Download ECON SUN #2 Student Contact Info (Copy from SUN #1) Student

ECON SUN #2
Student Contact Info (Copy from SUN #1)
Student Contact #1 Name:______________
Student Contact #1 Phone:______________
Student Contact #1 Email:______________
Student Contact #2….
McDermott Contact Email: [email protected]
Class Website: www.mcdermotthistory.net
Table of Contents
Page
Assignment
1. Student Contact and Table of Contents
2. Table of Contents (Con’t)
3. My Grade/Due Dates
4. Process: Competition and Market Structures *
5. Notes: Competition and Market Structures
6. Process: Taxation *
7. Notes: Taxation
8. Process: Economics of Gov’t Spending *
9. Notes: Economics of Gov’t Spending
10. Film: IOUSA */
11. Film: 30 Days */
12. Process: Deficits and National Debt *
13. Notes: Deficits and National Debt
14. Process: Savings *
15. Notes: Savings
16. Investment Assignment **
17. Investment Assignment Directions
18. Process: Investment Strategies *
19. Notes: Investment Strategies
20. Study Guide Test #3 **/
21. Study Guide Test #3
22. Study Guide
23. Study Guide
24. Process: Business Cycle *
25. Notes: Business Cycle
26. Process: Unemployment *
27. Notes: Unemployment
28. Project: Budget */
29. Directions: Budget Project
30. Advertising Project */
31. Advertising Project Directions
32. Process: Advertising Techniques *
33. Advertising Techniques
34. Final Study Guide **/
35.
36.
37. Final Study Guide
38. Process: Inflation *
39. Notes: Inflation
39
Notes: Inflation
I. Inflation in the United States
34
Final Study Guide
Production Possibilities Frontier (know the graphing of this
too)*
Sole Proprietorship
Corporation
Partnership
Gross Domestic Product
Paradox of Value
Wealth
Value
Opportunity Cost
Developing Countries
Obstacles to Economic Development **
World Bank
International Monetary Fund
Inflation
Expansion
Depression
Supply
Demand
Business Cycle
Unemployment
Types of Unemployment ***
Hyperinflation
Capitalism
Economics
Merger
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly
Types of Taxes ***
Public Sector
Private Sector
Social Security
Medicare
Factors of Production
Surplus
Shortage
Market Equilibrium
Elasticity (Supply and Demand – know how to graph) **
Mutual Fund
Roth IRA/IRA
401(k)
Capital Gains
Tax Return
IRS
Incidence of a tax
Sin Tax
Inflation Rate (calculate)
Be aware of the following: Films we have seen (IOUSA, 12
Angry Men, Tucker, and 30 Days episodes)
29
Directions: Budget Project
You are now in your mid to late 20s. You are earning an
income and will need to budget your finances. The income that
you earn will be “after taxes.”
You need to account for the following things per month:
1. Room (where you will live and the cost of that)
2. Food
3. Utilities (water, gas, electrical, garbage, phone, internet,
cable)
4. Transportation
5. Entertainment
6. Investment (savings)
7. Emergencies – repairs, doctor bills, etc.
8. Health Care
9. Insurance
10.
Any debts – school loans, credit cards?
11.
Misc.
On page 28 you will write out the budget for one month. Mr.
McDermott will give you your annual earnings and your
outstanding debt.
31
Advertising Project Directions
You will be coming up with an advertisement for a product
(good/service) that you make up. You will do this project on
page 30, and turn in a separate part to Mr. McD on its own as
well. Follow the criteria below to do this project:
1. Answer the couple of questions on page 30, you might
want to review page 33 in your notes on advertising
strategies.
2. You will need to do a rough draft on page 30, or an outline
of info regarding your ad, and then do a separate final draft to
be turned in on its own.
3. Student Choice: You can do one of the following: A print
ad (newspaper, magazine), a TV ad (you will write the script,
including what the viewer will see), or a Radio ad (just a
script).
4. The ad must be either a full page magazine or half page
newspaper, a TV ad that would last about a minute, or a radio
ad that would last about a minute.
5. Separate turn in due Thursday June 16, 2011.
30
Advertising Project
1. What is the name of your product, and define what it does?
2. What advertising strategies will you be using? Why?
3. Who is your target audience for the product and what is the
estimated sale price of the product?
