Analyze factors influencing the Analyze factors influencing the United States economyUnited States economy

Major ConceptsMajor Concepts Business CycleBusiness Cycle Economic IndicatorsEconomic Indicators TermsTerms Peak Peak RecessionRecession TroughTrough DepressionDepression ExpansionExpansion Gross Domestic Product (GDP)Gross Domestic Product (GDP) Per Capita GDPPer Capita GDP Standard of LivingStandard of Living Consumer Price Index (CPI)Consumer Price Index (CPI) National DebtNational Debt

The American economy grows most of the time, The American economy grows most of the time, but does not grow at a consistent rate.but does not grow at a consistent rate.

There are alternating periods of growth and There are alternating periods of growth and decline which is called the business cycle.decline which is called the business cycle.

When When growth takes placegrowth takes place, it is called , it is called expansionexpansion.. Expansion usually leads to recovery since the Expansion usually leads to recovery since the

expansion (growth) usually occurs after a time of expansion (growth) usually occurs after a time of decline.decline.

As long as the economy is growing, it does not As long as the economy is growing, it does not matter by how much. matter by how much.

At some point, the expansion will peakAt some point, the expansion will peak

A peak is the highest point of expansion. A peak is the highest point of expansion. At the At the peak, there are periods of peak, there are periods of

prosperity, low unemployment, and prosperity, low unemployment, and increased productionincreased production..

The peak period usually lasts a short time The peak period usually lasts a short time and then the economy starts to decline.and then the economy starts to decline.

When the economy starts to When the economy starts to decline (fall),decline (fall), this is called this is called contraction.contraction.

During contraction, During contraction, productivity and profits declineproductivity and profits decline, , demand for products declines and demand for products declines and workers are laid offworkers are laid off..

If this decline continues for six straight months or longer, If this decline continues for six straight months or longer, it is called a recession.it is called a recession.

When the economy hits its When the economy hits its lowest pointlowest point it is called the it is called the troughtrough..

Recession are painful times with Recession are painful times with high unemploymenthigh unemployment, , and if the recession lasts for a vary long time the nation and if the recession lasts for a vary long time the nation could go into a depression.could go into a depression.

The The Gross Domestic Product (GDP)Gross Domestic Product (GDP) is probably is probably the most widely the most widely used measure of a used measure of a country’scountry’s economic output. economic output.

GDP is defined as GDP is defined as the sum total of all goods and the sum total of all goods and services produced in one yearservices produced in one year..

It includes everything from McDonald’s Big Macs It includes everything from McDonald’s Big Macs to cars to tractors.to cars to tractors.

If GDP is growing, businesses are confident that If GDP is growing, businesses are confident that their products will sell, so they produce more.their products will sell, so they produce more.

A really interesting use of GDP is a A really interesting use of GDP is a comparison country by country.comparison country by country.

A list of the biggest GDP in the world in 2006A list of the biggest GDP in the world in 2006 U.S. = 11.7 (Trillion)U.S. = 11.7 (Trillion) Japan = 4.6Japan = 4.6 Germany = 2.7Germany = 2.7 Britain = 2.1Britain = 2.1 France = 2.0France = 2.0 China = 1.9China = 1.9 Italy = 1.6Italy = 1.6 Spain = 1.0Spain = 1.0 Canada = .9Canada = .9 India = .7India = .7

We hear about how tremendous China’s We hear about how tremendous China’s economy is and yet the U.S. is nearly six times economy is and yet the U.S. is nearly six times larger in terms of GDP.larger in terms of GDP.

This is a little misleading because China is This is a little misleading because China is growing at nearly 10% a year and we have growing at nearly 10% a year and we have slowed to around 3%.slowed to around 3%.

Another indicator, Another indicator, per capital GDPper capital GDP, is the value , is the value of of what one person produces yearwhat one person produces year and is found and is found by dividing the GDP by the population.by dividing the GDP by the population.

Example Example $11,700,000,000,000 (GDP) / 300,000,000 $11,700,000,000,000 (GDP) / 300,000,000

(Pop.) = $40,000 per capita (U.S. per capita (Pop.) = $40,000 per capita (U.S. per capita GDP for 2006GDP for 2006

Here are some othersHere are some others Luxembourg = $69,420Luxembourg = $69,420 Bermuda = $69,230Bermuda = $69,230 Norway = $54,360Norway = $54,360 Switzerland = $49,660Switzerland = $49,660 Ireland = $45,410Ireland = $45,410 U.S.A. = $39,430U.S.A. = $39,430

It’s easily and understandable that small It’s easily and understandable that small countries have more efficient work forces. These countries have more efficient work forces. These countries don’t have as much to manage as countries don’t have as much to manage as larger ones.larger ones.

GDP and per capita GDP are also used when GDP and per capita GDP are also used when measuring a country’s or individual’s standard of measuring a country’s or individual’s standard of living.living.

The The standard of livingstandard of living of people is base on of people is base on income, access to health care, education and income, access to health care, education and social rights.social rights.

The The Consumer Price Index (CPI)Consumer Price Index (CPI) is another is another economic indicator.economic indicator.

It is It is used to track changing prices of goods and used to track changing prices of goods and service purchased by consumers.service purchased by consumers.

How much the government owes, the national How much the government owes, the national debt, also has an effect on the economy.debt, also has an effect on the economy.

When economists look at the GDP, CPI and the When economists look at the GDP, CPI and the national debt, they can predict what they think national debt, they can predict what they think the economy is going to do.the economy is going to do.

