify and explain evidence of
economic performance in the articles. How appropriate are the measurements (e.g., workers
claim wages are falling behind prices)? Are some measurements of the economy better than
other measurements? What would you want to know if you had responsibility for assessing
the health and performance of the economy? Ask students to create a list of important
indicators of economic health from student comments.
Introduce Gross National Product (GNP) as a total of all goods/services exchanged at market
prices in one year—this also includes government purchases of goods/services. Ask students
to explain how GNP can be used as a measure of economic performance. Could we compare
this year to last year? What if prices were inflated or deflated between years? Introduce the
concept of a constant dollar—dollar values adjusted for inflation or deflation. If GNP is
measured in constant dollars, could we use it to measure growth or retraction of the
economy? Introduce Gross National Income (GNI) as a measure of consumer incomes for
the year. Ask students to consider how GNI can be used as a measure of economic
performance. Would we need to adjust the GNI for inflation or deflation?
One way to change the emphasis of the measurement is to divide GNP and/or GNI by the
population (e.g., GNP per capita). Ask students to describe how individuals might gain a
measure of their personal well being from this measure. Ask students to cut out articles from
the Wall Street Journal (or other papers) that include GNP, GNI, Consumer Price Index
(CPI) or other measures of the economy. Ask them to include tables and graphs that illustrate
economic performance. Ask students to explain how the performance measure(s) are being
used. Select clippings from the collection and ask students to interpret the information. Per
capita measures are the easiest way to compare two or more economies. Ask students to
locate economic data on 3-4 countries in the World Almanac (e.g., GNP per capita, GNI per
capita). Are constant dollars important? Ask them to construct comparative charts and
interpret the data. Provide GNP per capita data and a world political map. Ask students to
record the data for several countries on the map and draw conclusions about the location of
the best and worst performing economies. In India and Africa people often build their own
homes. Would the value of their homes be included in GNP or GNI? Why?
Activity 2: Gross Domestic Product v. Gross National Product (GLE: 47)
Ask students to explain what they believe is the difference between Gross Domestic Product
(GDP) and Gross National Product (GNP). Explain to students that Gross Domestic Product
includes only those goods and services produced within the nation. Even though a plant
Free Enterprise‘Unit 6‘Measuring the Economy
38
outside the U.S. is still an American plant, it is not considered part of the GDP because GDP
includes only things made within the country.
Ask students why intermediate products are not included in the GDP (e.g., windshield wipers
on a new car sold is not counted in the GDP, but replacement wipers are counted). Have
students give examples of other intermediate products. Explain to students that secondhand
products are also not counted in GDP. Explain to students that GNP does include American
plants in other countries, but does not include foreign plants in our country. (GDP does
include foreign plants in our country) Ask students to explain what they believe is the better
measure of economic well being in our country (GDP or GNP) and give an explanation why
they believe this is so.
Activity 3: Computing Inflation/Deflation Indices (GLE: 51)
Ask the class why the Consumer Price Index (CPI) is used to determine how much Social
Security payments should be increased from year to year. Challenge the class to construct a
market basket that can be used to measure price levels from year to year. Divide the class
into teams, with each trying to solve the problem. Ask each team to think about and try to
answer the following questions:
• What do we need to know about the price of products?
• What products should be put into the measure (e.g., luxury boats versus basic
cars)?
• What happens when a new product is introduced or a product no longer exists?
• Where will we get the pricing information?
Ask students to define CPI in their own words. Explain the problem in creating a market
basket for the average American (e.g., how much insurance, medical expenses, food,
electronics, etc., do you put into the basket?). How much does each item in the basket cost
the average consumer? After students work at the task for a while, use direct instruction to
explain how the CPI is computed. The government establishes a base year and places a value
of 100 on the market basket. The next year they determine the price of the market basket as
more than 100 (inflation in prices) or less than 100 (deflation in prices). Give students the
total cost of the market basket for three different years. Have students figure out the inflation
or deflation in prices in that three-year period. Allow students to practice figuring inflation
and deflation by giving them different market basket prices for three-year periods. Next,
discuss with students what are some of the causes of inflation and deflation.
Ask students to explain how the CPI might be used by:
• Government to determine increases in Social Security checks
• Labor to determine reasonable requests for wage increases
• Federal Reserve Board to decide to increase or decrease the supply of money
Free Enterprise‘Unit 6‘Measuring the Economy
39
Activity 4: Interpreting Income Data (GLEs: 49, 61)
Allow students to use the Internet or other reference sources to obtain information on the
average income of the United States in a specified year. Next have students, in small groups
or pairs, collect similar data from African or South Asian countries. The students should then
construct charts and/or graphs comparing that data with United States data. With this
information, students should write summary statements on what these numbers state about
the economic well-being of the countries. Next, provide population pyramids for each of the
countries selected. Ask students to compare the age distribution of each of the countries with
its income data and interpret their findings.
Sample Assessments
General Guidelines
•
•
Use a variety of performance assessments to determine student understanding of
content.
Select assessments that are consistent with the types of products that result from the
student activities and develop a scoring rubric collaboratively with other teachers or
students.
General Assessments
•
•
•
Students should predict what country is represented when given different GDP
figures. Give students a list of GDPs of several different countries. With that
information give students a list of the different countries from which they will match
the GDP with the country. Students should provide written explanations in their
journals of why they matched certain GDPs with particular countries.
Students should interview family members and create a list of products that might
have been included in a market basket 30 years ago that would probably not be
included in a market basket today. Students should write explanations for their choice
of products.
Students should find conflicting reports on the health of the American economy. They
should write an explanation of why they believe these reports are conflicting (e.g.,
political bias) and provide evidence to support their thoughts.
Summary of how the reports/articles portray
the health of the American economy
Analysis of why the reports/articles are
conflicting
Reports or articles of American economy are
attached to student analysis
Free Enterprise‘Unit 6‘Measuring the Economy
35%
45%
20%
40
Activity-Specific Assessments
•
Activity 1: Ask students to locate economic data on 3-4 countries in the World
Almanac (e.g., GNP per capita, GNI per capita). Are constant dollars important? Ask
them to construct comparative charts and interpret the data. Provide GNP per capita
data and a world political map. Ask students to record the data for several countries
on the map and draw conclusions about the location of the best and worst performing
economies. In India and Africa people often build their own homes. Would the value
of their homes be included in GNP or GNI? Why?