(Use the rest of page 30 for a rough draft and/or outline for
you advertisement)
33
Advertising Techniques
1. Avante Garde – Ahead of their time with a new product.
2. Facts and Figures – Using statistics to sell a product.
3. Weasel Words – Using terms that would not actually make
any guarantee.
4. Magic Ingredients – Suggestion that some miraculous
discovery makes the product amazing.
5. Patriotism – Showing pride in your country/nation.
6. Diversion – Draws away from the ill effects of the product.
7. Transfer – Using placement of products to suggest positive
qualities in which the product itself cannot promise.
8. Plain Folks – Suggesting the product is practical and used
by common people like you.
9. Snob Appeal – Product will make you into a super star and
put you into an elite status.
10. Bribery – Buy one get one free.
11. Testimonial – Person endorses the product (usually
someone famous).
12. Wit and Humor – Customers are attracted to the
entertainment value of the advertisement and can attach that
to the product.
13. Simple Solutions – The product can solve a nagging
problems simply.
14. Card Stacking – List all of the good aspects of the
product and ignore all negative ones. (very common in many
other techniques).
15. Bandwagon – Exploits the desire of most people to join
what everyone else is doing.
32
Process: Advertising Techniques
1. How much do you pay attention to how advertisers
influence you buying certain products? Have you ever
bought a product solely due to a commercial? Why? (10)
2. Of the different advertising techniques, which four do you
think are the most interesting?
27
Notes: Unemployment
I. Measuring Unemployment
A. The Unemployment Rate – The number of unemployed
individuals divided by the total number of persons in the civilian
labor force. This is done by a survey that the Bureau of Census
does.
B. Limitations of the Unemployment Rate – 1. Does not
count people that have stopped looking for work in the last
month. 2. Counts people that are severely underemployed
(worked 1 hour in month then you are employed).
II. Kinds of Unemployment
A. Frictional Unemployment – Caused by workers who are
between jobs. This is considered the good
unemployment and will usually always exist on some
level.
B. Structural Unemployment – Occurs when there are
fundamental changes in the operations of the economy.
For example a reduction in demand or supply because of
different factors. This type of unemployment can most
likely cause recessions or expansion if it is low.
C. Cyclical Unemployment – A direct relationship to the
business cycle. In a recession there is more of this
unemployment. During an expansion period there is less
of this unemployment.
D. Seasonal Unemployment –
E. Technological Unemployment –
III. The Concept of Full Employment – Does not truly exist,
however an unemployment rate of about 4% or lower is
considered great for the economy in the U.S.
26
Process: Unemployment Rate
1. What do you think about how the unemployment rate is
figured out and determined in the U.S.? Do you think this
should be changed? Why? (10)
2. Of the different types of unemployment which two do you
find the most interesting? Why? How is 4%
unemployment “good?”
25
Notes: Business Cycle
I. Business Cycle in the United States – Business cycle: largely
systematic ups and downs of real GDP. Business Fluctuations:
The rise and fall of real GDP over time in a nonsystematic
manner.
A. Phases of the Business Cycle – Recession: A period
during which real GDP declines for two quarters in a row (6
consecutive months). Peak: Point where real GDP stops going
up. Trough: The turnaround point where real GDP stops going
down. Expansion: A period of recovery from a recession. A
Depression is a state where there are large numbers of people
out of work, acute shortages, and excess capacity in
manufacturing plants.
B. The Great Depression – Began with the stock market
crash of 1929. Lasted throughout the 1930s. Marked by high
unemployment (over 20% some times), bank closures, and a
failing overall economy.
C. Causes of the Great Depression – 1. Disparity between
rich and poor was huge. 2. Easy credit allowed people to
borrow a lot. 3. Global economy relied heavily on the U.S. 4.
High U.S. tariffs discouraged trade and economic growth by
other countries (and cheaper goods).
D. Business Cycles Since WWII – Average 11 month
recession, and 43 month expansions.
II. Causes of the Business Cycle
A. Capital Expenditures – When the economy is expanded
usually businesses are buying factories/machinery, etc.
B. Inventory Adjustments – When businesses believe that
the economy will retract, they usually begin making their
inventory smaller.