In this way, they can try to come up with In this way, they can try to come up with solutions for any potential problems or see solutions for any potential problems or see what is working and hope that by making what is working and hope that by making the right decisions our economy will grow.the right decisions our economy will grow.

Objective 9.01Objective 9.01

Answer the Essential Answer the Essential Question (9.01) that is Question (9.01) that is

written on the white board.written on the white board.

Major ConceptsMajor Concepts Government RegulationsGovernment Regulations TermsTerms DeregulationDeregulation Environmental protectionEnvironmental protection Work place safetyWork place safety Consumer ProtectionConsumer Protection Labor disputesLabor disputes Affirmative ActionAffirmative Action

The government also has the role of regulating the The government also has the role of regulating the economy in certain instances.economy in certain instances.

They do this by imposing and enforcing rules and They do this by imposing and enforcing rules and regulation on certain business and social issuesregulation on certain business and social issues

Environmental Protection is one area in which the Environmental Protection is one area in which the government is involved.government is involved. The The Environmental Protection Agency (EPA)Environmental Protection Agency (EPA) is an is an

agency of the U.S. Federal government that is in agency of the U.S. Federal government that is in charge of protecting human health and with charge of protecting human health and with safeguarding the air, land and water quality and safeguarding the air, land and water quality and inspects industrial facilities.inspects industrial facilities.

The EPA has done much to stop the industrial The EPA has done much to stop the industrial pollution of the air and water by limiting the pollution of the air and water by limiting the amounts and kinds of wastes that industries may amounts and kinds of wastes that industries may discharge.discharge.

A good example is their monitoring of old A good example is their monitoring of old underground petroleum storage tanks.underground petroleum storage tanks.

Many times these tanks have been abandoned, Many times these tanks have been abandoned, are rusting and allowing old oil and gas to leak are rusting and allowing old oil and gas to leak into the Earth.into the Earth.

Thirty years ago they were not given attention.Thirty years ago they were not given attention.

Consumer protection is another area in which the Consumer protection is another area in which the government is involved.government is involved.

Consumer protectionConsumer protection is government regulation is government regulation that protects the interest of consumers.that protects the interest of consumers.

For example, businesses may be required to For example, businesses may be required to disclose detailed information about products, disclose detailed information about products, especially in areas of safety or public health.especially in areas of safety or public health.

The Occupational Safety and Health The Occupational Safety and Health Administration (OSHA)Administration (OSHA) is a government agency is a government agency that assumes the safety and health of American that assumes the safety and health of American workers by setting and enforcing standards, workers by setting and enforcing standards, providing education and training and encouraging providing education and training and encouraging safety in the workplace.safety in the workplace.

The Consumer Protection Safety Commission The Consumer Protection Safety Commission (CPSC) is another government agency that was (CPSC) is another government agency that was formed to protect the public from serious injury formed to protect the public from serious injury or death from consumer products.or death from consumer products.

They can obtain recalls of products that have They can obtain recalls of products that have been found to be harmful or defective. been found to be harmful or defective.

Environmental and consumer protection are just Environmental and consumer protection are just two of the areas that greatly affect the economy two of the areas that greatly affect the economy and the health and welfare of workers and and the health and welfare of workers and consumers.consumers.

These regulations help workers and These regulations help workers and consumers by providing needed health consumers by providing needed health standards to ensure their safety.standards to ensure their safety.

But they can also negatively affect the But they can also negatively affect the economy because businesses must spend economy because businesses must spend more money to make sure their workers and more money to make sure their workers and the working environment is safe.the working environment is safe.

When businesses have to spend more of their When businesses have to spend more of their profits because of these regulations, these profits because of these regulations, these increased costs will raise the price of products increased costs will raise the price of products paid by consumers.paid by consumers.

Labor disputes are also regulated by the Labor disputes are also regulated by the governments. governments.

Labor disputes are disagreements between Labor disputes are disagreements between employers and employees.employers and employees.

In 1947, the Federal Mediation and Conciliation In 1947, the Federal Mediation and Conciliation Service was created to provide mediation and Service was created to provide mediation and conflict resolution services to industry, conflict resolution services to industry, government agencies and communities.government agencies and communities.

This service tries to settle disputes between This service tries to settle disputes between employers and employees before they escalate employers and employees before they escalate into a bigger problem.into a bigger problem.

Another problem that the government deals with Another problem that the government deals with is discrimination.is discrimination.

In the 1970s, the federal government began In the 1970s, the federal government began affirmative action programs to correct past affirmative action programs to correct past discrimination.discrimination.

These programs encouraged the promotion and These programs encouraged the promotion and hiring of women and minorities in fields that had hiring of women and minorities in fields that had once been closed to them.once been closed to them.

Colleges were also encouraged to use Colleges were also encouraged to use affirmative action to help minority students get affirmative action to help minority students get admitted.admitted.

Affirmative actionAffirmative action has always been controversial. has always been controversial. Opponents say that it Opponents say that it gives preferential gives preferential

treatment to minorities and women but treatment to minorities and women but discrimination against whites and men. (Reverse discrimination against whites and men. (Reverse Discrimination!)Discrimination!)

In a lot of cases, white male high school In a lot of cases, white male high school graduates applying to universities were not graduates applying to universities were not admitted even though their scores were higher admitted even though their scores were higher than a minority applicant who was accepted.than a minority applicant who was accepted.

