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OBJECTIVES #1 / #2 • SWBAT COMPARE AND CONTRAST DIFFERENT ECONOMIC SYSTEMS (TRADITIONAL, MARKET, COMMAND AND MIXED) AND IDENTIFY THE POLITICAL SYSTEMS THEY ARE ASSOCIATED WITH. • SWBAT IDENTIFY HOW NATIONS UNDER EACH SYSTEM ALLOCATE THEIR LIMITED RESOURCES. ECONOMICS FINANCIAL LITERACY ECONOMICS DEALS WITH THE PRODUCTION, DISTRIBUTION AND CONSUMPTION OF GOODS AND SERVICES. FINANCIAL LITERACY USE KNOWLEDGE AND SKILLS TO MANAGE LIMITED FINANCIAL RESOURCES EFFECTIVELY FOR A LIFETIME OF FINANCIAL SECURITY. Economic System • Refers to how people and nations use limited resources to satisfy their wants and needs. • Questions that people as well as nations must answer… – What goods and services should we produce? – How should we produce them? – For whom should we produce them? – The Economic system will answer these questions. 4 Main types of Economies Traditional Command Mixed Market C&C • IN YOUR OWN WORDS BREIFLY DESCRIBE EACH OF THE 4 ECONOMIC SYSTEMS (USE THE HANDOUT). THEN COMPARE, CONTRAST AND SUMMARIZE THE INFORMATION IN A CLOSING PARAGRAPH TO BETTER UNDERSTAND THE TYPES OF ECONOMIES. • You may work with a partner TRADITIONAL ECONOMY • People produce what they need to survive. • An economy that depends heavily on hunting, gathering, and farming. • Where would you expect to see this in the world today? • Normally found in underdeveloped nations. MARKET ECONOMY • A SYSTEM WHERE DECISIONS REGARDING THE ALLOCATION OF RESOURCES DEPENDS ON FORCES SUCH AS SUPPLY AND DEMAND. • A ‘TRUE’ MARKET ECONOMY IS FREE OF GOVERNMENT INFLUENCE. • Laissez-faire • Competition is the key – Keeps quality up, prices down COMMAND ECONOMY • AN ECONOMY WHERE SUPPLY AND DEMAND IS REGULATED BY THE GOVERNMENT RATHER THAN MARKET FORCES. • GOVERNMENT PLANNERS DECIDE WHAT GOODS AND SERVICES ARE PRODUCED AND HOW THEY ARE DISTRIBUTED. • The government owns the factories, land, and stores MIXED ECONOMY • AN ECONOMIC SYSTEM IN WHICH PRIVATE BUSINESSES AND THE GOVERNMENT COEXIST. • MOST MODERN ECONOMIES ARE MIXED. WITH SIGNIFICANT SEGMENTS OF THE ECONOMY BEING PRIVATE AND STATE RUN. COMPARISONS traditional market command mixed How things By the are decided people By the people and market factors By the government By the people and government Importance Very of citizens important Very important Little importance Somewhat important Importance No of importance government No importance Very important Somewhat important Economic/Political Systems I. Communism & Dictatorships (Command Economy) A. Examples: Cuba, China (prior to 1989), Vietnam, North Korea, Venezuela, Laos 1. Government owns almost all means of production and almost all stores, from factories and land to consumer products. 2. Government decides what and how much to produce. Communism 3. People work for the good of the nation. Because of Nationalism 4. Government decides how people are rewarded for their work. 5. Supply is limited. Luxuries are available to only a chosen few. 6. Ultimate goal is to eliminate social class. 7. Individualism is frowned upon (no elitism) 8. No Private Property under communist government. 