C. Innovation and Imitation – When a new product comes
out it can have an expansionary effect on the economy
less innovation means a greater chance of recession.
D. Monetary Factors – The Federal Reserve sets the
interest rate, if the rate is high then people will borrow
less, which might cause recession. If the interest rate is
low then people will borrow more which can cause
expansion.
E. External Shocks – Natural disasters or unforeseen major
changes in the world can affect the Business cycle
(expansion or recession).
Index of Leading Indicators – Monthly statistical series that
usually turns down or up before real GDP.
24
Process: Business Cycles
1. How would you describe the business cycle to a 6th grader?
What would you think would be the most difficult thing for
them to understand about it? Why? (11)
2. What do you think were the greatest causes of the Great
Depression? Why? Why is it so difficult to predict
recessions or expansions?
19
Notes: Investment Strategies
I. Basic Investment Considerations
A. The Risk-Return Relationship – Risk: A situation in
which the outcome is not certain, but probabilities for each
possible outcome can be estimated. The higher the risk the
greater the possible return or loss. Lower risk usually has lower
return and a lower chance of loss.
B. Investment Objectives – The time that you are investing
for, the amount that you can invest, and the type of investment
can determine what type of choices you should or could make
with your money.
C. Simplicity – When things are “too good to be true” they
usually are. If an investment is too complex it is either illegal,
or might need a lawyer to look at it before you make the
investment. Most investments should be made with a short
understandable contract.
D. Consistency – Constantly investing over time is the best
way to do things. Monthly, annually, or semi-annually
contributing to an investment makes that investment grow.
E. 401(k) Plans - A tax-deferred investment and savings
plan that acts as a personal pension fund for employees. In
many cases the employer will match the funds contributed (cents
on the dollar).
II. Bonds as Financial Assets
A. Bond Components – Coupon: Stated interest on the
debt. Maturity: Life of the bond. Par Value: The
principal or the total amount initially borrowed that must
be repaid to the lender at maturity.
B. Bond Prices – Vary, and the interest amount will vary as
well.
C. Bond yields – Annual interest divided by the purchase
price.
III. Bond Ratings – Investors have a way to check the
availability that a bond will be paid back. Two major bond
ratings systems are Standard & Poor and Moody. The higher the
bond rating the more likely the business can pay you back.
However, lower rated bonds usually have higher interest.
IV. Financial Assets and Their Characteristics
A. Certificates of Deposit – CDs usually have higher
interest than a savings account, but they must stay in as
deposited for a certain amount of time.
B. Corporate Bonds – Usually above $1,000 par value, and
they vary based upon rating and yield.
C. Municipal Bonds – Tax-exempt (don’t have to pay taxes
on gains) and usually are very risk-free. Municipal
refers to a local/state government.
D. Government Savings Bonds – Issued through U.S.
Government payroll-savings plans.
E. Treasury Notes and Bonds – Treasury Notes – 2-10 year
maturity. Bonds are 10-30 years.
F. Treasury Bills – short term maturity (less than a year)
and $1,000 minimum.
G. IRAs – IRA is tax-deferred at deposit, but you pay taxes
when you take money out of account. Roth IRA is not
tax-deferred at deposit, but you don’t pay taxes when
you take money out.
V. Markets for Financial Assets
A. Capital Markets – Assets for more than a year.
B. Money Markets – Assets for less than a year.
C. Primary Markets – Market where only the original
owner can cash it in (no resale of asset).
D. Secondary Markets – Assets can be resold.
18.
Process: Investments
1. How would you invest for the future based upon what you
have learned about investments? Why? (10)
2. Why would bonds have different ratings? Explain. What
are drawbacks to bonds with governments (local and
federal)?