The complicated argument is that affirmative The complicated argument is that affirmative action is better for society as a whole.action is better for society as a whole.

Government can be very influential when it Government can be very influential when it come to deregulation.come to deregulation.

Deregulation Deregulation is when the government is when the government removes, reduces or simplifies restrictions removes, reduces or simplifies restrictions on business.on business.

By urging deregulation, the government By urging deregulation, the government hopes to raise the level of competitiveness hopes to raise the level of competitiveness which will increase productivity and lower which will increase productivity and lower prices.prices.

Objective 9.02Objective 9.02

Answer the Essential Answer the Essential Question (9.02) that is Question (9.02) that is

written on the white board.written on the white board.

Major ConceptsMajor Concepts Population ShiftsPopulation Shifts Sunbelt statesSunbelt states Frost Belt and Rustbelt statesFrost Belt and Rustbelt states Service SocietyService Society

Terms Terms MigrationMigration ImmigrationImmigration Service industriesService industries Silicon ValleySilicon Valley Research Triangle ParkResearch Triangle Park

Another factor that has greatly influenced the Another factor that has greatly influenced the economy is population shift.economy is population shift.

Population shiftsPopulation shifts are changes in population in are changes in population in certain areas due to large numbers of people certain areas due to large numbers of people moving away.moving away.

This movement of people from one area to This movement of people from one area to another is called another is called migrationmigration..

There are many reasons for people’s decision to There are many reasons for people’s decision to leave one area and move to another.leave one area and move to another.

It could be because of the climate, better job It could be because of the climate, better job opportunities or that a new area is more opportunities or that a new area is more affordable as far as cost of living and property.affordable as far as cost of living and property.

Population shifts can also be due to immigration.Population shifts can also be due to immigration. Immigration is the movement of people to the Immigration is the movement of people to the

U.S. from another country.U.S. from another country. The U.S. has seen its Hispanic population The U.S. has seen its Hispanic population

skyrocket in the past few years.skyrocket in the past few years. It is estimated that there are now twelve million It is estimated that there are now twelve million

Hispanics in this country, many illegally.Hispanics in this country, many illegally. This “This “immigrationimmigration” is becoming very ” is becoming very

controversial.controversial.

On one side, those who advocate leniency On one side, those who advocate leniency argue that Hispanics perform menial tasks that argue that Hispanics perform menial tasks that other will not do.other will not do.

They also argue that Hispanics are a “just in They also argue that Hispanics are a “just in time” workforce meaning they will show up time” workforce meaning they will show up where the jobs are allowing construction to where the jobs are allowing construction to move faster.move faster.

Opponents argue that Hispanics place unfair Opponents argue that Hispanics place unfair stress on services and schools and fail to stress on services and schools and fail to assimilate and learn English.assimilate and learn English.

When migration occurs, the population tries to move to When migration occurs, the population tries to move to areas where there are jobs.areas where there are jobs.

The areas in the U.S. where jobs are being created and The areas in the U.S. where jobs are being created and maintained today center around technology.maintained today center around technology.

The Research Triangle Park in the Durham-Raleigh-The Research Triangle Park in the Durham-Raleigh-Chapel opportunities.Chapel opportunities.

Hill area in North Carolina is one of the largest research Hill area in North Carolina is one of the largest research parks in the world.parks in the world.

Others might move to the Silicon Valley in California Others might move to the Silicon Valley in California where there are many high tech businesses that offer where there are many high tech businesses that offer employmentemployment

With all these population shifts, service With all these population shifts, service industries will also prosper.industries will also prosper.

Service industriesService industries are restaurants, motels, are restaurants, motels, hospitals, dentist’s offices, etc.hospitals, dentist’s offices, etc.

As population increases, more services As population increases, more services will have to be provided and more jobs in will have to be provided and more jobs in these areas will be available.these areas will be available.

As you see, population shifts can benefit the As you see, population shifts can benefit the areas into which migration takes place. areas into which migration takes place.

More money is added to the economy through More money is added to the economy through investments and more money is spent. investments and more money is spent.

But, this shift causes serious problems for the But, this shift causes serious problems for the economies in the areas from which the economies in the areas from which the population has moved. population has moved.

These locales many times suffer hardships. These locales many times suffer hardships. Their local businesses do not do well, real estate Their local businesses do not do well, real estate

prices fall, tax revenues droop and their overall prices fall, tax revenues droop and their overall economies falter.economies falter.

Major ConceptsMajor Concepts Technological AdvancesTechnological Advances War and Homeland SecurityWar and Homeland Security DownsizingDownsizing TermsTerms Microsoft Anti-trust CaseMicrosoft Anti-trust Case Operation Iraqi FreedomOperation Iraqi Freedom Homeland Security DepartmentHomeland Security Department Patriot ActPatriot Act Out-sourcingOut-sourcing

Unfortunately, even in our global society certain Unfortunately, even in our global society certain groups still cause conflict.groups still cause conflict.

The recent surge in terrorism has severe The recent surge in terrorism has severe implications.implications.

TerrorismTerrorism, which involves the use of violence as , which involves the use of violence as a means of coercion, has led to plane hijackings, a means of coercion, has led to plane hijackings, hostage situations, bombings of cars, trains, and hostage situations, bombings of cars, trains, and buildings and mass murder.buildings and mass murder.

Terrorism is also asymmetric, in other words, a Terrorism is also asymmetric, in other words, a very small number of terrorists can cause harm very small number of terrorists can cause harm to a great many people.to a great many people.