•
Activity 3: After constructing their own market baskets, have students provide a
written explanation of why they chose those particular items. Then have students
compare the lists they created with the actual list of products from the market basket.
Students should record the products that they listed that are not listed on the actual
market basket.
•
Activity 4: Students should compile data on average incomes for different regions in
the world. With that information, students should construct a thematic map on
average world incomes. After students complete this activity, students should create a
computer generated bar graph. (They may use such programs as Excel to create such
graphs.)
Free Enterprise‘Unit 6‘Measuring the Economy
41
Free Enterprise
Unit 7: Inflation and Unemployment
Time Frame: Approximately one week
Unit Description
This unit is a study of the impact of inflation and employment in a market economy.
Student Understandings
Students understand that inflation impacts the well-being of economies and influences
economic decisions. Students understand the reasons for unemployment and
“underemployment” in a market economy and its relationship to business cycles. Students
learn that the rate of unemployment varies regionally and demographically.
Guiding Questions
1. Can students explain the effect and importance of inflation and deflation on
economic decisions of individuals, nations and the world?
2. Can students define the role of unemployment and underemployment in the
economy?
Unit 7 Grade-Level Expectations (GLEs)
GLE #
GLE Text and Benchmarks
The Economy as a Whole
47.
Explain the meaning and use of various economic indicators and their
implications as measures of economic well-being. (E-1C-H1)
52.
Explain the impact of inflation/deflation on individuals, nations, and the world,
including its impact on economic decisions. (E-1C-H2)
56.
Explain various causes and consequences of unemployment in a market
economy (E-1C-H3)
57.
Analyze regional, national, or demographic differences in rates of
unemployment (E-1C-H3)
58.
Analyze the relationship between the business cycle and employment (E-1CH3)
59.
Explain the meaning of “underemployment” and analyze its causes and
consequences (E-1C-H3)
Free Enterprise‘Unit 7‘Inflation and Unemployment
42
Sample Activities
Activity 1: The Problems of Inflation/Deflation (GLE: 52)
Review the American business cycle of the 1920’s and 1930’s. Provide historical
descriptions of the Great Depression and ask students to explain how the following elements
contributed to prosperity in the 1920’s and depression in the 1930’s:
• The farm depression following WWI
• The boom in business activity
• The euphoria of full employment and good markets
• Rising stock prices (e.g., buying on margin)
• A growing money supply and individual debt
• Problems in the world economy
Ask students to describe what happened when investors decided that stocks had risen beyond
their value. What was the impact on borrowers? What are and why do runs on banks occur?
Ask students to explain the spiraling downward of prices, supply of money, foreclosures on
debt, employment of factors of production, and product flows.
Ask individual students to explain in writing what was happening to prices, production,
employment, consumption, and the money supply during this time period by using the
Circular Flow diagram. Next, ask students to explain how inflation impacts the following:
• Individuals (pay higher prices for goods, lowers cost of debt repayment, incomes
lag behind prices reducing consumption)
• Businesses (pay higher prices for factors, may cover inefficiencies in production
as the product is priced higher, inventories increase as goods may not be sold)
• Countries (debtor nations have an easier time paying off debts, creditor nations
suffer as money loses value)
Replay the same exercise with deflation.
Activity 2: Analyzing Inflation (GLE: 52)
Return to the Circular Flow chart. Ask students to look at the upper left quadrant and imagine
that consumers have excess money (incomes) to spend while there is no appreciable increase
in available goods/services. What will consumers do to acquire goods? Does demand exceed
supply? Why will prices increase? Ask students to look at the lower right quadrant and
imagine that producers need to increase production, but the factors of production are fully
employed. What will happen to wages if producers expand? What will an increase in wages
do to the cost of goods/services? Why will the price of products increase?
Free Enterprise‘Unit 7‘Inflation and Unemployment
43
As a class, define cost-push as a cause for inflation. As a class, define demand-pull as a cause
for inflation. Ask students, in small groups, to explain the effects of inflation in the following
brief scenarios:
• A producer’s costs are so high that profits are squeezed by more efficient
competitors.
• A consumer lives on a fixed income.
• A consumer holds a 30-year mortgage on his/her home.
• A banker has made low-interest-rate loans on home mortgages.
Ask students to generate other scenarios individually, providing more detail, and explain
inflation.
Activity 3: Unemployment (GLEs: 56, 57, 58, 59)
Ask students to explain the cause of unemployed factors of production in the following
situation: Automated switchboards are introduced in the 1950s. Telephone companies
purchase large quantities of new switchboards creating production by companies making
automated switchboards. Companies producing regular switchboards experience little
demand for their product.
Using the Internet and/or reference materials, ask students to collect current U.S.
unemployment data for different regions, for different racial groups, and for different age
groups. Ask them to construct graphical displays of the data illustrating region, race, and age
differences. Ask the class to interpret the data and explain: Why do some groups have higher
rates of unemployment? Why are there regional differences in unemployment?
Write an analysis as a group of why and how business cycles influence rates of employment.
Ask students to define underemployment and add to this example their own:
• Corporations in 2001 had to release skilled and knowledgeable middle managers
to achieve profitability. With demand for middle managers low, these individuals
accepted jobs requiring less skill and knowledge.
Ask students to explain what is happening when
• Older people are working at fast food restaurants
• Highly educated citizens drive taxis
Activity 4: (GLEs: 47, 56, 58)
Explain to students that there are different types of unemployment and that not all
unemployment is necessarily negative. First, ask students to give their own reasons why
people might be employed. Next, point out to students that a person is only considered
unemployed if he/she works less than one hour a week. Go through with students the
different types of unemployment—frictional, structural, cyclical, seasonal, and technological.