20
Study Guide Test #3
Sin Tax
Incidence of a Tax
Tax loopholes
Individual Income Tax
Sales Tax
Benefit Principal of Taxation
Ability-to-Pay Principal of Taxation
Proportional Tax
Progressive Tax
Regressive Tax
Payroll Withholding System
Internal Revenue Service
Tax Return
FICA
Payroll Taxes
Excise Tax
Public Sector
Private Sector
Transfer Payment
Impacts of Government Spending ***
Deficit
Debt
Balanced Budget
Trust Fund
Gramm-Rudman Hollings *
Budget Enforcement Act of 1990 *
Omnibus Budget Reconciliation Act of 1993 *
Balanced Budget Agreement of 1997 *
Line-Item Veto
Entitlements
Savings
Financial System
Financial Intermediaries
Financial Assets
Nonbank Financial Institutions
Bill Consolidation Loans
Premium
Mutual Fund
Pension Fund
Risk
401(k)
Bond Components **
Current Yield
Certificate of Deposit
Tax-exempt
Treasury Notes
Treasury Bills
Individual Retirement Account
Roth IRA
Money Market
Primary Market
Secondary Market
15
Notes: Savings
I. Saving and Capital Formation – Saving:
Savings:
When people save it opens up the ability for others that can then
borrow money (to grow or make new businesses).
II. Financial Assets and the Financial System – Financial
System:
A. Financial Assets –
Certificate of Deposit: A receipt showing that an investor
has made an interest-bearing loan to a bank.
B. Financial Intermediaries –
C. The Circular Flow of Funds – When people save then
others can borrow, the jobs and economic growth that
occurs from that borrowing allows for people to get more
money, which they can then save, and it keeps going in a
circle.
III. Nonbank Financial Intermediaries – Non-depository
institutions that channel savings to borrowers (for example: life
insurance companies, pension funds, finance companies, etc.)
A. Finance Companies –
Bill Consolidation Loans: Getting a loan to pay off a
number of other loans helps consolidate (bring together) the
debt to make one easier and usually lower interest rate
payment.
B. Life Insurance Companies – These offer a payout upon a
death but charge a premium (an amount the insured pays
for the policy usually monthly).
C. Mutual Funds –
Net Asset Value (NAV) – The value of all the shares that
the mutual fund owns divided by the total number of shares
that they are selling on the market.
D. Pension Fund –
14
Process: Savings
1. Why is savings good for the economy? Explain the
circular flow of funds with regards to savings. (10)
2. Why are financial intermediaries important? Which type of
nonbank financial intermediaries do you think are the best?
Why?
13
Notes: Deficits and National Debt
I. From Deficit to the Debt – Deficit Spending: Spending in
excess of revenues collected in a given budget year.
A. Deficits Add to the Debt – The Federal Debt: The total
amount borrowed from investors to finance the government’s
deficit spending. Balanced Budget: An annual budget in which
expenditures (spending) equals revenues (collected money – like
taxes).
B. How Big is the Debt – Right now about 14.3 trillion
dollars is our total debt. Some of the money that is owed
beyond this year and is considered part of our projected debt is
held in trust funds (like Social Security). Trust Funds – Special
accounts used to fund specific types of spending programs.
C. Public vs. Private Debt – There are a couple of
differences between public debt (U.S. government owes itself)
and private debt (what an individual or firm would owe to
someone else). First, there is usually a time requirement placed
on almost all private debts. Also, purchasing power is a
difference. Private debt takes away purchasing power from the
individual, Public debt does not affect purchasing power
because the money is just transferred (rich to poor, or from taxes
to programs).
II. Impact of the National Debt – Can affect the distribution of
incomes (taxes). The larger the debt the more it affects the
economy and inflation. Heavier reliance on the purchasing
power of the federal government. Work incentives decline due
to higher taxes to bring down debt. Crowding-out-effect:
Higher than normal interest rates that heavy government
borrowing causes can “crowd-out” the ability of the private
sector to purchase goods/services.
III. Taming the Deficit – There have been many attempts to
bring down the deficit.
A. GRH (Gramm-Rudman-Hollings) – Legislation passed
to set deficit targets to bring down the deficit. However,
there were many ways around this that Congress used,
and it was ineffective.
B. Budget Enforcement Act of 1990 – Included “pay-asyou-go” provision – where spending increases or tax cuts
would have to be accounted for in reductions in other
parts of the budget. However, it only applied to
discretionary (optional) spending.
C. Omnibus Budget Reconciliation Act of 1993 – President
Clinton passed this to reduce the rate of growth of the
deficit (not to reduce the deficit itself).
D. Balanced Budget Agreement of 1997 – Gave the
president line-item veto (found to be unconstitutional
later), but it featured spending caps (limits on spending)
so that Congress could balance the budget by 2002.
They did better than that by 1998, and saw budget
surpluses (extra money over the spending) for a couple
of years.
