MATHEMATICS€¦ · Web view1. Write the word “steel” on the board. Ask students the following questions. a. What is steel? (Students may know that steel is a product used in

Social StudiesActivity Worksheet

GRADE LEVEL: High School

Course Title: Economics

Strand: III. Government

Topic: Purposes of Government

Grade Level Standard: E-10 Examine the purpose of government in economics.

Grade Level Benchmark: 1. Evaluate how effectively the federal government is

serving the purposes for which it was created. (III.1.HS.2)

Learning Activity(s)/Facts/Information

1. The Constitutional Period: Problems Under the Articles of Confederation (activity attached)

2. Public Choice: Economics Goes to Washington and Into the Voting Booth (activity attached)

Resources

United State History: Eyes on the Economy Volume One: Through the Civil WarNational Council on Economic EducationISBN: 1-56183-480-7(pp. 67-73)

Focus: High School EconomicsNational Council on Economic EducationISBN: 1-56183-489-0(pp. 121-133)

New Vocabulary:

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THE CONSTITUTIONAL PERIOD: PROBLEMS UNDER THE ARTICLES OF CONFEDERATION

Unit 5 examines changes in the U.S. economy during the Constitutional period. Its lessons analyze the economic features of the U.S. Constitution.Lesson I invites students to use economic reasoning to examine the problems facing the new nation under the Articles of Confederation, including the national debt, taxation, tariff battles, and military weakness.Lesson 2 examines what the Constitution did to establish the basis for a successful U.S. economy. By establishing rules which protect contracts and private property rights and encourage trade and innovation, the Constitution created an environment in which a market economy could develop and flourish.

INTRODUCTIONHistory – The Articles of Confederation, adopted in 1781, represented the former colonists’ first attempt to establish a new government after the Revolutionary War. These Articles provided for a weak central government. Because of the excesses of King George III, whose rule they had just overthrown, the Americans were reluctant to grant much economic power to the central government.

Mystery – Americans faced severe problems after the Revolutionary War such as the national debt. Many argued that the national government, even if it had strong powers of taxation, should refuse to pay its war debts. After all, the bonds issued to pay for the war debt had changed hands many times. Payment would not go to those who originally had helped support the war effort. Only speculators would benefit. But others argued that war debts must be repaid. Why?

Economic History – As Americans began to recognize the problems associated with the Articles of Confederation, they anticipated that their approach to solving these problems would influence the economic strength of the nation in the future. For example, failure to repay debts would discourage lending, resulting in reduced investment in the country’s future. Imposition of trade barriers would discourage specialization and reduce voluntary trade among states.

CONCEPTSDebtTaxTariffTradeCurrency

OBJECTIVES• Identify the economic problems facing the nation during the period of the Articles

of Confederation.

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• Make predictions about how the failure to address these economic problems could hurt the economic growth of the nation.

LESSON DESCRIPTIONThis lesson begins with discussion of the economic problems facing the new nation. Students read and discuss information in a handout; then they make predictions about effects on economic growth.

TIME REQUIRED• One class period

MATERIALSOne transparency each of Visuals 1 and 2. One copy for each student of Activities I and 2.

PROCEDURE1. Explain to the class that new nations often face serious economic problems. Newly

independent nations in Africa, Asia, Latin America, and, more recently, the nations of Central Europe, had to make fundamental decisions about how to manage their economic problems. The economic situation facing the United States in 1781 caused some to think that the new country was on the brink of economic collapse.

2. Display Visual 1. Use the diagram to provide an overview of what the students will read about in Activity 1.

3. Distribute Activity 1 to the class. Explain to the class that they should use economic reasoning to answer questions about the problems faced by the United States under the Articles of Con federation.

4. Divide the class into four small groups. Assign each group to work on one of the four topics in Activity 1: debt, power to tax, tariff wars, and weak military. Ask each group to write out its predictions and explanations.

5. Discuss the students’ reasoning about each problem. Distribute Activity 2. Ask members of the class to compare their reasoning to the reasoning provided in Activity 2.

A. Should the United States have paid its debt? (People lend money in the expectation of repayment with interest. Lenders would have lost confidence in the U.S. government if debts had not been paid. Future borrowing and investing to stimulate economic growth would have been discouraged.)

B. Should the United States have the power to tax? (The government needed a practical way to repay debts. Without revenue, the government might have defaulted on debts, threatening its ability to obtain credit from other nations in the future. This would have discouraged future saving and investment, reducing the potential for economic growth.)