Free Enterprise‘Unit 7‘Inflation and Unemployment
44
Frictional unemployment is caused by workers between jobs. Is this type of unemployment
always bad? When could this type of unemployment be seen as a positive?
Structural unemployment occurs when consumers no longer demand a product; those who
make that product are no longer employed (e.g., typewriter producers). How might the causes
of structural unemployment mean something positive for the economy? (Country might be
becoming more technologically advanced.)
Cyclical unemployment is unemployment caused by changes in the business cycle. (People
are less likely to buy luxury items in times of a recession; industries that produce those items
may lay off workers).
Seasonal unemployment is unemployment caused by changes in the season. For example,
one who owns a Christmas store will need more workers in the holiday season than in the
off-season.
Technological unemployment is caused when workers are replaced by automation.
Have students give examples of each type of unemployment. Have students work in pairs to
explain how each type of unemployment may indicate other positive occurrences in society
at that time period.
Explain to students why a society that is improving technologically could never have 0%
unemployment. Students should also explain how a low unemployment, however, indicates
economic well-being.
Have students find news articles of how politicians might quote unemployment figures to
gain an advantage in an election. (Students may use older news magazines if necessary.)
Sample Assessments
General Guidelines
•
•
•
Use a variety of performance assessments to determine student understanding of
content.
Select assessments that are consistent with the types of products that result from the
student activities.
Develop a scoring rubric collaboratively with other teachers or students.
Free Enterprise‘Unit 7‘Inflation and Unemployment
45
General Assessments
•
•
•
Students should create a graph of stock prices from 1920-35. If available, students
should use a computer program such as Excel to create the graph. If computers are
not available, have students create their own graphs.
Students should find articles in a newspaper or news magazine that discuss
unemployment of a particular group of people, or of a group of people formerly
employed in the same industry. Students should classify what type of unemployment
is being discussed. Students should also analyze the causes of unemployment for this
group.
Students should write a journal entry on how inflation could possibly affect their
families. Students should consider paying higher prices for goods, lagging incomes,
and reducing consumption. Students should also answer in these entries how inflation
could directly affect their lives.
Activity-Specific Assessments
•
Activity 2: Ask students, in small groups, to write a rationale to explain the effects of
inflation in the following brief scenarios:
a. A producer’s costs are so high that profits are squeezed by more efficient
competitors.
b. A consumer lives on a fixed income.
c. A consumer holds a 30-year mortgage on his/her home.
d. A banker has made low-interest-rate loans on home mortgages.
Students should create at least 5 more scenarios and explain the effects of inflation in
the new scenarios created. Students should present their new scenarios to the class.
Rationale for each of the teacher-generated
scenarios is accurate and complete
Five new scenarios created in which the
effects of inflation are analyzed
New scenarios are clearly articulated to the
class
•
35%
35%
30%
Activity 3: Have students write a definition of underemployment. In groups, students
should create scenarios when underemployment might occur. The following is an
example of the type of scenarios students should write:
Corporations in 2001 had to release skilled and knowledgeable middle managers
to achieve profitability. With demand for middle managers low, these individuals
accepted jobs requiring less skill and knowledge.
Free Enterprise‘Unit 7‘Inflation and Unemployment
46
•
Activity 4: Have students give examples of each type of unemployment. Have
students work in pairs to explain how each type of unemployment may indicate other
positive occurrences in society at that time period. Students should complete a chart
similar to the one below:
Types of unemployment
Possible positive occurrence in society
during the same time period
Frictional
Structural
Cyclical
Seasonal
Technological
Free Enterprise‘Unit 7‘Inflation and Unemployment
47
Free Enterprise
Unit 8: Government Policy and Taxation
Time Frame: Approximately two weeks
Unit Description
This unit focuses on the role of government in a market economy in establishing fiscal and
taxation policy.
Student Understandings
Students understand that government impacts an economic system as producer, employer,
and consumer. Students understand that government establishes economic policies for the
purpose of regulating economic behavior. Students learn that government is financed through
various forms of taxation. Students learn how tax policy affects the U.S. economy.
Guiding Questions
1. Can students identify the purpose and importance of different types of taxes and
how they impact individuals and businesses?
2. Can students explain how and why government intervention has an effect on the
economy?
3. Can students explain how federal spending and taxation are related to budget
deficits, national debt and surpluses?
4. Can students distinguish between fiscal and monetary policy and explain the role
of government policy on the economy?
Unit 8 Grade-Level Expectations (GLEs)
GLE #
GLE Text and Benchmarks
Economics: Fundamental Economic Concepts
18.
Explain the role of government as producer, employer, and consumer in
economic systems (E-1A-H6)
Individuals, Households, Businesses, and Governments
33.
Identify various forms of taxation (E-1B-H3)
34.
Describe the impact of given forms of taxation (E-1B-H3)
35.
Analyze the effects of governmental action or intervention in a market
economy (E-1B-H3)
36.
Describe major revenue and expenditure categories and their respective
proportions of local, state, and federal budgets (E-1B-H3)
Free Enterprise‘Unit 8‘Government Policy and Taxation
48
GLE #
37.
GLE Text and Benchmarks
Predict how changes in federal spending and taxation would affect budget
deficits and surpluses and the national debt (E-1B-H3)
38.
Evaluate the impact of policies related to the use of resources (e.g., water use
regulations, policies on scarce natural resources) (E-1B-H3)
The Economy as a Whole
60.
Explain factors contributing to unequal distribution of income in a market
economy (E-1C-H3)
62.
Distinguish monetary policy from fiscal policy (E-1C-H4)
Sample Activities
Activity 1: Introducing Government in the Economy (GLE: 18)
Inform the class that it is time to consider the role government plays in the Circular Flow of
Goods and Services. Begin by asking students how governments obtain income (taxes, fees,
borrowing). Using the Circular Flow, ask students to trace the impact government (local,
state, and federal) taxes and fees would have on the flow of money, goods, levels of
consumption and production, and incomes.