9. Military service is typically required. Economic/Political Systems I. Socialism (mix of government ownership and private enterprise) – Mixed Economy A. Canada, Japan, All of Western Europe (France, Germany, Spain, Britain, etc.). China = Socialist Dictatorship 1. Government owns major means of production and decides what and how much to produce. Individuals are allowed to own and invest privately, though private investments are closely regulated. Socialism 2. People work for the good of the nation. 3. Government owns some major industries, majority are privately owned 4. Progressive tax system, the more you make the more pay. Goal = more social equality, less “have-nots”. 5. Majority of property is privately owned. Economic/Political Systems I. Capitalism (Free Market Economy) (roots are in laissez faire economics) A. Examples: USA, Mexico, Australia 1. Almost all means of production are owned by individuals, not by the government. Consumer spending decides what and how much is produced. Supply and demand decides cost. Capitalism 2. Buyers and sellers compete for their own advantage. Free competition can mean greater efficiency and lower prices. Freedom to make profit however also means investors can lose money. 3. People can work anywhere. Wages determine how much they can buy. Government provides some services to help the poor. Capitalism Freedoms in our American Economy 1.Freedom to earn profits 2.Freedom to own property 3.Free competition among business firms 4.Free competition among workers 5.Free market INSTRUCTIONAL GOAL #3 - 12/10 - WILL BE ABLE TO DEVELOP A PLAN FOR SHORT-TERM INVESTMANT STRATEGY. STOCK MARKET • SHARE OF STOCK A SHARE OF OWNERSHIP OF A COMPANY, SHARE THE RISKS, REWARDS AND DESCISIONS. • HOW TO MAKE MONEY DIVIDENDS AND SALE OF STOCKS. • POSSIBLE INFLUENCES ON THE VALUE WEATHER, COMPETITORS, FINANCIAL REPORTS, INVENTIONS, LABOR SPRINGSTEEN’S ICE CREAM STAND FREEHOLD, NJ • • • • • • • $100, 000 NEEDED 5 SHAREHOLDERS at $20,000 each STORM DESTROYS ROOF HOTTEST SUMMER IN RECORD DQ ANNOUNCES PLANS FOR NEARBY STORE A STOCKHOLDER LOSES HIS/HER JOB STORM DESTROYS 1/3 OF DAIRY COWS IN AMERICA • RATS FOUND IN BOTTOM OF DQ’S FREEZERS REVIEW • WHAT VARIABLES HELPED DRIVE THE STOCK’S VALUE UP? • WHAT VARIABLES HELPED DRIVE THE STOCK’S VALUES DOWN? • WHAT ELSE, CAN YOU IMAGINE MIGHT HELP OR HURT THE VALUE OF SPRINGSTEEN’S STOCK? • WITH OUR UPCOMING STOCK MARKET SIMULATION DEC. 10-JAN. 17TH, WHAT VARIABLES MIGHT HAVE THE GREATEST IMAPCT? How to read a stock quote Stock Market Simulation • Reading a stock market quote table worksheet • Log In handout – Review web site • Begin investing PARTICIPATION • DOES EVERY COMPANY HAVE STOCK? • EXPLAIN WHAT MIGHT POSITIVELY IMPACT THE PRICE OF STOCKS IN GENERAL MOTORS. • EXPLAIN WHAT MIGHT NEGATIVELY IMPACT THE PRICE OF STOCKS IN THE APPLE COMPUTER COMPANY. MAD MONEY • JIM CRAMER • SELLING PRICE GOOGLE 17.21 • SIMULATION CHARTS (3 MONTH 5 YEARS) • PARTICIPATION POINTS • RECORD NOTES ( INCLUDING THE NAMES OF STOCKS ) AND ADVICE ON BUYING OR SELLING THE BULL AND THE BEAR • BULL MARKET – A stock market that is on the rise. The trend for the value of stocks is showing a steady increase. • BEAR MARKET – A stock market that is on the fall/decline. The trend for the value of stocks is showing a steady decrease. • Named after the way in which each animal (bull and bear) attacks. • “Net Change” on a stock market quote