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C. Should states be able to tax each other’s goods? (If states had placed tariffs on goods and services imported from other states, the prices of goods and services would have increased. States would have been discouraged from specializing in producing the goods and services they could provide most efficiently. Instead, they would have faced incentives to become more self-sufficient. The result would have been less wealth for the nation.)

D. Display Visual 2. Ask the students to use supply and demand curves to explain how tariffs would reduce supply and increase price. (Placing tariffs on goods from other states discourages the willingness to produce. This would reduce supply from S1 to S2. Prices would increase from P1 to P2.

E. Should the United States strengthen its military? (The costs of U.S. shipping would have been higher. Trade would have been discouraged. The standard of living would have been reduced. This poses another problem. Were the benefits from trade greater than the costs of having a stronger military? Perhaps the benefits of remaining in the British empire were greater than imagined.)

CLOSUREConclude the lesson by projecting Visual 1 again on the overhead projector. Review the problems faced by the new American government. Ask the students to use economic reasoning to explain how these problems should be addressed to encourage economic growth.

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VISUAL 1ECONOMIC PROBLEMS DIAGRAM

Economic Problems During the Articles of Confederation

Debt Taxation Tariff MilitaryBattles Weakness

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VISUAL 2TARIFFS ON EXPORTSFROM OTHER STATES

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P2

P1

Q2 Q1 Quantity

Demand

Supply1

Supply2

Pric

e

ACTIVITY 1ONE NATION OR THIRTEEN?

The American people had just won the Revolutionary War, a remarkable accomplishment in the eyes of people over the world. Now the economic problems facing the new nation had to be solved. To many, the situation seemed bleak. However, knowing how to use economic thinking will enable you to decide which policies might have been best for the economy.

DEBT: After the Revolutionary War, Congress faced enormous debt. The United States owed money to the French, who helped support the war. Money also was owed to American citizens who previously had bought bonds from the government to help support the war effort. The problem was so severe that some Americans recommended simply not paying back the debts that were owed. Some people argued that, since these bonds had changed hands several times, payment now would not go to the people who originally helped support the war effort but to speculators who had purchased the bonds from them.

Economic Reasoning: Remember that people respond to incentives in predictable ways. People make loans expecting repayment with interest. Predict what would happen if war debts were unpaid. Explain briefly.

POWER TO TAX: The federal government, according to the Articles of Confederation, could levy a direct tax only if the money were turned back to the states on the basis of population. In other words, the federal government was very restricted in how it could collect revenue to handle its own debts and expenses.

Economic Reasoning: Remember that people respond to incentives in predictable ways. People who make loans to governments expect repayment with interest. Predict what would happen if government debts were unpaid. Explain briefly.

TARIFF WARS: There were some signs that tariff wars would erupt between the states. New York imposed a fee on vessels traveling to and from Connecticut and New Jersey. Not to be outdone, New Jersey imposed its own tax on a New York-owned lighthouse on New Jersey soil. New Jersey, lying between New York City and Philadelphia, found its imports heavily taxed. Leaders in other states watched attentively and considered placing their own taxes on products from neighboring states.

Economic Reasoning: Remember that people gain when they trade voluntarily. Predict what would happen if states could place tariffs on goods from other states. Explain briefly.

WEAK MILITARY: Britain continued to occupy its territories in the Great Lakes region, in open violation the Treaty of Paris, which ended the Revolutionary War. British occupation interfered with Americans who sought to develop the Northwest Territory. The Spanish refused to grant Americans navigation rights on parts of the Mississippi River. Meanwhile, the Barbary pirates were attacking American shipping in the Mediterranean Sea.

Economic Reasoning: Remember that people gain when they trade voluntarily. Predict how a weak military would affect trade. Explain briefly.

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ACTIVITY 2APPLYING ECONOMIC REASONING TO THE

ARTICLES OF CONFEDERATION

1. SHOULD THE UNITED STATES HAVE PAID ITS DEBT?People lend money in the expectation that the money will be fully repaid at the agreed upon rate of interest. Interest, in this case, is a reward for lending money.

A government refusing to pay its war debts would seem untrustworthy to lenders. Citizens would hesitate to place their savings in U.S. government bonds or in new businesses, knowing that the government might break its promise to repay or might allow others to do so. People who lend money under these circumstances would expect to be compensated for their risk at higher rates of interest than would otherwise be charged.