There were only a dozen terrorists involved in 9/11.There were only a dozen terrorists involved in 9/11. The actions caused 3,500 deaths and lost billions of The actions caused 3,500 deaths and lost billions of

dollars in the U.S. economy.dollars in the U.S. economy. Terrorist acts such as the 1993 World Trade Center Terrorist acts such as the 1993 World Trade Center

Bombing, and the bombing of a federal building in Bombing, and the bombing of a federal building in Oklahoma City in 1995, the 9/11 terrorist attacks in New Oklahoma City in 1995, the 9/11 terrorist attacks in New York and the Pentagon and the recent train/tube system York and the Pentagon and the recent train/tube system bombings in London, Paris, Madrid heighten our bombings in London, Paris, Madrid heighten our awareness of the very real threat that terrorism poses to awareness of the very real threat that terrorism poses to our safety.our safety.

These events disrupt trade, alter These events disrupt trade, alter production, and affect overall spending.production, and affect overall spending.

The plane and train industries suffered The plane and train industries suffered huge financial losses after these latest huge financial losses after these latest instances because people felt travel was instances because people felt travel was unsafe.unsafe.

In 2001, the government formed the In 2001, the government formed the Department of Homeland SecurityDepartment of Homeland Security to assess to assess the nation’s vulnerabilities. the nation’s vulnerabilities.

It works with federal, state, and local It works with federal, state, and local governments to ensure the most effective governments to ensure the most effective response to future terrorism threats.response to future terrorism threats.

It works to anticipate, preempt and deter It works to anticipate, preempt and deter threats to the homeland whenever possible and threats to the homeland whenever possible and responds quickly when threats materialize. responds quickly when threats materialize.

Also, in 2001, the Also, in 2001, the Patriot Act signed by Patriot Act signed by President George W. Bush, expanded the President George W. Bush, expanded the authority of American law enforcement for authority of American law enforcement for the purposes of fighting terrorism in the the purposes of fighting terrorism in the U.S. and abroad.U.S. and abroad.

It has also been used to deter and It has also been used to deter and prosecute other alleged political crimes prosecute other alleged political crimes such as providing false information on such as providing false information on terrorism.terrorism.

In 2003, the U.S. led coalition forces of more than 40 In 2003, the U.S. led coalition forces of more than 40 countries invaded Iraq to disarm Iraq of weapons of countries invaded Iraq to disarm Iraq of weapons of mass destruction, to end Saddam Hussein’s support of mass destruction, to end Saddam Hussein’s support of terrorism and to free the Iraqi people.terrorism and to free the Iraqi people.

This operation was called Operation Iraqi Freedom.This operation was called Operation Iraqi Freedom. American soldiers are still there today.American soldiers are still there today. This war has had tremendous economic effects on the This war has had tremendous economic effects on the

U.S.U.S. Oil prices are still unstable, airlines and airports have Oil prices are still unstable, airlines and airports have

had to add more security measures and many products had to add more security measures and many products and services have increased prices.and services have increased prices.

Businesses must also deal with economic Businesses must also deal with economic problems that arise from current events.problems that arise from current events.

The growth of foreign markets and the increase The growth of foreign markets and the increase of exports from other countries to the U.S. have of exports from other countries to the U.S. have hurt many American businesses.hurt many American businesses.

When the U.S. imports cheaper products from When the U.S. imports cheaper products from other countries, the American workers suffers.other countries, the American workers suffers.

In order for American businesses to stay open, In order for American businesses to stay open, sometimes they must downsize.sometimes they must downsize.

Downsizing means reducing the number of Downsizing means reducing the number of employees that the business has employed.employees that the business has employed.

This is very bad for workers because they no This is very bad for workers because they no longer have a salary but it is also bad for the longer have a salary but it is also bad for the community because the workers will not have community because the workers will not have money to spend in the local businesses.money to spend in the local businesses.

Ford Motor Company is now in the process of Ford Motor Company is now in the process of downsizing by terminating thousands of downsizing by terminating thousands of employees and closing several plants.employees and closing several plants.

This will have a big impact on those areas where This will have a big impact on those areas where the downsizing occurs.the downsizing occurs.

Another way that businesses deal with economic Another way that businesses deal with economic problems is to problems is to outsource.outsource.

Businesses will close some of their factories in Businesses will close some of their factories in the U.S., putting hundreds of workers out of a the U.S., putting hundreds of workers out of a job to outsource (relocate to another country) job to outsource (relocate to another country) where labor is cheaper.where labor is cheaper.

Businesses who are barely making a profit think Businesses who are barely making a profit think that this is a good investment. that this is a good investment.

They can pay cheaper wages and be exempt They can pay cheaper wages and be exempt from most of the workers rights’ laws in the U.S. from most of the workers rights’ laws in the U.S.

They feel that by They feel that by outsourcingoutsourcing, their , their business can increase profits and remain business can increase profits and remain competitive.competitive.

This is wonderful for the business but This is wonderful for the business but heartbreaking for all the workers who were heartbreaking for all the workers who were terminated as the result.terminated as the result.

