Thursday, April 26, 2018

Month 9 week 3: Key Terms

Key Terms-Final Review
Directions: Review the key terms listed below. Select 10 terms you are not familiar with. Review the 10 terms in your textbook. Post the 10 terms with an explanation of the key term. Include the page number from the text book where you found the explanation of the key term.

  1. ·       Entrepreneur
  2. ·       Land
  3. ·       Human Capital
  4. ·       Production Possibilities Curve
  5. ·       Competition
  6. ·       Free Market
  7. ·       Safety Net
  8. ·       Market Economy
  9. ·       Socialist
  10. ·       Innovation
  11. ·       Public Goods
  12. ·       Elasticity
  13. ·       Elastic Supply
  14. ·       Subsidies
  15. ·       Market Supply Curve
  16. ·       Supply Curve
  17. ·       Inelastic
  18. ·       Black Market
  19. ·       Rent Control
  20. ·       Sherman Antitrust Act
  21. ·       Antitrust Laws
  22. ·       Sole Proprietorship
  23. ·       Closely Held Corporation
  24. ·       Glass Ceiling
  25. ·       Labor Union
  26. ·       Finance Company
  27. ·       Banking before Civil War
  28. ·       FDIC
  29. ·       Credit
  30. ·       Aggregate demand/supply
  31. ·       Depression
  32. ·       Poverty Threshold
  33. ·       “Working Poor”
  34. ·       Taxable Income
  35. ·       Deduction
  36. ·       Federal Reserve System
  37. ·       Tight Money Policy
  38. ·       Interest Rates and Money Supply
  39. ·       Less Developed Country
  40. ·       Brain Drain





Month 9 week 4: Money Creation

Money Creation


The Department of the Treasury is responsible for manufacturing money. The Federal Reserve is responsible for putting dollars into circulation. How does this money get into the economy? The process is called money creation, and it is carried out by the Fed and by banks all around the country. Money creation does not mean the printing of money. Banks create money not by printing it, but by simply going about their business. For example, suppose you take out a loan of $1,000. You decide to deposit the money in a checking account. Once you have deposited the money, you now have a balance of $1,000. Since demand deposit account balances, such as a checking account are included in the M1, the money supply has now increased by $1,000. The process of money creation begins here.

Your bank will lend part of the $1,000 that you deposited. The amount that the bank is allowed to lend is determined by the required reserve ration (RRR)- the fraction of the deposit that must be kept on reserve. The RRR is the fraction of the deposits that banks are required to keep on reserves to ensure banks have enough funds to supply customers' withdrawal needs.

 (Economics Principles in Action, Prentice Hall 2005, p. 425-427)

Still need more explanation? Watch this video on how money is multiplied.
Directions: Read the example and answer the question: 

1.) If you deposit $1,000 of borrowed money in a bank checking account, by how much do you increase the money supply?
2.) You deposit $1,000 of borrowed money in a checking account. Your $1,000 deposit minus $100 in reserves is loaned to Elaine. Elaine deposits the $900 in a checking account.  At this point the money supply has increased by?

Month 9 week 2: Aggregate Demand

Influences on the Gross Domestic Product (GDP)

Defining Aggregate Supply and Aggregate Demand

You already know about supply and demand and how these two forces interact in the market. The only difference here is the addition of aggregate, which means "total amount." Aggregate supply and aggregate demand are on a nationwide scale or large scale total national amount. Aggregate supply is the total amount of goods and services in the economy available at all possible price levels. Aggregate demand is the amount of goods and services in the economy that will be purchased at all possible price levels.
Directions:  Take a look at the following information regarding the effects of aggregate demand.
Then answer the following questions and post your answers.

The Effects of Aggregate Demand

Aggregate expenditures and price are inversely related. A rise in price level will cause a decrease in aggregate expenditures and a decrease in price level will cause an increase in aggregate expenditures. There are three things that explain why falling price levels increase aggregate expenditures.
They are:
  • The Wealth Effect: This says that a rise in the price level will make people who have money and other financial assets feel poorer. They then buy less, and the opposite is true if the price level were to fall- people would buy more. If people feel poorer and since consumption is a part of AD, then aggregate expenditures will decrease, thus decreasing the quantity demanded.
  • The International Effect: This states that as the price of our goods go up -and become more expensive to foreigners- net exports will fall. In addition, imports will increase because foreign goods will seem cheaper than the goods at home whose prices have risen. Since net exports will fall and this is a part of AD, then overall aggregate expenditures will decrease.
  • The Interest Rate Effect: This says that as price increases, interest rates will increase causing investments to decrease. If prices are higher, then people will have less money because they will be forced to spend more. If interest rates are higher, people will be less willing to put what little money they have into investments. Since Investments are part of the aggregate demand, the quantity of aggregate expenditures will go down, showing a negative relationship between price and aggregate expenditures. 




Copyright 2006 Experimental Economics Center. All rights reserved.
Downloaded 5/11/15 from: http://www.econport.org/content/handbook/ADandS/AD/Effects.html 

1.) An international crisis has caused consumers to save their money and postpone big purchases. What is the effect on aggregate demand and aggregate supply?  choose the best answer below
 a. Will the aggregate supply decrease, raising the price level and lower real GDP.
 b. Will the aggregate demand decrease lowering both real GDP and the price level.