table, a great way to determine bullish or bearish markets. HOWTHEMARKETWORKS.COM • CHECK STANDINGS • DISCUSS PROGRESS • QUESTIONS INSTRUCTIONAL GOAL #4 •DESCRIBE THE VALUE OF MONEY AND IMPACT OF INFLATION AND DEFLATION. MONEY • WHAT IS THE VALUE OF MONEY • COMPLETELY BASED ON TRUST AND CONFIDENCE • EXCHANGE RATE REFLECTS CONFIDENCE • http://www.x-rates.com/d/USD/table.html A WORLDWIDE VIEW • The dollar's worth is NOT tied to the worth of gold held in our treasuries anymore. What it is tied to is the global economy. If lots of countries buy our debt and feel that is a safe purchase (meaning we will pay off the debt at the prescribed time) the dollar's value will be high. 3 USES OF MONEY • MEDIUM OF EXCHANGE(BARTER) • COMPARE VALUE • STORE OF VALUE INFLATION • INFLATION THE GENERAL RISE OF THE COST OF GOODS AND SERVICES • A GALLON OF GAS 1974 $.39 • A GALLON OF GAS 2010 $2.99 • THE PRICE IS INFLATED ALMOST 800% INFLATION • • • • Related to the flow of currency in a nation. More currency in circulation = prices rise However, value of currency is less THE HIGHER THE RATE OF INFLATION THE LESS BUYING POWER YOU HAVE. • Your money buys fewer goods and services because of each unit’s lack of value. • In economic times of recession should the government support inflation? PARTICIPATION • WHAT TYPE OF PRODUCTS MIGHT BE AFFECTED BY THE INFLATION OF GAS PRICES • HOW MIGHT THE INFLATION OF GAS PRICES IMPACT THE COST OF PRODUCING OTHER PRODUCTS? • HOW MIGHT THE INFLATION OF GAS PRICES IMPACT THE PRICE OF OTHER PRODUCTS? DEFLATION • DEFLATION – A general decline in the prices of goods and services. • Related to the flow of currency in a nation • Less currency in circulation = prices fall • However, value of money increases DEFLATION • How might deflation affect spending in our nation? • You have more purchasing power, because your units of money can buy you more with the same amount of money. • How might deflation affect business? CAPITALISM • What are the main characteristics of a Free Market economy? • What market factors “drive” this type of system? • What type of political system do we typically associate with capitalism and free market economy? • Name one country (besides the US) that has this type of system. • What weaknesses do you see in this system? INSTRUCTIONAL GOAL #5 • SWBAT TO DESCRIBE THE IMPACT OF COMPETITION ON COSTS, PRICES, PRODUCTION AND CONSUMPTION. INSTRUCTIONAL GOAL #6 • WILL BE ABLE TO SHOW THE RELATIONSHIP BETWEEN TRADE AGREEMENTS AND THE POSSIBLE IMPACT ON THE U.S. ECONOMY. Billionaires Up, America Down • Read short article and answer the questions that correspond. • Capitalism; A Love Story. By Michael Moore COMPETITION THE STRUGGLE AMONG PRODUCERS FOR THE MONEY OF CONSUMERS. • COSTS • PRICES • GOODS & SERVICES • PRODUCTION POWER • COMPETITION AMONG CAR COMPANIES DROVE GM TO CLOSE PLANTS AND LAY PEOPLE OFF IN FLINT, MICH. (birthplace of GM) TRADE AGREEMENTS • Ronald Reagan Administration 1980s. • NAFTA(1994)NORTH AMERICAN FREE TRADE AGREEMENT, ELIMINATED TARIFFS AND OTHER TRADE BARRIERS BETWEEN; U.S., CANADA AND MEXICO. • EXPORTS INCREASED • JOBS LOST SEEMED OFFSET BY JOBS GAINED • AUTO INDUSTRY HURT WHILE OTHER AREAS OF THE ECONOMY WERE HELPED. • OUTSOURCING BECOMES A NATION PROBLEM. Warm Up 12/19 1. Why is competition such an important factor in a Free Market Economy? 