Major ConceptsMajor Concepts Global Interdependence Global Interdependence Protective TariffsProtective Tariffs TermsTerms TariffsTariffs Foreign tradeForeign trade Exchange rateExchange rate TreatyTreaty GlobalizationGlobalization North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA) World Trade Organization (WTO)World Trade Organization (WTO) European Union (EU)European Union (EU) Unfavorable Balanced Trade Unfavorable Balanced Trade Favorable Balance of TradeFavorable Balance of Trade Comparative advantageComparative advantage

Major ConceptsMajor Concepts Global Interdependency and International TradeGlobal Interdependency and International Trade

TermsTerms Developed CountriesDeveloped Countries Developing CountriesDeveloping Countries Foreign AidForeign Aid United NationsUnited Nations World BankWorld Bank Free TradeFree Trade

People and nations all over the world depend on each People and nations all over the world depend on each other for many goods and services.other for many goods and services.

This is known as This is known as global interdependenceglobal interdependence.. It also means that what happens in one country affects It also means that what happens in one country affects

what happens in other countrieswhat happens in other countries Every country depends upon other countries for raw Every country depends upon other countries for raw

materials, products and services.materials, products and services. International tradeInternational trade is the process used by nations to is the process used by nations to

exchange goods with each otherexchange goods with each other

The process of trading goods with other The process of trading goods with other countries is called countries is called foreign tradeforeign trade..

Some goods are exported (sold to other Some goods are exported (sold to other countries) and other goods are imported countries) and other goods are imported (purchased from other countries).(purchased from other countries).

A favorable balance of trade is when a country A favorable balance of trade is when a country exports more goods than it imports.exports more goods than it imports.

When there is a favorable balance of trade, a When there is a favorable balance of trade, a country receives more payment for goods than it country receives more payment for goods than it spends on foreign goods. spends on foreign goods.

This is usually a sign of a strong economy.This is usually a sign of a strong economy. China right now is flooding the world with cheaply China right now is flooding the world with cheaply

produced goods.produced goods. This is making China’s balance of trade very favorable.This is making China’s balance of trade very favorable. But, China’s cheap goods are also helping the world But, China’s cheap goods are also helping the world

control inflation.control inflation. An unfavorable balance of trade is when a nation imports An unfavorable balance of trade is when a nation imports

more than it exportsmore than it exports.. This means that a country spends more on foreign This means that a country spends more on foreign

goods than it receives in payment for its goods.goods than it receives in payment for its goods.

The United States is presently in this The United States is presently in this situation. situation.

We are buying more goods than we are We are buying more goods than we are selling.selling.

We have an unfavorable balance of trade.We have an unfavorable balance of trade.

Comparative advantage is another reason Comparative advantage is another reason countries trade with each other. countries trade with each other.

Comparative advantage is the ability of a country Comparative advantage is the ability of a country to produce goods at a lower cost than another to produce goods at a lower cost than another country can.country can.

This is why China is doing well.This is why China is doing well. Their comparative advantage is cheap labor.Their comparative advantage is cheap labor. The U.S. could still make furniture for example, The U.S. could still make furniture for example,

but China can make it more efficiently and at a but China can make it more efficiently and at a lower cost because of their cheap labor.lower cost because of their cheap labor.

The The Exchange rateExchange rate is an important factor in international is an important factor in international trade.trade.

Different nations have different currencies.Different nations have different currencies. The reason the US $ has been so successful in the The reason the US $ has been so successful in the

world is that it is so STABLE.world is that it is so STABLE. It is very important to know the exchange rate before you It is very important to know the exchange rate before you

negotiate a deal with any country.negotiate a deal with any country. A currency’s exchange rate will have an effect on a A currency’s exchange rate will have an effect on a

country’s balance of trade.country’s balance of trade. The difference between the value of a country’s exports The difference between the value of a country’s exports

and imports is the balance of tradeand imports is the balance of trade

Governments usually regulate trade.Governments usually regulate trade. A A tarifftariff is a tax on an imported good. is a tax on an imported good. Governments usually impose tariffs to make Governments usually impose tariffs to make

the price of imported goods higher than the the price of imported goods higher than the price of the same good that is produced price of the same good that is produced domestically.domestically.

By doing this, consumers should buy the By doing this, consumers should buy the product made domestically instead of buying product made domestically instead of buying the importthe import

Another way that government can impact Another way that government can impact trade is through embargoes.trade is through embargoes.

EmbargoesEmbargoes are sanctions (efforts to punish are sanctions (efforts to punish another nation) that are agreed upon by a another nation) that are agreed upon by a nation or group of nations that prohibit them nation or group of nations that prohibit them all from trading with a given nation.all from trading with a given nation.

The United States has had an embargo The United States has had an embargo against Cuba since 1962.against Cuba since 1962.

TreatiesTreaties are formal agreements between are formal agreements between nations.nations.

Treaties can be for defense in times of war, Treaties can be for defense in times of war, an attempt to keep peace or can be for an attempt to keep peace or can be for economic purposes.economic purposes.

Many of these agreements have Many of these agreements have organizations in place to make sure that organizations in place to make sure that everything that has been agreed to is done.everything that has been agreed to is done.

North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA) NAFTA was signed by NAFTA was signed by Canada, Mexico, and the U.S.Canada, Mexico, and the U.S. as away to as away to

lower trade barriers between these three countries.lower trade barriers between these three countries. By doing so, trade will theoretically be stimulated in all three By doing so, trade will theoretically be stimulated in all three

countries.countries. Mexico is particularly vulnerable to rapid change, since it is the Mexico is particularly vulnerable to rapid change, since it is the

only country of the group to be considered developing rather only country of the group to be considered developing rather than developed. than developed.