Ask students to suggest ways in which government is a producer and an employer (e.g.,
schools and teachers). Then ask how government is a consumer (e.g., purchases military
equipment). Ask students to explain how government taxes impact the flow of money and
goods. How does government—as consumer, employer, and producer—impact the flow of
money and goods in the economy? Explain withholding taxes to the class (e.g., Social
Security, Medicare, and income taxes). Ask students to discuss the following:
• How does this tax impact consumer income?
• How does this tax and its collection impact producer costs?
Case Study: In the 1950s the federal government purchased large amounts of farm products
at market prices and stored the goods in storage facilities. Ask students to
determine how this government spending impacts producers (farmers). How
would it impact consumers? What happens to the price of farm products? Ask
students to generate another example of government intervention and how it
affects the economy.
Activity 2: Government Tax Credits and Economic Flows (GLE: 33)
Rather than taxing and/or spending, suppose that government gives a tax credit to an
industry. For example, Congress passed a law that gives tax exemptions to investor
partnerships who agree to build and operate low cost housing units for a period of ten years.
How would the tax credit influence the supply of housing in a community? What would be
Free Enterprise‘Unit 8‘Government Policy and Taxation
49
the impact on the cost of housing in the community? How would this activity impact private
citizens offering housing for rent?
Consider a proposed tax cut for a particular group—exemptions to teachers with ten or more
years of continuous service. What would the impact be on teachers? On the community? On
education?
What would be an argument against this proposed tax credit for teachers and why?
Activity 3: Analyzing Government Tax Impacts and Government Intervention in the
Economy (GLEs: 34, 35, 36)
Ask students to create a list of all the taxes their family pays and post the list on the board.
Add taxes that are often hidden or disguised (e.g., license fees, soft drink taxes).
Given the Circular Flow, ask students to explain the impact of each of those taxes on
consumers and producers: (Teachers may add more examples.)
• Real estate taxes—reduces expendable consumer income by the amount of the
tax; adds to cost of production as taxes are paid on capital (e.g., buildings).
• Sales tax—increases the price of products to the consumer; has less impact on the
production process.
• Consumption taxes on cigarettes and liquor (sin tax)—tax on an inelastic demand
produces a lot of government revenue while reducing consumption of an
undesirable product; severely reduces the sales and production levels of
producers.
As a class, reach a consensus to define taxation inductively as a transfer of money from
individual incomes to government—or a transfer in purchasing power. Taxes transfer
purchasing power to government to provide schools (local), roads (state), and a military
(national).
Government may also intervene in the economy to correct perceived problems. Ask students
to analyze the following governmental actions and predict their effect on the economy (add
other examples):
• Government agrees to maintain the price of milk and butter by buying surplus
supplies of dairy products.
• Government creates public works projects to employ laborers who have been
unemployed.
Assign student teams to research the annual budgets of the parish, Louisiana, and federal
governments. Ask them to create circle graphs illustrating the major categories of
expenditures and revenues for each level of government (e.g., show raw numbers and
percentages). When comparing expenditures and revenues, ask students to explain debt and
service on debt:
Free Enterprise‘Unit 8‘Government Policy and Taxation
50
•
•
•
Do governments operate a balanced budget?
Is governmental borrowing (i.e., borrowing purchasing power now for repayment
in the future) a good thing?
When is a deficit a problem?
Activity 4: Analyzing Federal Budgeting, Responsibilities and the Economy
(GLEs: 37, 38)
Using data produced in the previous activity, ask students to explain the impact on the
economy if the government balanced budgets and avoided deficits or surpluses.
Provide students with a 50-year history of national debt in the United States. Ask them to
respond to the following questions:
• When do we seem to incur debt (run deficits) and when do we pay the debt down
(run surpluses)?
• What would be the impact of a tax increase to pay down the national debt?
• What would be the impact if government cut expenditures to pay down the
national debt?
• If the country had high levels of unemployment, how would paying down the
national debt create more problems?
• What if the country had low levels of unemployment?
Ask students to use the Circular Flow as they prepare their responses.
Government is obligated to provide for the general welfare of its citizens. Sometimes that
means ignoring economic impacts of a governmental policy to protect the public health. For
example, the government promises protection against polluted water and air. Regulatory
agencies set standards for businesses using and returning water to streams used for public
water. Ask students to analyze the economic impact in each of the following situations:
• Imagine that a business is polluting a stream. How will government fines levied
against the business impact costs of production, employment, and prices?
• If the business voluntarily cleans up its water discharge, what will be the impact
on production, employment, and prices?
Ask students to challenge or defend the following statement: The best argument for
government regulations of natural resource use is that the private cost to businesses should be
equal to or less than the social benefits to the public.
Activity 5: Assessing Problems of Income Inequality and Savings, Investment, and
Incomes (GLE: 60)
Discuss with students the following terms: progressive taxes, proportional/flat taxes,
regressive taxes.
Free Enterprise‘Unit 8‘Government Policy and Taxation
51
Ask students to debate the merits of income inequality.
• Are NBA stars overpaid?
• How do people who save and earn from investments benefit others?
• Should consumers who have wealth gain more because they invest more in the
economy? How do income taxes (progressive tax) serve to reduce income
inequality?
• Is an income tax fair?
• How are sales taxes regressive taxes? (Lower income people pay a higher
percentage of taxes on sales taxes than those who make a higher income.)
• Given the above facts on sales taxes, explain whether or not they are fair taxes.
From the Circular Flow chart, students know that consumers (all people are consumers) earn
their incomes by selling their ownership (factors of production) to producers. (Example: One of
the factors of production that consumers sell is their labor, including their skills, knowledge,
talent, and abilities.) Individual consumers own different amounts of these productive factors.
Individual laborers possess different skill levels, producing different incomes—e.g., skilled NBA
player.
In a capitalist economy, individuals earn an income equal to their contributions to the production
process and unequal incomes are the result.
Consumers have a choice with regard to spending and saving their income. Those consumers
who save and invest portions of their income earn more shares (income) in the economy.
Provide a graphic of average incomes of Americans for discussion of:
• Savings and investment in the economy
• Consumption
• Productive capacity
Ask students to explain how disparity of income impacts the economy. Then ask students to
consider how government can and does reduce income disparity (e.g., progressive income
taxes, capital gains tax).