2.) Describe how the wealth factor influences aggregate demand?

9.1: The Federal Reserve System: The Federal Chair Game

The Federal Reserve System:


Background:  

The Federal Reserve System is overseen by the Board of Governors of the the Federal Reserve. The Board of Governors is headquartered in Washington, D.C. Its seven members are appointed for staggered fourteen -year terms by the President of the the United States with the advice and consent of the Senate. The President also appoints, from among these seven members, the chair of the Board of Governors. The Senate confirms the appointment. Chairs serve four-year terms. The chair acts as the main spokesperson for monetary policy for the country.Monetary policy refers to the actions the Fed takes to influence the level of real GDP.

Activity:

The Fed Chairman Game (FCG) is an interactive online website tool to help you better understand the impact of the Federal Funds Rate on unemployment and inflation.  Put yourselves in the chair’s shoes and try your hand at monetary policy through steering a simulated economy. Crises pop up throughout the game in order to lend an element of surprise and to simulate sudden changes in the economy. At the end of the game, the “Chair” is reappointed if you did well in keeping inflation low and stable and meeting the unemployment target.

Directions: Check out the Fed Chair Game and then answer the following questions and post your answers.

1.) What is the relationship between interest rates and demand for money?
2.) When the economy is expanding quickly and inflation is high, what should the Chair do to slow inflation?
3.) What is one of the key roles of Chair of the Federal Reserve?
4.) How does the Chair of the Federal Reserve benefit American society?

Wednesday, April 11, 2018

Month 8 week 4: Federal Regulatory Agencies

Federal Regulatory Agencies:

AGENCIESFOUND 435                Image result for federal banking a  seal image

The government has created a number of federal regulatory agencies to oversee the economy. The government's involvement in our economy has created a modified free enterprise system. The agencies are intended to protect and regulate industries and consumers. Some of the agencies you maybe familiar with are:

  • FDA - Food and Drug Administration
  • NLRB- National Labor Relations Board
  • EPA - Environmental Protection Agency
  • FAA -  Federal Aviation Administration
  • FDIC -Federal Deposit Insurance Corporation
Directions: Read about the FDIC FDIC: Who is the FDIC   and visit the following website:FDA and answer the following questions. Post your answers.

1. If you open a savings account in a bank that indicates deposits are FDIC insured, what protection does that give you?

2. If you purchase uncooked meat at the grocery store what government agency will oversee monitor the quality and safe handling of the product?

3. Which Agency oversees the safety and procedures of the airline industry?

4. Select a Federal Agency that interests you. Tell us about the agency include the name, the purpose, and how the agency benefits American society.

Tuesday, March 27, 2018

Month 8 week 3: Anti-Trust Legislation

Anti-Trust Legislation

Directions: Review document below. Watch at least one of the two links. Answer the questions. Post your answers. 

Sherman Anti-Trust Act (1890)

 Chapter 7 Section 3

The government can encourage competition and regulate monopolies in order protect the public welfare. This power was established in the late 1800's when a law was passed to prevent monopolies, combinations and trusts. The law was the Sherman Antitrust Act of 1890. It outlawed all contracts in restraint of trade in order to slow the growth of trusts and monopolies. The Act was intended to maintain competition. However, more specific laws were needed to stop practices that interfered with trade between the states. The government created four anti-monopoly legislative acts known as:1890 Sherman Antitrust Act, 1914 Clayton Antitrust Act, 1914 Federal Trade Commission Act and the 1936 Robinson Patman Act. The over arching goal of the legislation is to prevent market failures due to inadequate competition and restrictions on trade between the states. 

The Sherman Anti-Trust

Directions: Watch one or both of the above posted videos which describes the Sherman Anti Trust Act and answer the following questions. Post your answers.
1. Define the following terms trust and monopoly.
2. Describe the Sherman Anti Trust Act noting when, where and what it was about.
3. What was the chief effect of the  Sherman Antitrust Act?

Month 8 week 1 and 2: Market Structure- Self Interest

Chapter 7 Market Structures







Adam Smith on Self-Interest (Document A)


Adam Smith was a Scottish professor that strongly believed in the idea of a free economy. His ideas were the foundation of Capitalism.  In this passage  from his book The Wealth of Nations, Adam Smith discusses his law of self-interest, which is the idea that people work for their own good.     


“The natural desire of every individual is to improve his own condition (life).  
For example, it is not because of the benevolence (kindness) of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own self-interest
It is for his own benefit, and not that of the society, that the butcher is thinking about when he slaughters his pigs for meat. His self-interest leads him to choose that employment (job) which is also helpful to society, but he intends (desires) only his own gain. If people were not willing to pay the butcher good money for his meat, then the butcher would not care to slaughter his pigs.”

Guiding Questions
  1. Analyze: What does Smith mean when he says “the natural desire of every individual is to improve his own condition”? Explain.





  1.  Summarize. Why does Adam Smith believe the butcher does his job (EXPLAIN! Don’t just say “self-interest!”)?





  1. Interpret: Do you agree with Adam Smith that people do their jobs only out of self-interest? Are there any jobs that people might do for a different reason? Explain.