2. How has increased global competition been bad for the American worker? 3. What does NAFTA stand for? What is it? 4. How have agreements like NAFTA impacted the American economy and lives of average American workers? ROGER AND ME • PART 1 • 2 Columns • RECORD EXAMPLES OF “ECONOMIC HARDSHIPS”. • RECORD PROBLEMS THAT LED TO THE HARDSHIPS “SOURCES OF ECONOMIC HARDSHIPS” IDENTIFIED BY THE NARRATOR. Roger and Me • What negatives do you see to outsourcing? • What positives do you see to outsourcing? • If you were a CEO in today’s highly competitive global economy, would you outsource if given the opportunity to move your business to…say China or Mexico? Explain. • What is the solution if any to this problem? INSTRUCTIONAL GOAL #7 • WILL BE ABLE TO DESCRIBE HOW CONSUMERS AND PRODUCERS INTERACT IN A FREE MARKET ECONOMY. SUPPLY • The quantity of a commodity that is available for purchase at a particular price. DEMAND The desire to purchase, coupled with the power to do so. Supply and Demand The market price is determined by both the supply and demand for it. The price level of a good is determined by the point at which quantity supplied equals quantity demanded. BUSINESS CYCLE PRODUCTS BUSINESS PRODUCER EMPLOYER INDIVIDUAL CONSUMER EMPLOYEE LABOR PARTICIPATION • WHAT CAN BE DONE TO INCREASE ANY OF THESE, EXPLAIN HOW. • SKILLED LABOR FORCE • NUMBER OF JOBS • AMOUNT OF A PRODUCT CONSUMED • AMOUNT OF A PRODUCT PRODUCED INSTRUCTIONAL GOAL • WILL BE ABLE TO EXPLAIN HOW FEDERAL RESERVE USES MONETARY TOOLS TO REGULATE THE NATION’S MONEY SUPPLY AND HOW THIS IMPACTS OUR ECONOMY. PRIMING THE PUMP • THE GOVERNMENT GETS MONEY INTO THE ECONOMY ( TAX REFUNDS, GOVERNMENT FUNDED JOBS) TO DRIVE THE BUSINESS CYCLE IN A POSITIVE DIRECTION. FEDERAL RESERVE BANK • A 12 BANK SYSTEM. • THE ‘FED’ CONTROLS THE ‘PRIME’ INTEREST RATE, MANY LOANS TIED TO THIS FIGURE. • THE HIGHER THE INTEREST RATE, THE FEWER LOANS ARE MADE AND THE SUPPLY OF MONEY DECREASES. • THE LOWER THE INTEREST RATE, THE LESS PEOPLE OWE ON THEIR LOANS, THEY MAY THEN SPEND MORE AND FUEL THE ECONOMY BANKING INTEREST PAID INTEREST EARNED DEPOSITORS BORROWERS 10 Trillion and Counting • Complete chart as video plays. VIDEO PREVIEW • BUDGET DEFICIT-GOVERNMENT SPENDING THAT IS MORE THAN IT’S INCOME • NATIONAL DEBT- THE MONEY A COUNTRY OWES TO LENDERS AS A RESULT OF MANY ANNUAL BUDGET DEFICITS. • RECESSION- A PERIOD OF SLOW OR NEGATIVE ECONOMIC ACTIVITY USUALLY INCLUDES RISING UNEMPLOYMENT. • ECONOMIC STIMULUS- A TAX CUT OR INCREASE IN GOVERNMENT SPENDING DESIGNED TO INCREASE ECONOMIC ACTIVITY • BALANCED BUDGET-EXPENDITURES WILL EQUAL INCOME VIDEO VOCABULARY • BOND – AN INVESTMENT, WHERE A BOND(PROMISE TO BE REPAYED WITH INTEREST) IS SOLD TO SOMEONE ELSE • GROSS DOMESTIC PRODUCT (GDP) – THE TOTAL VALUE OF A COUNTRY’S ANNUAL OUTPUT OF GOODS AND SERVICES. • MONETARY POLICY – THE REGULATION OF MONEY SUPPLY USUALLY BY CONTROLLING THE INTEREST RATE. ACT Word 1/25/11 • Immutable (adj.). Not susceptible to change. 