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Unit 3: Measuring Economic Performance
Unit 3: Money, Banking, and Finance
Goals – 9.01, 9.02, 9.04, 9.08, 10.02, 10,03, 10.05
Goals – 7.02, 7.03, 8.07, 8.08, 8.09, 9.07
Unit Essential Questions
1) What are the different phases of the business cycle?
2) How do economic indicators help to analyze the health of the economy?
3) What is money, and what is its purpose?
4) What is monetary policy, and the Federal Reserve?
5) Why is investing important?
6) What are some advantages and disadvantages of borrowing?
UNIT PACING
Day 1:

Business Cycle, Inflation, & Unemployment (Economics Document)

Review Business Cycle, Inflation, & Unemployment
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Business Cycle/Economic Indicators Chart
Day 2:
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Economics Document – Money & Banking
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Review – The Function of Money & The Federal Reserve
Day 3:
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Tools of the Federal Reserve

The Federal Reserve System
Day 4:
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Economics Document – Personal Finance, Consumerism
Day 5:
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Test Review & Test – Units 4 & 5
Unit 3 – Measuring Economic Performance:
NCSCOS – 9.01, 9.02, 9.04, 9.08, 10.02, 10.03, 10.05
Part 1 - GDP, Business Cycles, Inflation, Unemployment
Chapter 23, Section (pgs. 638-644)
Fill in the Phases of the Business Cycle
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o
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o
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o
Expansion
Peak
Contraction
Trough
Recession
Depression
Explain each of the Following Economic Indicators
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GDP
Real GDP
Unemployment Rate
Delayed Deliveries
New Durable Good Orders
Stock Market
New Building Permits
CPI – Inflation
Stock Prices
Explain the Following about the Stock Market
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o
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Bull Market
Bear Market
Dow Jones Industrial Average (DJIA)
Standard & Poor’s 500 (S&P 500)
New York Stock Exchange (NYSE)
NASDAQ
Define the Following
o Inflation (Cost Push, Demand Pull)
o Fiscal Policy, Monetary Policy
Business Cycle/ Economic Indicators Chart
Objective: Analyze the effect of economic indicators on the business
cycle.
Assignment: Each student must draw the business cycle on a sheet of
8.5 x 11 piece of paper. Under each phase you must place which
economic indicators belong in each phase. Assume that economists
have made the following reports about these leading economic
indicators. Where would these indicators be placed on the business
cycle?
Put the number of the statement where it should go on the business cycle
Economic Indicators:
1) Stock prices show steady increases over the last six months.
2) Unemployment claims are up 5%.
3) Total inventories have slightly increased.
4) The # of building permits issued in the last six months have
drastically increased.
5) Manufacturing labor hours show steady increases.
6) New plants & equipment have increased sharply.
7) Delayed deliveries have drastically reduced.
8) New durable good orders have declined slightly.
9) The number of new businesses formed has sharply increased.
Unit 3 – Money, Banking, and Personal Finance
NCSCOS 7.02, 7.03, 8.07, 8.08, 8.09, 9.07
PART 2 – MONEY AND BANKING
Chapter 24, Section 1 (pgs. 657-659)
Define the Following
o Functions of Money
Medium of Exchange
Store of Value
Measure of Value
o Currency
o Commercial Banks
o Savings & Loans Associations (S&Ls)
o Credit Unions
o FDIC
Chapter 24, Section 2 (pgs. 661-665)
Explain the Following about the Federal Reserve
o
o
o
o
o
Federal Reserve System
Monetary Policy
Loose Monetary Policy
Tight Monetary Policy
Tools of the Fedral Reserve
Discount Rate
Reserve Requirement
Open Market Operations
Tools of the Federal Reserve
The Federal Reserve uses (3) major tools to control the nation’s money supply. These
tools are the reserve requirement, the discount rate, and open market operations.

Describe how the Fed can use each of its tools to increase the money supply.
1) Changing the Reserve Requirement –
2) Changing the Discount Rate –
3) Open-Market Operations

Imagine you are a member of the Federal Reserve Board and your staff gives
you this report on the money supply and the economy. “The consumer Price
Index continues to rise, the money supply has increased beyond target levels.
Consumers fear a return of high inflation.” Underline the appropriate words in
parentheses to show the policy you would follow.
1) The Fed should now follow a (tighter/looser) monetary policy with the
desired effect of (increasing/decreasing) the money supply.
2) Possible actions to implement the policy are (raising/lowering) reserve
requirements, (raising/lowering) the discount rate, or (selling/buying)
treasury securities on the open-market.