Ask students to debate the following: What if the government did not transfer (social
welfare) income from the highest income groups to the lowest income groups? Why do some
people say that the rich get richer? Ask students to make one suggestion for income tax
reform that they could defend.
Activity 6: Our Progressive Income Taxes (GLE: 33)
Explain to students that we pay progressive income taxes in the United States. The more
money one makes, the greater percentage he/she pays in income taxes. Some argue that a
flat/proportional tax would be a better tax because everyone would be taxed the same
percentage. People would still pay different amounts in taxes, but the percentage would be
Free Enterprise‘Unit 8‘Government Policy and Taxation
52
the same. For example, a 10% flat tax would require one who makes $20,000 a year to pay
$2,000 a year, while someone who made $200,000 a year would pay $20,000 in taxes.
Provide students with information on tax brackets so they may see the percentage of income
taxes people pay with varying incomes.
Provide students with 1040EZ forms and sample W-2s. Instruct the students to complete the
1040EZ forms following the instructions provided. Allow students to use the tax tables so
they may see the progressive nature of taxes paid.
Activity 7: Monetary and Fiscal Policy (GLE: 62)
Revisit the Circular Flow of Goods and Services and ask students to explain demand- and
supply-side economics. If we were experiencing demand-pull inflation, the Federal Reserve
Board (FRB) might reduce the money supply (ask students to explain) by raising the discount
rate and/or selling Treasury Notes to individuals. If we were experiencing deflated prices, the
FRB could increase the money supply (ask students to explain) by reducing the discount rate
and purchasing Treasury Notes.
Define monetary policy collectively. Define fiscal policy collectively. Ask students to explain
• government revenues exceed expenditures = government surplus
• government expenditures exceed revenues = government deficit
Review: Whenever the economy is experiencing full employment, the government can
increase taxes and/or reduce spending to avoid inflation. Whenever the economy is
experiencing unemployment, the government can decrease taxes and/or increase
spending to avoid deflation. Using the Circular Flow, ask students to explain how
actions would alter economic flows (e.g., supply of goods available to consumers).
Ask students to explain what monetary and fiscal policies are in place at the present
date, using the Circular Flow.
When Franklin D. Roosevelt was elected president in 1932, the country was in the throes of a
depression (e.g., deflated prices, bankruptcies, inadequate demand, little incentive for
investment, and low incomes). Provide readings describing New Deal policies Roosevelt
enacted to stimulate the economy. (Add to the below list.) Ask students to analyze each
program and explain how it would impact the economy:
• Agricultural Adjustment Act
• Works Progress Administration
• Civilian Conservation Corps
• National Industrial Recovery Act
• Emergency Relief Act
• Emergency Banking Act
Why did Roosevelt repeatedly say, “We have nothing to fear but fear itself”? Complete
recovery from the Depression did not occur until World War II began. Why would
preparations for war stimulate an economy? Some people argue that Roosevelt interfered too
Free Enterprise‘Unit 8‘Government Policy and Taxation
53
much in the economy and spent too much government money. Others argue that Roosevelt
failed to spend enough money to get the economy moving. Ask students to debate informally
the success and/or failure of New Deal policies.
Sample Assessments
General Guidelines
•
•
•
Use a variety of performance assessments to determine student understanding of
content.
Select assessments that are consistent with the types of products that result from the
student activities.
Develop a scoring rubric collaboratively with other teachers or students.
General Assessments
•
•
Students should look at the following case study, then write their responses and their
own example in their journals.
Case Study: In the 1950s the federal government purchased large amounts of farm
products at market prices and stored the goods in storage facilities.
Determine how this government spending impacts producers (farmers).
How would it impact consumers? What happens to the price of farm
products? Generate another example of government intervention and
how it affects the economy.
Students should make a list of the pros and cons of proportional/flat taxes versus the
pros and cons of progressive taxes. Have students prepare a persuasive paper citing
which type of tax is fairer. Students should include calculations and specific examples
within their papers.
Clear statement and analysis
of what type of tax is fairer—
progressive or proportional
Calculations or other
evidence to support your
point of view
Organization and grammar
Clarity
•
20%
50%
15%
15%
Students will informally debate whether or not the government should intervene in
the economy during tough economic times. Students should consider examples from
history. For example, students should consider the fact that Roosevelt intervened
Free Enterprise‘Unit 8‘Government Policy and Taxation
54
during the Great Depression and consider that some argue he interfered too much
while others say he failed to spend enough money to get the economy moving
Activity-Specific Assessments
•
Activity 2: Have students prepare an oral or written debate explaining why a
particular group of people should receive a tax cut. Consider a proposed tax cut for a
particular group—exemptions to teachers with 10 or more years of continuous
service. What would the impact be on teachers? On the community? On education?
•
Activity 3: Assign student teams to research the annual budgets of the parish,
Louisiana, and federal governments. Ask them to create circle graphs illustrating the
major categories of expenditures and revenues for each level of government (e.g.,
show raw numbers and percentages). When comparing expenditures and revenues,
ask students to explain debt and service on debt.
•
Activity 6: Provide students with 1040EZ forms and sample W-2s. Instruct the
students to complete the 1040EZ forms following the instructions provided. Allow
students to use the tax tables so they may see the progressive nature of taxes paid.
Free Enterprise‘Unit 8‘Government Policy and Taxation
55
Free Enterprise
Unit 9: The Global Economy
Time Frame: Approximately two weeks
Unit Description
This unit emphasizes how nations, businesses, and individuals participate in a global
interdependent economy.
Student Understandings
Students understand that the world is a globally interdependent economy. Students learn how
currency and trade policy affect the global economy. Students learn the benefits and costs of
economic interdependence. Students learn how nations, institutions and economic trends
affect the global economy. Students understand that Louisiana is a part of a global economy.
Guiding Questions
1. Can students identify the causes of economic interdependence?
2. Can students explain how businesses have changed to be competitive in a global
market?
3. Can students explain how economies of different countries affect one another?
4. Can students explain the International Monetary Fund and how currency
valuations and exchange rates affect the global economy?