Already we have seen many American companies establish Already we have seen many American companies establish branches of industry in Mexico in order to take advantage of branches of industry in Mexico in order to take advantage of cheaper real estate and labor costs.cheaper real estate and labor costs.

Opponents argue that NAFTA is hurting U.S. workers’ jobs. Time Opponents argue that NAFTA is hurting U.S. workers’ jobs. Time will tell the true benefits of NAFTA to Americanswill tell the true benefits of NAFTA to Americans

The European Union (EU)The European Union (EU) = is a trading union is comprised of 27 = is a trading union is comprised of 27 democratic member countries in Europe.democratic member countries in Europe. The union has a single market consisting of a customs union, a The union has a single market consisting of a customs union, a

common trade policy, and a currency called the euro – adopted common trade policy, and a currency called the euro – adopted by 13 member states.by 13 member states.

World Trade Organization (WTO)World Trade Organization (WTO) = is an international body that = is an international body that oversees trade among nations. oversees trade among nations. It organizes negotiations about trade rules and provides aid to It organizes negotiations about trade rules and provides aid to

countries who are trying to develop their economies.countries who are trying to develop their economies.

United Nations (UN)United Nations (UN) = is an international = is an international organization founded in 1945 and located organization founded in 1945 and located in NYC.in NYC. Its goals are to deal diplomatically with issues Its goals are to deal diplomatically with issues

of international law, international security, of international law, international security, economic development, social progress and economic development, social progress and human rights issues and human rights issues and prevent world warsprevent world wars. .

The U.S., Germany, Japan, Canada, and many The U.S., Germany, Japan, Canada, and many other nations are rich, other nations are rich, industrialized countriesindustrialized countries..

These nations have built a way of life that is These nations have built a way of life that is based on highly developed industry and based on highly developed industry and business. business.

Developed countries possess natural resources Developed countries possess natural resources that can be assessed, have large industries that that can be assessed, have large industries that can produce many of the goods that are sold all can produce many of the goods that are sold all over the world and their citizens are, for the over the world and their citizens are, for the most part, healthy, educated and willing to work.most part, healthy, educated and willing to work.

Then there are the poorer and less developed countries Then there are the poorer and less developed countries where there are high death rate due to disease and where there are high death rate due to disease and starvation and underdeveloped industrial economies.starvation and underdeveloped industrial economies.

These countries are called developing countries.These countries are called developing countries. Some have few natural resources, cannot produce enough Some have few natural resources, cannot produce enough

food for their populations and manufacture few products.food for their populations and manufacture few products. Others have many natural resources, but they do not have Others have many natural resources, but they do not have

the health, education, or industry to develop these the health, education, or industry to develop these resources.resources.

Most of these countries have high unemployment, poverty, Most of these countries have high unemployment, poverty, and many health problems.and many health problems.

Many of the developed, industrialized nations try Many of the developed, industrialized nations try to help the developing nations by giving them to help the developing nations by giving them foreign aid.foreign aid. Foreign aid is money for financial and technical aid, Foreign aid is money for financial and technical aid,

food, and medicine to help these people survive.food, and medicine to help these people survive.

The The World BankWorld Bank is also focused on helping the is also focused on helping the developing countries.developing countries. They They provide financingprovide financing (low interest loans) for (low interest loans) for

education, health, agriculture, irrigation, pollution education, health, agriculture, irrigation, pollution reduction, roads, electricity, and for anti-corruptionreduction, roads, electricity, and for anti-corruption

Major ConceptsMajor Concepts Federals Reserve System Federals Reserve System

(FED)(FED) Spending and TaxationSpending and Taxation TermsTerms Monetary policyMonetary policy Fiscal policyFiscal policy Loose money policyLoose money policy Tight money policyTight money policy Reserve requirementReserve requirement Discount RateDiscount Rate Interest RateInterest Rate

Open Market OperationsOpen Market Operations Government SpendingGovernment Spending RevenueRevenue TaxationTaxation Personal Income TaxPersonal Income Tax Excise TaxExcise Tax Regressive TaxRegressive Tax Progressive TaxProgressive Tax Proportional TaxProportional Tax Sales TaxSales Tax

The United States government uses its The United States government uses its fiscal policyfiscal policy and and monetary policymonetary policy to to influence its economy.influence its economy. The Fiscal policy is the use of spending and The Fiscal policy is the use of spending and

taxation policiestaxation policies The Monetary policy involves controlling the The Monetary policy involves controlling the

supply of money and the cost of borrowing supply of money and the cost of borrowing money.money. Both of these policies have economic impacts on Both of these policies have economic impacts on

consumers and producers.consumers and producers.

The The Federal Reserve isFederal Reserve is a regulatory a regulatory agency that is agency that is our nation’s central bankour nation’s central bank..

It serves as the government’s bank and It serves as the government’s bank and controls monetary policycontrols monetary policy in the U.S. and in the U.S. and controls the amount of money that is controls the amount of money that is circulating in the economy.circulating in the economy. How does the Federal Reserve control the How does the Federal Reserve control the

amount of money circulating in the economy?amount of money circulating in the economy? How is this done?How is this done?

One way is by controlling the One way is by controlling the reserve requirementreserve requirement – – lowering it or raising it.lowering it or raising it.