112th CONGRESS • 3 NEW HOUSE RULES • ALL BILLS MUST SHOW CONSTITUTIONAL BASIS • ALL BILLS SHOW HOW IT WILL BE PAID FOR, NO DEFICIT SPENDING (PAYGO) • LIMITED USE OF CELL PHONES PARTICIPATION • WHAT ARE ENTITLEMENTS AND HOW DO THEY IMPACT THE FEDERAL BUDGET? • WHAT WAS THE TAX POLICY, UNDER GEORGE BUSH? HOW DID THIS SEEM TO IMPACT THE ECONOMY? • WHAT WAS THE SPENDING POLICY, UNDER GEORGE BUSH, HOW DID THIS SEEM TO IMPACT THE ECONOMY? • GIVEN THE EVENTS OF 9/11 WHAT WOULD YOU HAVE DONE, AS PRESIDENT, CONSIDERING NATIONAL DEFENSE AND OUR ECONOMY? State of the Union • You are to write a solid paragraph making your predictions on what will be the main issues that Barak Obama will address tonight in the State of the Union Address. What will he say about these issues, what will be the Republican response to him? ACT Word 1/31 • Impudent (adj.). Rude, improper. • Incessant (adj.). Without interruption. • Inclination (noun). A tendency, propensity INSTRUCTIONAL GOALS • WILL IDENTIFY THE VARIOUS TYPES OF TAXES LEVIED BY CONGRESS ON AMERICANS. • WILL COMPARE AND CONTRAST PORPORTIONAL, PROGRESSIVE AND REGRESSIVE TAXES. 3 Basic Categories of Taxes • Regressive Taxes • Progressive Taxes • Proportional Taxes REGRESSIVE TAX • A tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. • Business, Marriage, Fishing Licenses PROGRESSIVE TAX • Is a tax by which the tax rate increases as the taxable base amount increases. • Income Tax PROPORTIONAL TAX • A tax imposed so that the tax rate is in proportion to the amount subject to taxation. • Sales Tax Warm Up 1/10 1. What are the 3 basic categories of taxes here in the US? 2. Which category of tax best describes income taxes here in the US. Explain that type of tax. 3. Which category of tax best describes sales taxes here in the US. Explain it. 4. Which category of tax best describes joint marriage tax filing here in the US. Explain it. Warm Up 1/11 1. What is the “main tax” in America? 2. Business taxes are also called what? 3. What types of things are included in payroll taxes? 4. How are the most common types of capital gains taxes created? 5. What are sales taxes also known as? INSTRUCTIONAL GOAL #8 • WILL BE ABLE TO DESCRIBE THE IMPACT OF EDUCATION, CAREER CHOICE, GEOGRAPHY, AND WORK HABITS WILL HAVE ON FUTURE EMPLOYMENT AND JOB SECURITY. C&C • DEVELOP A LIST OF THE MOST SIGNIFICANT VARIABLES ON INCOME LEVEL. INCOME POTENTIAL INCOME POTENTIAL • SUPPLY AND DEMAND INTERACT • WHAT CAN PUT YOU MORE IN DEMAND THAN ANOTHER POTENTIAL EMPLOYEE? • EDUCATION • DROPOUTS AVERAGE $8.00 PER HOUR • HS $11 SOME COLL$14 COLL$23 • ADVANCED DEGREE $30 AND HOUR$62,000 INTRUCTIONAL GOAL #9 • WILL ANANLYZE EARNING STATEMENT AND IDENTIFY IMPORTANT INFORMATION; GROSS WAGES, BENEFITS, TAXES AND MISC. DEDUCTIONS. Sample Paystub INSTRUCTIONAL GOAL #8 • WILL BE ABLE TO RELATE FEDERAL GOVERNMENT SPENDING AND TAX POLICY TO THE HEALTH OF OUR ECONOMY. INTRUCTIONAL GOAL • WILL ANANLYZE EARNING STATEMENT AND IDENTIFY IMPRORTANT INFORMATION; GROSS WAGES, BENEFITS, TAXES AND MISC. DEDUCTIONS. INSTRUCTIONAL GOAL • WILL BE ABLE TO MAKE ECONOMIC CHOICES BECAUSE YOU CAN’T HAVE ALL THE GOODS AND SERVICES THAT YOU MAY WANT. INSTRUCTIONAL GOAL • USE FINANCIAL REPORTS ( BANK STATEMENTS, STOCK MARKET REPORTS, MUTUAL FUND STATEMETNS) TO MAKE AND ANALYZE DECISIONS ABOUT PERSONAL FINANCE. INSTRUCTIONAL GOAL • WILL BE ABLE TO SHOW RELATION BETWEEN TARIFFS, QUOTAS, SUBSIDIES, TRADE AGREEMENTS AND MEMBERSHIP ECONOMIC ORGANIZATIONS SIGNIFICANTLY IMPACTS INTERNATIONAL TRADE.