E. Success – Then Failure: There were a couple of years of
surpluses, but then recession, wars, and tax cuts heavily
increased our deficits.
12
Process: Deficits and National Debt
1. Explain in your own words what the National Debt and
deficits mean to the U.S. Economy. Are they bad or good?
Why? What do you think should be done about the
deficits/debt? (12)
2. Look at the different “fixes” that they tried to implement to
fix the deficit and debt. Why were these unsuccessful
primarily? What do you think of the idea of line-item veto?
9
Notes: Economics of Gov’t Spending
I. Government Spending in Perspective: Per capita (per person)
spending in the United States is about $10,000.00. The public
sector makes up all the economic activity of the Federal, State,
and Local governments. The Private sector is all economic
activity handled by all privately owned firms/businesses.
Government spending has increased due to – 1. Great
Depression: Massive social welfare programs to recover from
this. 2. War spending – WWII, Korea, Vietnam, Cold War,
Iraq, Afghanistan. 3. Some government programs have seen
success like the TVA.
II. Two Kinds of Spending
A. Goods and Services – The Government spends money
on the items they purchase (buildings, tanks, bombs,
schools, etc.) and the services that are provided by
people who work for the government (military personnel,
post office employees, law enforcement officers, etc.)
B. Transfer Payments – These are payments for services
that the government does not see an immediate return on
(and it is debatable what return there is). These
payments are for things like unemployment, welfare,
social security, etc.
III. Impact of Government Spending
A. Affecting Resource Allocation – When government
makes the decision to do something it can have wide and
effective results on the economy.
B. Redistributing Income – Government spending can
affect families, and locations where government services
are going to be provided or bought.
C. Competing With the Private Sector - Tax dollars
subsidize programs/services/goods that private industries
could provide (education, delivery of goods,
technological discovery) and therefore the government is
competing with those private firms for private sector
dollars.
8
Process: Economics Gov’t Spending
1. What do you think about the level of government spending
in this country? Why? Of the kinds of government
spending which do you feel is more important? Why? (11)
2. Explain in your own words what impacts government
spending has. List 5 things that you have participated in
that have required some government spending on some
level in the last day(s).
10
Film: I.O.U.S.A.
Section 1
|Section 2
|
|
|
Section 3
|Section 4
|
|
7
Notes: Taxation
I. Economic Impact of Taxes
A. Resource Allocation – When taxes are added to a firm,
industry, or product the resources that have to be used in the
creation or purchasing of those products have to be reexamined.
B. Behavior Adjustment – Sin Tax: A relatively high tax
designed to raise revenue and reduce consumption of a socially
undesirable product such as liquor or tobacco.
C. Productivity and Growth – Taxes can affect how much
growth and productivity someone (or a firm) will have. The
higher the tax the harder it is for firms to grow, and the harder it
is to create incentives for harder work.
D. The Incidence of a Tax: The final burden of the tax.
This determines who pays the most for the tax, it can be the
workers, the owners, the consumers, or the suppliers (factories).
II. Criteria for Effective Taxes
A. Equity – How fair is a tax? Taxes are considered fairer
if they tax people accordingly and they limit the amount
of “tax loopholes” (exceptions or oversights in the tax
law that allow people and businesses to avoid paying
taxes).
B. Simplicity – Keeping taxes simple to figure out is
effective. The Individual Income Tax is very confusing,
and an entire government agency (IRS) is devoted to
figuring out the taxes. The sales tax is an example of a
simple tax as it can easily be figured out by anyone.
C. Efficiency – A tax should be relatively easy to
administer and reasonably successful at generating
revenue. Once again as an example the Individual
Income Tax is reasonable efficient because of the federal
withholding.
III. Two Principles of Taxation – Two principles of taxation are
used in the United States to justify and create taxes.
A. Benefit Principle: Those who benefit from government
goods and services should pay in proportion to the
amount of benefits they receive. Examples include –
Gasoline tax, and Truck Tire Tax. Two limitations – 1.
Many government services are provided to those who
can least afford to pay for them. 2. Benefits are hard to
measure in totality.
B. Ability to Pay Principle: Those who can afford taxes
pay more of them because they can. They would pay
these taxes in large portion even if they are not
benefiting from the programs those taxes pay for.