5. Can students explain the purpose and role of policies and international agreements
on the ability to trade internationally?
Unit 9 Grade-Level Expectations (GLEs)
GLE #
GLE Text and Benchmarks
Economics: Fundamental Economic Concepts
21.
Explain ways in which businesses have changed to meet rising production costs
or to compete more effectively in a global market (E-1A-H6)
Individuals, Households, Businesses, and Governments
39.
Explain the causes of global economic interdependence (E-1B-H4)
40.
Describe the worldwide exchange of goods and services in terms of its effect in
increasing global interdependence and global competition (E-1B-H4)
41.
Examine fundamental concepts of currency valuation and foreign exchange and
their role in a global economy (E-1B-H4)
Free Enterprise‘Unit 9‘The Global Economy
56
GLE #
42.
43.
44.
45.
46.
GLE Text and Benchmarks
Explain how the economy of one country can affect the economies of other
countries or the balance of trade among nations (E-1B-H4)
Explain the role of the International Monetary Fund in supporting world
economies (E-1B-H4)
Identify and evaluate various types of trade barriers among nations (E-1B-H5)
Take and defend a position on a trade policy or issue (e.g., NAFTA, G8,
European Union) (E-1B-H5)
Evaluate the role and importance of Louisiana ports and products in the
national and international economy (E-1B-H6)
Sample Activities
Activity 1: Interdependence and Global Competition (GLEs: 21, 44)
Introduce the concept of interdependence by asking students to list all of the products their
families purchase that are made outside the United States. Then list all of the products and
services they purchase that are made inside the U.S. Ask them what would happen if
Congress constructed a tariff wall around the United States? Would we be better off without
imports? Would our wealth as a nation be lesser or greater?
Conduct a class discussion about the use of protective tariffs. Ask teams of students to
research some historical actions on trade and assess their effectiveness:
• Jefferson’s use of embargoes in 1807
• Abominable Tariff of 1828
Simulate a business (sports shoes might be good) where competition in the market for
goods/services has kept prices low, while the factors of production are costly. Provide
alternatives for a business that is losing money in this context: find new technologies
increasing the productivity of factors (labor), relocating production overseas where factors of
production are less expensive (labor). Ask students to explain why businesses make these
decisions and how those decisions impact employment (wages, costs), communities in which
the plants were located (e.g., Rust Belt), and tax revenues for governments.
Activity 2: Causes for Global Interdependence, World Trade and Interdependence
(GLEs: 39, 40)
Provide a map of the world’s natural resources. (Maps of world resources may be found in a
world atlas.) Discuss with students the products that different countries specialize in and
how many products would not be available to us if it were not for international trade. Ask
students to explain why it is impossible for any one country to maintain a modern economy,
independent of the world.
Free Enterprise‘Unit 9‘The Global Economy
57
Provide a case study of Japan. The country has little or no oil, coal, iron or rubber resources
but produces a large quantity of the world’s cars. The case study should include data on the
top ten Japanese imports and exports. Ask students to study the case and explain how Japan
is successful in world trade.
Using the World Almanac and/or World Bank publications, ask students to research the
volume of world trade between some selected number of countries. Ask them to create
graphs illustrating how the volume of trade among countries is expanding. Do these data
indicate that interdependence is likely to grow rather than decline? What would happen if
countries or blocs of countries created barriers (e.g., tariffs) to trade? Returning to the
example of businesses relocating overseas to reduce costs, ask students to explain why labor
and labor unions might oppose free trade and economic interdependence (at least in the short
run). Would economic interdependence cause our standard of living to increase or decrease?
Why? Is it possible that economic interdependence might increase living standards in the
United States while some groups might suffer a loss in wages and incomes? When businesses
go abroad to produce goods, what happens to wages at home?
Activity 3: Currency Exchange Rates and Effects of Global Trade on Domestic
Economies (GLEs: 41, 42)
Provide a current table of exchange rates from a daily newspaper and ask students to examine
the dollar against the Yen, Euro, Pound, etc. Students may also use the internet to make
conversions from the dollar to other currencies. (One available website that may be used for
these conversions is www.oanda.com/convert/classic.)
Simulate a situation where the class is considering taking a trip to Italy. Characteristics of the
simulation might include the following:
• Assume that both countries permit their currency (money) to float freely on the
world market (e.g., the governments do not fix the value of their currency at some
prescribed level).
• There is a world market for currencies in which demand and supply determine the
value of each currency.
• These tourists need to have Italian Euros to spend in Italy, creating a demand for
Euro currency.
• Department stores buying shoes in Italy also demand Euros to buy goods.
• Italians also have a demand for American currency for travel and trade.
• Credit card use is another form of demand for a currency when used overseas.
• The more a currency is demanded, the greater its value.
Ask students to explain how an increase or decrease in the value of a currency would impact
a country’s economy.
Ask students to explain what happens to domestic economies in the following scenarios:
• Congress places a tariff on steel products from Germany.
• Congress subsidizes farm products regularly shipped to France.
Free Enterprise‘Unit 9‘The Global Economy
58
•
•
The United States runs a deficit, leading to devaluation of the dollar against the
yen.
The United States experiences a recession, reducing importation of oil from Saudi
Arabia.
Ask the students to trace impacts of each situation on wages, prices, production, and
consumption in each country.
Activity 4: The IMF and Global Investment; Applying Concepts of International Trade
(GLE: 43)
Provide an organizational chart of the International Monetary Fund (IMF), listing its goals.
Ask students to explain the role of creditor nations (depositors) and debtor nations
(borrowers) in maintaining the circular flow of international trade.
Ask students to apply the Circular Flow as if there were no country boundaries.
• Why does the IMF place restrictions on domestic economic decisions that debtor
nations can make?
• How does borrowing by debtor nations increase employment, production, and
consumption in their domestic economy?
Compare this with how borrowing in the United States increases consumption by individuals.