The The reserve requirement is how much money each bank reserve requirement is how much money each bank must hold for customer deposits and withdrawals – vault must hold for customer deposits and withdrawals – vault cash.cash. A tight money policy reduces the reserves (money A tight money policy reduces the reserves (money

supply) and an easy money supply increases the supply) and an easy money supply increases the supply.supply.

With a tight money policy, inflation may be curbed by With a tight money policy, inflation may be curbed by limiting borrowing at a high interest rate. limiting borrowing at a high interest rate.

With a easy money policy, borrowing is encouraged With a easy money policy, borrowing is encouraged because money is plentiful at a low interest rate.because money is plentiful at a low interest rate.

The discount rate is the interest rate which The discount rate is the interest rate which the Federal Reserve charges member the Federal Reserve charges member banks for loans and is another way that the banks for loans and is another way that the Federal Reserve controls the amount of Federal Reserve controls the amount of money circulating in the economy.money circulating in the economy.

An interest rate is the price (percentage) An interest rate is the price (percentage) that is charged for the use of money.that is charged for the use of money.

The Federal Reserve can raise or lower The Federal Reserve can raise or lower this rate in order to stimulate the economy. this rate in order to stimulate the economy.

The Federal Reserve does this by, The Federal Reserve does this by, lowering the discount rate which lowering the discount rate which encourages banks to borrow money to encourages banks to borrow money to make loans to their customers. make loans to their customers.

This speeds up the economy.This speeds up the economy. In order to slow down the economy, it In order to slow down the economy, it

raises the discount rate to discourage raises the discount rate to discourage borrowing and encourage savings. borrowing and encourage savings.

Open market operations are the principal tool for Open market operations are the principal tool for the Federal Reserve’s implementing monetary the Federal Reserve’s implementing monetary policy.policy.

They can either buy or sell U.S. Treasury and They can either buy or sell U.S. Treasury and federal agency securities depending upon which federal agency securities depending upon which way they want the economy to go.way they want the economy to go.

Raising the interest rate on bonds they are Raising the interest rate on bonds they are selling attracts investors who choose to invest selling attracts investors who choose to invest rather than spend and buy things. rather than spend and buy things.

This slows down the economyThis slows down the economy

On the other hand, buying bonds back On the other hand, buying bonds back from investors puts more money in their from investors puts more money in their hands, which they spend and which then hands, which they spend and which then stimulates and make the economy grow.stimulates and make the economy grow.

The Fiscal policy of the government The Fiscal policy of the government determines the amount of money that is spent determines the amount of money that is spent or raised by the government.or raised by the government. Taxation is a big part of that.Taxation is a big part of that. Governments can raise or lower the tax rates. Governments can raise or lower the tax rates.

When governments increase taxes, producers will have When governments increase taxes, producers will have less spendable money, but the government will have less spendable money, but the government will have more money to spend.more money to spend.

When government decreases taxes, producers will When government decreases taxes, producers will have more money to spend which should stimulate the have more money to spend which should stimulate the economyeconomy

Remember that there are many types of taxes (income, Remember that there are many types of taxes (income, property, sales, excise, etc…)property, sales, excise, etc…)

These taxes are classified according to the effect that These taxes are classified according to the effect that they will have on the person who is taxed.they will have on the person who is taxed.

They first type is the proportional tax.They first type is the proportional tax. A proportional tax takes the same percentage from A proportional tax takes the same percentage from

everyone no matter how much they earn. everyone no matter how much they earn. A second type is a progressive tax.A second type is a progressive tax.

A A progressive tax (the proportion of earnings taken in progressive tax (the proportion of earnings taken in taxes) will increase as your income increasestaxes) will increase as your income increases

The third type is a regressive tax. The third type is a regressive tax. A A regressive tax (the proportion of earnings taken in regressive tax (the proportion of earnings taken in

taxes) will decrease as you make more money.taxes) will decrease as you make more money. What does the government do with the taxes that are What does the government do with the taxes that are

paid?paid? This money that is paid (revenue) is part of This money that is paid (revenue) is part of

government spendinggovernment spending This money is spent on the general operations of the This money is spent on the general operations of the

government, for government programs and for government, for government programs and for retirees.retirees.

Major ConceptsMajor Concepts Environmental protection and conflict with industryEnvironmental protection and conflict with industry Personal decision making related to economic Personal decision making related to economic

conditionsconditions Government regulations and its impact on the Government regulations and its impact on the

individual individual Federal ownership of land Vs private ownership Federal ownership of land Vs private ownership

across the country.across the country. Zoning and its impact on economic development and Zoning and its impact on economic development and

neighborhood standardsneighborhood standards

TermsTerms ScarcityScarcity DepressionDepression InflationInflation RecessionRecession Bear and Bull MarketsBear and Bull Markets NIMBY (Not In My Back Yard)NIMBY (Not In My Back Yard) Cuban Economic EmbargoCuban Economic Embargo Zoning LawsZoning Laws Building CodesBuilding Codes

Many factors can depress the U.S. economy.Many factors can depress the U.S. economy. One such problem is scarcityOne such problem is scarcity Scarcity is when you have a limited supply of a certain Scarcity is when you have a limited supply of a certain

product.product. When Hurricane Katrina struck in 2005, it damaged or When Hurricane Katrina struck in 2005, it damaged or

destroyed thirty oil platforms and caused the closure destroyed thirty oil platforms and caused the closure of nine refineries.of nine refineries.

Gas prices increased dramatically and some stations Gas prices increased dramatically and some stations received no gas supplies for their particular area.received no gas supplies for their particular area.