IV. Types of Taxes: There are three major types of taxes in the
United States – 1. Proportional Tax: Imposes the same
percentage rate of taxation on everyone, regardless of income.
This would be a “flat tax” where everyone would pay the same
proportion (sometimes called the average tax rate). 2.
Progressive Tax: Tax that imposes a higher rate of taxation on
higher incomes. The Individual Income tax is a progressive tax.
3. Regressive Tax: A tax that imposes a higher percentage rate
of taxation on lower incomes than on higher incomes. The
California state sales tax is an example of this.
6
Process: Economics of Taxes
1. Explain the economic impact of taxes in your own words.
Which criteria do you believe is the most important? Why?
Which type of tax do you feel is the best? Why? (12)
2. How would you end the story of the ant and the
grasshopper? Why? How does that relate to the types of
taxes that you would support?
3
My Grade and Due Dates
Grade:
Assignment
Pts. Earned
SUN #1 Transfer Grade
Test #2
SUN #1 Score
Assignment
Test #2
SUN #1
C.E. #3
Pts. Possible
Due Dates
Pts. Possible Date Due
4-29 (Fri)
5-3 (Tue)
20
5-20 (Fri)
5
Notes: Competition Market Structures
I. Perfect Competition – Laissez-faire: “Allow them to do”
refers to the ability to have business do what it can in the free
market without government interference. Market Structure: The
nature and degree of competition among firms operating in the
same industry. Perfect Competition: A large number of wellinformed independent buyers and sellers who exchange identical
products.
A. Necessary Conditions (for Perfect Competition): 1.
Large # of buyers/sellers. 2. Identical products. 3. Buyers and
sellers act independently. 4. Buyers/Sellers reasonable
informed about products/prices. 5. Buyers/sellers free to enter
into and out of the market.
B. Theoretical Situation – Imperfect competition: Name
given to market structures that lack one or more of the necessary
conditions for perfect competition.
II. Monopolistic Competition: The market structure that has all
the conditions of perfect competition except for identical
products.
A. Product Differentiation: Real or imagined differences
between competing products in the same industry.
B. Non-price Competition: The use of advertising,
giveaways, and other promotional campaigns to
convince buyers that their product is somehow better
than another brand (similar product within the industry).
This often takes the place of price competition.
III. Oligopoly: Market structure in which a few very large
sellers dominate the industry. (American Automobiles, Soft
Drinks, Sports Shoes, Hamburger Fast-food Places)
A. Interdependent Behavior – Collusion: Formal agreement
to set prices to otherwise behave in a cooperative
manner. Price-fixing: Agreeing to change the same or
similar prices for a product between competing firms.
(Both are usually illegal, but do in essence happen more
often).
B. Pricing Behavior – When one firm lowers their price
usually the other firm must follow, and the same for
rising prices. Usually this results in relief for consumers
as prices are usually kept relatively low.
IV. Monopoly – Market Structure with only one seller of a
particular product. (pg. 170)
A. Types of Monopolies – 1. Natural monopoly
2. Geographic monopoly
3. Technological monopoly
4. Government monopoly
4
Process: Competition Market Structure
1. What do you think about the different types of
competition? Which type do you think is the most
important type? Why? (10)
2. Of the four different monopolies which do you think would
be the most beneficial? Why are most monopolies not
beneficial in economics?
Social Justice Artifact #4
Due: 6-15-11
For this Artifact you will be doing the following:
1. Identify a problem, issue, or inequality that you have found
or seen locally or globally. Describe that issue in a short
paragraph.
2. In your next paragraph explain how you would start a
charity or an organization to solve the problem.
3. Describe what your charity or organization would do
exactly in the next paragraph. Give clear details with
regards to the organizations goals, outcomes, and specific
purpose.
4. Finally in your last paragraph, explain how you would get
others to be a part of your organization. What motivated
you to address this issue in this way, and how could you
convince others to join you in this idea?
LAUSD building new schools
Billboards in Spanish
Sight impaired crosswalks
Tagging (vandalism)
Theft
School Uniforms
Open Campus
Curfews
Bullying
Wounded Vets (physical/emotional)
Child Labor
Drugs
“Free” Money
Fast Food/Obesity
Pet abandonment/Animal Cruelty
Abortion