How does stimulation of a debtor’s economy improve the flow of world trade? Discuss the
following: The United States has the world’s largest economy (i.e., we produce more and
consume more goods/services, valued at market prices, than any other country). We are
dependent upon other countries for vital natural resources (e.g., oil, minerals). At the same
time, we have a skilled labor source that is the most productive in the world. Our productivity
occurs, in part, because of advancements in and investment in technologies.
Ask students to explain how differences between the United States and its trading partners
affect wages, costs, and prices (e.g., prices of natural resources in underdeveloped countries
versus prices of finished products in developed countries). Conclude with the question: Is a
market economy for the world (global markets) a good thing for the United States? Is it good
for developing countries? Who benefits and who loses?
Choose any one of several trends that impact international trade and ask students to trace the
impact of each on currency and product flows.
• For example, the policy in Europe is to place high use taxes on gasoline, and that
trend is growing in other countries. How would such taxation impact oilproducing nations, oil-consuming nations, and oil-related industries (cars)?
• Define tariff, subsidy, cartel (OPEC), and embargoes. Ask students to explain
how each affects the performance of international trade.
• Ask students to write a domestic policy for a nation that has determined it must
restrict trade. The policy statement must include reasons for placing limits on
international trade.
Free Enterprise‘Unit 9‘The Global Economy
59
•
Ask other students to evaluate the impact of the domestic policy written by their
peers. The evaluation must include effects on imports and exports, wages and
prices in the domestic economy, and the standard of living in the domestic
economy.
Activity 5: Trade Barriers, Free Trade, and Defending a Trade Policy (GLEs: 44, 45)
Review with students such barriers to trade as tariffs and quotas. Have students brainstorm
arguments for maintaining trade barriers, (e.g., protecting domestic jobs and maintaining the
balance of payments between our nation and other nations).
Explain to students what the North American Free Trade Agreement (NAFTA) is. Discuss
the pros and cons of NAFTA from the perspectives of the three countries involved: US,
Canada and Mexico. Give each student a slip of paper which describes a business or person
who might have been affected by NAFTA (e.g., textile worker in Louisiana, small corn
farmer in Mexico). Have students write the position of these different people/businesses; then
have them explain their positions to the class.
The North American Free Trade Agreement (NAFTA) has been praised and opposed by
different labor and business groups in the United States. Ask students to research the
arguments for and against NAFTA, and prepare a paper defending their position on this trade
agreement.
In groups, have students research the European Union and G8. Students should write what
countries are included in these free trade agreements; then students should write a list of pros
and cons for these trade agreements.
Activity 6: Louisiana in World Trade (GLE: 46)
Using government data on export and import volume, ask students to evaluate the monetary
importance (exports and imports) of Louisiana ports relative to other primary trading ports in
the United States. How is this trade volume related to barge and rail connections to the port?
Select the top ten products exported by Louisiana firms and describe transportation routes
and systems used to export the goods.
Sample Assessments
General Guidelines
•
Use a variety of performance assessments to determine student understanding of
content.
Free Enterprise‘Unit 9‘The Global Economy
60
•
•
Select assessments that are consistent with the types of products that result from the
student activities.
Develop a scoring rubric collaboratively with other teachers or students.
General Assessments
•
Students should research the different views on outsourcing as stated by our country’s
main political parties. Have students write a paper explaining what outsourcing is,
how it might be harmful or beneficial, and how different groups (i.e., political parties)
might view outsourcing.
Explanation of outsourcing
Analysis of outsourcing-who
it benefits/harms
Explanation and analysis of
how different political
parties view outsourcing
Grammar, organization,
clarity
•
•
20%
30%
30%
20%
Students should write journal entries throughout the unit on topics discussed in class.
For example, students might use their journals to explain how an increase or decrease
in the value of a currency would impact the economy or to explain why labor and
labor unions might oppose free trade and economic interdependence. Allow students
to use their journals in order to better evaluate their understanding of topics.
Students should create a list of the pros and cons of protective tariffs. Students should
be able to explain verbally their reasoning for each choice.
Activity-Specific Assessments
•
Activity 2: Using the World Almanac and/or World Bank publications, ask students to
research the volume of world trade between some selected number of countries. Ask
them to create graphs illustrating how the volume of trade among countries is
expanding. After creating the graphs, students should then answer the following:
a. Does this information indicate that interdependence is likely to grow rather
than decline? Explain.
b. What would happen if countries or blocs of countries created barriers (e.g.,
tariffs) to trade?
•
Activity 4: Ask students to write a domestic policy for a nation that has determined it
must restrict foreign trade. The policy statement must include reasons for placing
limits on international trade. Ask other students to evaluate the impact of the domestic
policy written by their peers. The evaluation must include effects on imports and
Free Enterprise‘Unit 9‘The Global Economy
61
exports, wages and prices in the domestic economy, and the standard of living in the
domestic economy.
•
Activity 5: Have students write their positions on NAFTA, assuming the role given to
them by the teacher. First, give each student a slip of paper which describes a
business or person who might have been affected by NAFTA (e.g., textile worker in
Louisiana, a farmer who raises corn on a small farm in Mexico). Have students write
the position of these different people/businesses; then have them explain their
positions to the class.
Free Enterprise‘Unit 9‘The Global Economy
62
Free Enterprise
Unit 10: Personal Economics
Time Frame: Approximately one week
Unit Description
This unit shows students how economic choices and opportunities affect their roles in the
U.S. economy.
Student Understandings
Students understand that career choice and preparation affects their success in finding
employment and job satisfaction. Students learn about career opportunities in Louisiana.
Students learn how their knowledge and application of fundamental economic
understandings helps them to analyze economic issues and make personal economic
decisions.
Guiding Questions
1. Can students identify factors that affect successful acquisition of jobs?
2. Can students explain how interest rates affect saving and borrowing?
3. Can students identify the types, purpose, and importance of specific jobs needed
in Louisiana?
Unit 10 Grade Level Expectations (GLEs)
GLE #
GLE Text and Benchmarks
Economics: Fundamental Economic Concepts
1.
Apply fundamental economic concepts to decisions about personal finance
(E-1A-H1)
10.
