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• Warm-up: Write down 3 words that describe unemployment, and 3 words that describe poverty • Now list 2 people that you know, their job and 3 of their job functions. Tell me what could happen to get rid of their position and one thing that could happen to increase the need for that position. Ch 13: Economic Challenges 13.1 Unemployment • In the late 1990’s, early 2000’s lows unemployment in the US hit record_____. It is not just a personal issue – it is an national economy. issue for the _______ unemployment to • Economists look at ____________ determine the health of the economy. • Frictional Unemployment – When people take time ____ to find a job • Seasonal Unemployment season – When industries slow or shut down for a _______ • Structural Unemployment do not match the jobs that are – When workers’ skills ____________ available (farming, industrial, technological) • Cyclical Unemployment – Rises during economic downturns and falls when economy improves (Great Depression) – During recessions _________ of the business cycle the demand for goods and services drops. – This then causes the demand _______ for labor to drop. – The worst was during the Great Depression – when ¼ __ of workers were laid off. • FULL Employment no cyclical – Level reached when there is __________ employment • Underemployment – Working at a job for which they are over-qualified or working part-time when they ___________, desire full-time work • Some people give up hope of finding work. These _________ discouraged workers have stopped searching for employment. Activity: Create a Character • Create a fictional worker. Write a paragraph explaining each person’s employment situation. Include why these workers are discouraged or underemployed, their current financial situation, and their view of the future. – Discouraged, underemployed, frictional, seasonal, structural or cyclical (groups) Ch 13.3 Inflation • As inflation rises, every dollar will buy a _______ smaller percentage of a good. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year. Most countries' central banks will try to 2-3%. sustain an inflation rate of _____ • During World War II, you could buy a loaf of bread for $0.15, a new car for less than $1,000 and an average house for around $5,000. In the twenty-first century, bread, cars, houses and just about everything else cost more. A lot more. Clearly, we've experienced a significant amount of inflation over the last 60 years. When inflation surged to double-digit _________ levels in the mid- to late1970s, Americans declared it public enemy No.1. Since then, public fearful anxiety has abated along with inflation, but people remain ________ of inflation, even at the minimal levels we've seen over the past few years. Although it's common knowledge that prices go up over time, the general population doesn't understand the forces behind inflation. INFLATION • Inflation is a general ________ increase in prices. Consumer Price Index • CPI: ____________________ measures the price of a standard group of goods meant to represent the “market basket” Market Basket • The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually ________. For the current CPI, this information was bought collected from the Consumer Expenditure Surveys for 2005 and 2006. In each of those years, about 7,000 families from around the country provided information each quarter on their spending habits in the interview survey. To collect information on frequently purchased items, such as food and personal care products, another 7,000 families in each of these years kept diaries listing everything they bought during a 2-week period. • Over the 2 year period, then, expenditure information came from approximately 28,000 weekly diaries and 60,000 quarterly interviews used to determine the importance, or weight, of the more than ________________ 200 item categories in the CPI index structure. • The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows: • • • • • • • • Food and beverages (milk, coffee, chicken, wine, snacks) Housing (rent, fuel oil, furniture) Apparel (shirts, sweaters, jewelry) Transportation (cars, airline fares, gas, car insurance) Medical care (prescriptions, medical supplies, eye care) Recreation (tv, toys, pets, sports equipment) Education and communication (tuition, postate, telephone, computers) Other goods and services (tobacco, haircuts, funeral expenses) Market Basket Cont. does not • The CPI _________ include investment items, such as stocks, bonds, real estate, and life insurance. (These items relate to savings and not to day-to-day consumption expenses.) • About every 10 _______ years the items in the updated to account market basket are ________ for shifting consumer buying habits. Types of Inflation • Core inflation rate • Hyperinflation – out of control – worst type Causes of Inflation • Quantity Theory: ______________ too much money supplies • Demand-pull: demand exceeds _______ thus forcing prices up. • Cost-push: when producers raise price to meet increased cost (primarily led by wage increase) – Wage-price spiral (p. 342) A feedback loop in which wage hikes due to inflation cause companies to raise prices, and those rising prices lead to demand for further wage increases, perpetuating the cycle. The opposite = today Effects of Inflation decreases • Purchasing Power __________ • People on fixed income have less. – ___________: Fixed income does not increase when prices go up lose money if the inflation • Savers may __________ rate is higher than their banks interest rate Ch 13.3 Poverty POVERTY Poverty threshold income level below • ______________: which income is insufficient to support a family • Cause of Poverty: Education, location, race, gender, change in family structure, economic shift. Income Inequality • The highest ___ 1/5 of the population have ___ 13 times more than the lower 1/5 Lorenz curve illustrates the • The ___________ distribution of income in the economy. • The lowest 20% of households received 3.6% of the nations income • The lowest 40% (2/5) received 12.5% • The wealthiest 1/5 of US households have ____ 50% Lorenz Curve Income Gap Cont. • Differences in skills and education • Inheritances Anti-Poverty Policies • Enterprise Zones: create jobs/opportunity in rundown areas – revitalize ________ inner cities or rural areas minimum wage • Employment Assistance: _____________ and grants for education • Welfare • Suppose you are in charge of creating an antipoverty program for your state. Create a list of at least 5 proposals for your program. • Make a flyer for one of your programs & present