Consumers who were used to paying around $1.00 Consumers who were used to paying around $1.00 per gallon began paying $3.00+ per gallon for gasolineper gallon began paying $3.00+ per gallon for gasoline

This caused consumers to drive only when necessary, This caused consumers to drive only when necessary, use more mass transit, cutback on other activities to use more mass transit, cutback on other activities to save money for gas and look for more gas efficient cars.save money for gas and look for more gas efficient cars.

Another problem is inflation.Another problem is inflation. Inflation occurs when there is a sustained increase in Inflation occurs when there is a sustained increase in

prices.prices. The economy is hurt by inflation because it reduces The economy is hurt by inflation because it reduces

the purchasing power of money and consumers the purchasing power of money and consumers cannot buy as much as they used to with the same cannot buy as much as they used to with the same amount of moneyamount of money

The stock market is another factor that affects The stock market is another factor that affects the economy.the economy.

People like to invest in the stock market as long People like to invest in the stock market as long as the prices of stocks are on an upward trend.as the prices of stocks are on an upward trend.

This upward trend is called a “bull market”.This upward trend is called a “bull market”. People do not like to be in the stock market People do not like to be in the stock market

when there is a prolonged period of falling when there is a prolonged period of falling investment prices.investment prices.

This falling trend is called a “bear market” This falling trend is called a “bear market”

Environmentalism (protecting our environment) Environmentalism (protecting our environment) has become a national concern.has become a national concern.

In 1970, Congress passed the Clean Air Act and In 1970, Congress passed the Clean Air Act and established the Environmental Protection established the Environmental Protection Agency (EPA) Agency (EPA)

The Clean Air Act regulates how much pollution The Clean Air Act regulates how much pollution industries can release into the air.industries can release into the air.

The EPA is the government agency that works to The EPA is the government agency that works to provide a cleaner, healthier environment for the provide a cleaner, healthier environment for the American people.American people.

There are many political issues that can There are many political issues that can affect the economy.affect the economy.

One of them is an embargo.One of them is an embargo. Embargoes are agreements among a Embargoes are agreements among a

group of nations that prohibits them all group of nations that prohibits them all from trading with another country.from trading with another country.

Embargoes limit the products that Embargoes limit the products that consumers can buy.consumers can buy.

One desire shared by all countries of the world is One desire shared by all countries of the world is the purchase of oil that fuels the engines of industry the purchase of oil that fuels the engines of industry and transportation.and transportation.

While there are many places in the world that While there are many places in the world that produce oil, such as Alaska, Texas, and Venezuela, produce oil, such as Alaska, Texas, and Venezuela, by far the highest concentration of petroleum lies in by far the highest concentration of petroleum lies in the Middle East.the Middle East.

Earlier this century, the large oil producing countries Earlier this century, the large oil producing countries formed a union known as the Organization of formed a union known as the Organization of Petroleum Exporting Countries (OPEC) Petroleum Exporting Countries (OPEC)

Countries such as Saudi Arabia, Oman, Countries such as Saudi Arabia, Oman, Kuwait, Yemen, Iraq, and United Arab Kuwait, Yemen, Iraq, and United Arab Emirates are members and all share a very Emirates are members and all share a very high per capita income.high per capita income.

Some of the richest individuals in the world Some of the richest individuals in the world are citizens of these countries.are citizens of these countries.

They have established a virtual monopoly They have established a virtual monopoly on oil trade.on oil trade.

Our reliance makes us vulnerable.Our reliance makes us vulnerable.

For example, our energy crisis of the 1970s For example, our energy crisis of the 1970s when gas prices skyrocketed due to extreme when gas prices skyrocketed due to extreme shortages of fuel, was in part a retaliation shortages of fuel, was in part a retaliation (embargo) by the OPEC nations against (embargo) by the OPEC nations against “American support of the nation of Israel during “American support of the nation of Israel during the Arab-Israeli wars of the late 1960s and the Arab-Israeli wars of the late 1960s and early 1970s.” early 1970s.”

As long as the Western world relies in Arab oil, As long as the Western world relies in Arab oil, it will always have to view political situations in it will always have to view political situations in terms of economic impact.terms of economic impact.

Political issues also arise in local areas.Political issues also arise in local areas. These conflicts between government and individuals These conflicts between government and individuals

usually concerning zoning laws and building codes.usually concerning zoning laws and building codes. Zoning laws and building codes were established to Zoning laws and building codes were established to

regulate where residential housing and commercial regulate where residential housing and commercial facilities could be built and how they are built.facilities could be built and how they are built.

Disputes usually arise when citizens do not want a Disputes usually arise when citizens do not want a particular business or facility in or near their particular business or facility in or near their neighborhood.neighborhood.

NIMBY (Not In My Back Yard) is the familiar phrase that NIMBY (Not In My Back Yard) is the familiar phrase that goes along with this conflict.goes along with this conflict. Even though new businesses or facilities may bring Even though new businesses or facilities may bring

more jobs and more money into the community, some more jobs and more money into the community, some individuals look at the possibility of property values individuals look at the possibility of property values decreasing, an increase in traffic or even a danger to decreasing, an increase in traffic or even a danger to the community.the community.

Most conflicts arise when facilities such as a prison, Most conflicts arise when facilities such as a prison, nuclear power plant, waste treatment plant, drug nuclear power plant, waste treatment plant, drug rehabilitation center or landfill are involvedrehabilitation center or landfill are involved