Now imagine that a year has passed and your staff gives you this report.
“Business activity continues to sag, unemployment is rising, and the economy
appears to be weakening. The money supply is growing at a much slower rate.”
1) The Fed should now follow a (tighter/looser) monetary policy with the
desired effect of (increasing/decreasing) the money supply.
2) Possible actions to implement the policy are (raising/lowering) reserve
requirements, (raising/lowering) the discount rate, or (selling/buying)
treasury securities on the open-market.
Federal Reserve Quiz
1) Who created the Federal Reserve?
2) Who appoints members to the Federal Reserve Board of
Governors?
3) What is the purpose of the Federal Reserve?
4) What are the (3) tools of the Federal Reserve?
5) If the Fed increases the reserve requirement, what effect would
it have on the money supply? (increase/decrease)
6) When would the Fed want to do this? (recession/inflation)
7) If the Fed sells securities on the open market, what effect would
it have on the money supply? (increase/decrease)
8) When would the Fed want to do this? (recession/inflation)
9) If the Fed lowers the discount rate, what effect would it have on
the money supply? (increase/decrease)
10) When would the Fed want to do this? (recession/inflation)
PART 3 – PERSONAL FINANCE
Chapter 20, Section 1 (pgs. 539-543)
Define the Following
o
o
o
o
o
o
o
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Disposable Income
Discretionary Income
“Caveat Emptor”
Consumerism
The Food, Drug, and Cosmetic Act
The Pure Food and Drug Act
The Fair Packaging and Labeling Act
Better Business Bureau
Answer the Following
o Explain the 5 rights in the Consumer Bill of Rights
o Explain the 5 responsibilities consumers have?
Chapter 20, Section 2 (pgs. 545-549)
Define the Following
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Budget
Income
Expenses
Balanced Budget
Budget Surplus
Budget Deficit
Credit
Sources of Credit
Interest
APR
Credit Rating
Collateral
Bankruptcy
Chapter 20, Section 3 (pgs. 552-558)
Define the Following
o CD, Money Market Account, US Savings Bonds,
o Investments
o Stocks – Dividends, Bonds, Mutual Fund
o
Unit 3 - Measuring Economic Performance
Unit 3 – Money, Banking, & Finance
Directions: You will need to answer the following questions on a separate sheet of
paper. This review will count for 10 extra credit points on the test.
Business Cycle
1) Draw and label the phases of the business cycle. (see business cycle notes)
2) These economic indicators give economists the ability to predict the phase of
the business cycle our economy is in currently, and where the economy is
headed. Briefly describe each of the following.
- manufacturing labor hours
- building permits
- unemployment claims
- total inventories
- new durable good orders
- commodity prices
- delayed deliveries
- stock prices
- # of new businesses formed
- money supply
- new plants & equipment
- consumer confidence
(see economic indicators worksheet)
3) The Government & the Business Cycle
The government plays a role in the economy by trying to influence and
solve certain problems. There are two basic problems that occur during the
business cycle. One problem is inflation. Inflation is a general increase in the
price level. Inflation results from too much money in circulation, meaning that
people are spending money too quickly.
The other problem is a recession. A recession results from people
spending too much little money. The result is that business sales are down, and
they begin to lay off workers. This means there is too little money in
circulation.
The government can influence the amount of money in circulation in two
ways. One is through the Federal Reserve. The Federal Reserve is in charge of
monetary policy. Monetary Policy is the Federal Reserve’s policy toward
controlling the money supply. Tight monetary policy is used during a period of
inflation. The Federal Reserve is trying to decrease the amount of money in
circulation. Loose monetary policy is used during a period of recession. The
Federal Reserve is trying to increase the amount of money in circulation.
Explain how the Federal Reserve uses each of its tools to control the
money supply.
Economic Problems - 1) Inflation
2) Recession
Fed Tools - 1) Reserve Requirement 2) Discount Rate 3) Government Securities
4) Personal Finance
- consumer rights & responsibilities
- borrower
- budget
- investor
- functions of money
- collateral
- investments (stocks, bonds, CDs, mutual funds, savings accounts)
- FDIC
Test Format
All Classes

30 multiple choice

10 Federal Reserve & Money Supply (tools, impact on money supply)

5 Economic Indicators (expansion or contraction)
Honors Classes (Essay)
Explain the following about the Federal Reserve.

When was the Fed created, by whom, and what is its purpose?
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What is monetary policy, and explain the (2) types?
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What is the problem during a period on inflation & recession?
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What are the (3) tools of the Federal Reserve? How would the Fed use each of
(3) tools to solve the problem of inflation and recession?