Download Economics

Economics
OGT Review
Study of Economics
Economics - study of how people use their limited resources to satisfy their unlimited wants.
3 Basic Economic Questions
Every Society Must Answer
• What to produce?
• How to produce?
• For whom to produce it for?
ECONOMIC SYSTEMS
Lets look at a couple samples of how questions look on the OGT that
will test your knowledge of economic systems
In a certain country, decisions
regarding production and
consumption of goods are based
upon customs, beliefs, rituals, and
habits. Over time, the economic
system changes to one in which
production decisions are based on
competition and consumer choice.
How has the economic system of
this country changed?
A. from a mixed economy to a
command economy
B. from a command economy to
a mixed economy
C. from a traditional economy to
a market economy
D. from a market economy to a
traditional economy
ECONOMIC SYSTEMS
Lets look at a couple samples of how questions look on the OGT that
will test your knowledge of economic systems
In a certain country, all decisions
concerning the production of goods
and services are made by the
government. However, following a
political revolution, a new economic
system is set up in which some
decisions regarding production of
goods and services are made by
the government and others are
made by individuals and private
companies.
How has the economy of this
country changed?
A. from a mixed economy to a
market economy
B. from a command economy to
a mixed economy
C. from a market economy to a
traditional economy
D. from a traditional economy to
a command economy
ECONOMIC SYSTEMS
Lets look at a couple samples of how questions look on the OGT that
will test your knowledge of economic systems
A. if the government takes
control of family-owned
farms
Economic systems answer the
question of how goods and
services are produced. What is one
way a country could change from a
command economy to a market
economy?
B. if privately owned banks
become subject to stricter
regulation
C. if agricultural and factory
workers are required to join
labor unions
D. if industries that had been
owned by the government
become privately owned
TRADE
IMPORTANT TERMS TO KNOW
1. Imports: products entering into a
country from a different location
2. Exports: products leaving a country
for a different destination
3. Tariff: tax on imported goods
4. Embargo/Blockade: a country
refuses to trade with another nation for
political or economic reasons
5. Trading Blocs: Countries from the
same region of the world who will work
together to conduct trade with other
nations.
They do this because they are likely to
get more for their products as a group
than competing against one another.
Example: Countries in the Middle East
pooling their oil and selling it as one
organization: OPEC
TARIFF INFORMATION
***A country will raise tariffs on
foreign imports to help
companies in their nation sell
more goods to consumers
If a foreign company has to pay a
higher tax to sell their good in
the United States they will have
to charge consumers more for
that product.
***A country will lower tariffs on
foreign imports if there is a
product in high demand in their
nation that cannot be produced
by their own companies
Trade
Lets look at a couple samples of how questions look on the OGT that
will test your knowledge of Trade
A. increase taxes on the
production of U.S.
automobiles
Which action could the U.S.
government employ to protect U.S.
automobile manufacturers from
foreign competition?
B. create free trade
agreements
with automobile-producing
countries
C. increase tariffs and import
restrictions on foreign
automobiles
D. implement stricter control
of competition among U.S.
automobile manufacturers
TAXES
TAX Effects
*16th Amendment: granted
Congress the right to raise
money (revenue) by collecting
taxes from people’s income
(money earned from work)
Tax money is used to pay for
schools, public service projects,
military, aide to foreign nations,
etc.
How much the government taxes
workers and business owners
can have a HUGE impact on the
economy
***If the government raises taxes on
money made by BUSINESSES it
takes away from business owners
profits
If business owners are losing money to
high taxes they are going to look for
things to cut to make up for the
money loss….Number ONE CUT—
JOBS!
***If workers are seeing more of their
hard earned paycheck taken away
by taxes they are going to buy fewer
products. This means businesses
make less money and risk going out
of business or having to lay off
workers!
Taxes
Lets look at a couple samples of how questions look on the OGT that
will test your knowledge of Taxes. The following is an example of a 2
point writing question on the OGT.
POTENTIAL WRITTEN RESPONSE
What would be the expected effect
on consumer spending and on the
unemployment rate if the United
States government were to
increase
personal income tax rates?
Write your answer in the Answer
Document. (2 points)
If the U.S. government were to
increase income taxes consumer
spending would go down
because people would be
getting to keep less of the
money they earn with each
paycheck. Because people are
buying fewer products
businesses will be making less
money and will have to lay
workers off leading to a
HIGHER unemployment rate.
Cleaning up the Banking System
FEDERAL RESERVE SYSTEM
Improved the nation’s monetary and banking system by allowing banks to control the
money supply. The Federal Reserve Board was created to monitor spending/lending
and determine the amount of money made available to banks for loans.
Level OneFederal Reserve Board (FED)…members are appointed
by the President. They control the money supply to the banks by
raising/lowering interest rates
I
II
III
Level Two 12 Federal Reserve Banks across the U.S. that
provide and collect money from local banks within their
region. (Cleveland)
Level ThreeThe millions of member banks
found in every community across the U.S.
HOW DOES THE FED WORK?
ESSAYThe country is in a state of economic depression. Money is scarce, unemployment is high, bankruptcy/foreclosures are rising, and
businesses are failing. What can the FED do to fix this economic problem and what impact will the FED’s decision have on consumers, businesses,
and the government.
*IT ALL COMES DOWN TO INTERST RATES!-A rate which is charged or paid for the
use of money
The Fed should……..
Lower Interest rates to increase the amount of money
banks have available for loan and make it easier for
people and businesses to get access to that money.
Impact of Lowering Interest Rates?……
Consumers: The money in circulation will
rise encouraging consumers to spend more
money
Business: As people spend more, business will hire
more workers, increase production, and expand.
Government: More people spending money, more
people making income, business making hire
profits EQUALS greater TAX REVENUES!