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Goal 9 Factors Influencing the US Economy The Business Cycle • Expansion (economic recovery) • Peak (highest point, means prosperity) • Contraction (fall in economy) • Trough (lowest point, can be recession or even depression) Economic Indicators - GDP • Above example is US GDP (calculates total value of all goods and services in the economy • Per Capita GDP – calculates number of goods produced per person (great at figuring out standard of living) Economic Indicators - GNP • Gross National Product calculates goods produced by US companies Economic Indicators - Consumer Price Index • CPI measures monthly changes in the cost of goods by monitoring goods that are typically bought by consumers Economic Indicators - National Debt • National Debt is the amount of money owed by the federal gov’t Government Regulation • Environmental Protection through the EPA • OSHA and CPSC are concerned with safety, workplace and consumer respectively • Affirmative Action (giving minorities candidates a better opportunity for jobs) is enforced • Labor Disputes are often dealt with by government Government Deregulation • The government will sometimes deregulate (take regulations away from the government) an industry to encourage competition • An example of this is when Jimmy Carter deregulated the airlines, making it more competitive and made the airlines have to provide better stuff than their competitors What impacts Resources – Sort of New Stuff so LOOK AT THIS Immigration (people coming into the US from another country Migration (people moving within the US) Leaving of the Rust Belt (Northeast US area that held manufacturing jobs) Leaving of the Frost Belt (Upper North like Montana that held manufacturing jobs) Settling in the Sun Belt (Area of South including NC that hold new jobs for people) Settling in Silicon Valley (northern California’s high tech computer hub) Settling in Research Triangle Park (Raliegh’s high tech research and development area) Automation has replaced workers in manufacturing areas in the North Service Industries have increased and provided new jobs for workers Current Events that Affected US Economy • The War on Terror and 9/11 • The Department of Homeland Security created to deal with terrorist threats • Patriot Act increases law enforcement’s ability to investigate people • Operation Iraqi Freedom and Afghanistan invasion Legal and Economic Events Affecting the US Economy • Legal Event is Microsoft Case in 2001 – government told Microsoft to break into other companies and stop it’s monopoly, but Microsoft appeals and somewhat wins case • Economic Events: 1) Downsizing – reducing employees and production 2) Outsourcing – sending jobs oversees 3) NC Textile and Furniture Industries have been especially hit by downsizing and outsourcing International Trade • Multinational Conglomerates own a variety of countries in more than one nation • Globalization is a worldwide connection of businesses • Interdependence is when countries rely on each other for products • These three things dominate international trade today Balances of Trade • If imports are greater than exports: 1) Trade Deficit (money is lost through trading) 2) Unfavorable Balance of Trade • If exports are greater than imports: 1) Trade Surplus (money is gained through trading) 2) Favorable Balance of Trade Who Should Produce a Good? • Absolute Advantage says one country can produce more of a good than another country can • Comparative Advantage says one country can produce a good more efficiently than another country can • Law of Comparative Advantage says that the country with the greater Comparative Advantage produces the good Factors When Trading Exchange Rates (converting one currency into another currency of another nation) Free Trade (no barriers) v. Embargoes (preventing another country from trading) Tariffs (taxes on goods from another country, raises prices of foreign goods in a country and therefore helps home business), Import Quotas and Export Restraints Treaties (formal agreements between nations) including WTO, EU, IMF, UN, and NAFTA to trade freely Global Problems • Giving foreign aid to developing countries (not developed) • The World Bank provides council and finances to poorer countries that need it • US helps because it provides more markets, helps country stability, and we have a moral duty • Political concerns include: 1) Human Rights Issues 2) Child Labor Laws 3) Examples would be Cuba and China Monetary v. Fiscal Policy • Fiscal Policy 1) Taxation (including proportional, regressive, and progressive taxes) 2) Spending (looking at revenue from taxes and deciding how to prepare federal budget) • Monetary Policy 1) Federal Reserve creates reserve requirements (banks keep certain amount of money) 2) Discount Rates or Interest Rates (percentage of money one must pay a lender in exchange for loan) 3) Open Market Operations (selling or buying stuff as the Fed) Economic Conditions • Scarcity is a problem (OPEC oil embargo creates scarcity of oil in 1973, just like Katrina in 2006) • Inflation, or even Stagflation, forces people to cut back on what they spend • The Stock Market can be a “bull market” (doing well) or a “bear market” (doing poorly) and determines whether people will invest or spend money Environmental and Political Factors • Environmental: 1) Clean Air Act and Clean Water Act 2) Government restricts economic development to protect environment (Alaska oil drilling for example) 3) Government enforces pollution standards • Political: 1) OPEC imposes embargo on oil in the Middle East 2) Embargo against Cuban goods 3) Zoning Laws and Building Codes prevent certain economic development 4) NIMBY and YIMBY affect economic development