Explain the skills, knowledge, talents, personal characteristics, and efforts
likely to enhance prospects of success in finding a job in a particular field
(E-1A-H3)
11.
Explain the types of jobs important to meeting the needs of Louisiana industries
and an information-based society (E-1A-H3)
12.
Evaluate various careers in terms of availability, educational and skill
requirements, salary and benefits, and intrinsic sources of job satisfaction
(E-1A-H3)
Free Enterprise‘Unit 10‘Personal Economics
63
GLE #
GLE Text and Benchmarks
The Economy as a Whole
54.
Predict the consequences of investment decisions made by individuals,
businesses, and government (E-1C-H2)
55.
Predict how interest rates will act as an incentive for savers and borrowers
(E-1C-H2)
Sample Activities
Activity 1: Personal Spending Saving and Credit (GLE: 1)
Introduce the lesson by having students describe various ways they can pay for a particular
purchase. On an overhead projector or chalkboard write PROS and CONS and have students
explain what is advantageous and what is detrimental about their payment choices. Use the
following terms to help guide the discussion: checks, debit cards, cash, bank loans, credit
cards, lay-away programs, and personal loans. Emphasize the problems many young people
have with credit cards. Show students how a purchase can end up costing several times its
original cost.
Have students make a list of purchases they will make in their future (e.g., education, car,
home, furniture) and write beside each item how they imagine they will pay for these items.
Establishing sound credit is important in our modern economy. Discuss with students what
lenders look for in potential borrowers: character, capacity, and collateral. Provide students
with a blank credit application for an imaginary/real credit card for a bank or business. Have
students review the information requested (e.g., employment history, salary, references). Ask
students to answer the following questions:
• Why do lenders require particular information?
• Is it important to have steady employment history?
• Why do lenders want to issue credit?
• How can too much credit lead to serious debt?
• How does debt affect future employment and purchasing possibilities?
Discuss with students how creditors and employers check on the credit history of potential
borrowers, future employees? Explain to students the purpose and importance of credit
reporting institutions and how credit ratings are assigned. Bankruptcy in the United States is
a serious problem. Discuss with students what it means to become bankrupt. Explain to
students the long-term ramifications of bankruptcy and steps people can take to avoid
bankruptcy.
Free Enterprise‘Unit 10‘Personal Economics
64
Activity 2: The Louisiana Economy (GLEs: 10, 11, 12)
Create a list of industries in Louisiana. Create a list of various careers associated with those
industries. Evaluate those careers with a detailed chart utilizing a 1-5 rating system for the
following criteria:
• availability
• educational and skill requirements
• salary and benefits
• intrinsic sources of job satisfaction
Explain how industries in Louisiana can continue to make an impact in a global, informationbased society. Describe how potential new industries could affect the economy in Louisiana.
What are the skills, knowledge, talents, personal characteristics, and efforts likely to enhance
prospects of success in finding a job in a particular field?
Ask students to create a future resume applying for a position in a specific place and business
in Louisiana. Ask students to act as interviewers/prospective employers as they share
resumes.
Activity 3: Consequences of Saving and Investment and Perspective on Interest Rates
(GLEs: 54, 55)
Ask students to explain why savings are important to individuals and businesspersons via a
chart that identifies at least three to five reasons. Discuss with students how savings provide a
safety net in the event of unexpected events (e.g., sickness, layoffs, natural disasters).
Discuss with students different types of savings instruments and accounts (e.g., 401K plans,
savings bonds, passbook savings accounts, retirement accounts). Have students write a brief
saving plan for their future that includes regular and retirement savings.
Ask students to explain how individual and business savings plans may affect government.
Explain the importance of savings in a market economy.
Ask students to explain (and graph) how the principle of demand and supply determines the
equilibrium interest rate. How will interest rates act as an incentive for savers and borrowers?
Ask students to create a consumer help brochure outlining the value of saving for the
individual, the business, and the market economy.
Free Enterprise‘Unit 10‘Personal Economics
65
Sample Assessments
General Guidelines
•
•
•
Use a variety of performance assessments to determine student understanding of
content.
Select assessments that are consistent with the types of products that result from the
student activities.
Develop a scoring rubric collaboratively with other teachers or students.
General Assessments
•
•
•
Students should write a journal entry on what they see as their own skills and
interests. Students should write what career would be best suited for them,
considering their own skills and interests. Allow students to research the requirements
of occupations with the Internet or other resource materials.
Students should look through the fine print in credit card advertisements and
applications to find information that consumers might need when opening a credit
card account (e.g., annual fees, APR, late fees). The teacher should provide students
with a variety of these advertisements and applications that come in the mail.
Students should write a list of the pros and cons of each credit card advertisement
they reviewed.
Students should create a “best financial advice” list. Students should ask several
adults to give them their five best financial tips. Students should compile all the tips
into a best financial advice list. Students should be able to explain why the adult they
interviewed believed that it was good financial advice.
Activity-Specific Assessments
•
Activity 1: Have students write a future household budget. First, students should
research their anticipated career and find out what their monthly salary will be. Next,
provide students with a list of expenses, such as housing, electricity, car note, food,
medical care, entertainment, savings, and taxes. Students should write how much they
will spend on each item, then calculate the total expenses. Students should research
what their expenses will be for each item by using the internet, contacting business, or
speaking to adults.
•
Activity 2: Ask students to create a future resume applying for a position in a specific
place and business in Louisiana. Ask students to act as interviewers/prospective
employers as they share resumes.
Free Enterprise‘Unit 10‘Personal Economics
66
•
Activity 3: Ask students to explain (and graph) how the principle of demand and
supply determines the equilibrium interest rate. In their journals, students should
answer, How will interest rates act as an incentive for savers and borrowers? Next,
have students create a consumer help brochure outlining the value of saving for the
individual, the business, and the market economy. Students may use computer
graphics to make this brochure. Rubric for brochure:
Neat and uses pictures (either handdrawn or computer- generated)
Accurately outlines the benefits of
saving for the individual, business,
and market economy (at least 3
benefits for each)
Grammar and spelling
Free Enterprise‘Unit 10‘Personal Economics
15%
60%
25%
67