The United States government and the nation’s many new farms and businesses needed to be able to borrow money. Failure to repay debts would limit the future ability of each of those groups to borrow and invest in the economy.

Economic reasoning suggests, therefore, that the war debts should have been repaid.

2. SHOULD THE UNITED STATES HAVE THE POWER TO TAX?The analysis here is similar to the previous analysis of repayment of debts. A government without an ability to tax has few ways to repay its financial obligations or meet its military expenses. To default on loans would decrease the possibility of obtaining credit from other nations at reasonable rates of interest.

Economic reasoning suggests that the federal government, therefore, needed to have the power to levy and collect taxes.

3. SHOULD STATES BE ABLE TO TAX EACH OTHER’S GOODS?An economic way of thinking tells us that people gain when they trade voluntarily. Erecting tariff walls would restrict trade and thus encourage farms and businesses to try to become self-sufficient rather than depend on trade with farms and businesses in other states. Imagine the situation today if people in New York were persuaded to grow their own citrus fruit because they did not want to depend on imported citrus products from Florida. In discouraging trade between states, tariffs also discourage specialization. Overall, fewer goods would be produced at higher cost. The economy would not be as efficient if trade across state borders were taxed.

Economic reasoning suggests, therefore, that states should have been prevented from taxing goods imported from other states.

4. SHOULD THE UNITED STATES STRENGTHEN ITS MILITARY?People gain when they trade voluntarily. It was difficult to conduct trade when merchants were fearful that their products would be stolen by pirates or someone else. An adequate level of military protection appeared necessary if the nation expected to be a successful trader.

Economic reasoning suggests, therefore, that the United States needed a more powerful military than it had during the period of the Articles of Confederation. However, this raises another question that is worth pondering: Were the benefits from more secure trade greater than the costs of a stronger military needed to secure the trade? Perhaps the benefits of remaining in the British empire were greater than the colonists had imagined.

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PUBLIC CHOICE: ECONOMICS GOES TO WASHINGTON AND INTO THE VOTING BOOTH

INTRODUCTIONEconomist James Buchanan won the Nobel prize in economics in 1987, for pioneering work he had done with Gordon Tullock and others in the new field of public choice economics. This approach applies the basic economic way of thinking to group decisions made through the electoral process or by some government body.

That means thinking of voters, elected officials, and government employees as people who pursue their own self-interest, rather than some altruistic view of the public good. Before Buchanan’s work, most philosophers, political scientists, and even many economists, had not systematically applied that way of thinking to the public sector, except to decry individual cases of corruption that came to light more frequently than many people wanted to think about.

Public choice ideas are not yet included in many high school economics textbooks, or even in some college-level principles textbooks. But that is changing rapidly, especially at the college level where the textbook revision and adoption cycle is much shorter. Because this material may be new to many teachers, a brief appendix of background material is included at the end of this lesson. If you are not familiar with these ideas, read the appendix before you look through the activities in this lesson.

The instructional activities are built around the most visible and exciting symbol of public choice in a democratic political system, elections. Be sure your students also recognize that public choice ideas can also be used to explain the day- to-day actions of both ordinary government employees (aka: bureaucrats) and politicians.

CONCEPTSSelf-interestExpected benefits and costs of votingInformation and search costsSpecial interest effectsSystematic failure of government programs and policies

CONTENT STANDARDSPublic policies involve economic and political choices and are influenced by the actions of special interest groups as well as by both positive and normative economic concepts.

Government policies often affect the well-being of people, businesses, and regions differently, due to the impact of different kinds of taxes, transfer payments, laws, regulations, and the provision of goods and services that are not used equally by all groups.

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OBJECTIVE• Critically assess the actions of voters, elected officials, and public employees,

working from the basic assumption that individuals in each of these groups will follow their own economic self interest.

LESSON DESCRIPTIONStudents will participate in a series of class room elections to see:1. What are special interest effects, and how do they develop?

2. How can the costs of voting and acquiring information about candidates or, propositions on a ballot affect whether or not people vote, and if so how informed they will be?

3. What are the causes and consequences of logrolling and similar kinds of collusion by elected officials?

TIME REQUIREDThree or four class periods. Day one—conduct elections 1-3 (procedures 1-7). Day two and perhaps three—prepare for and conduct election 4 (procedures 8-11). Day three or four—conduct election 5 and the assessment activity (procedures 12 and 13).

MATERIALSPlay money—start each student with a $5 bill and five $1 bills. Prepare 10 additional $5 bills and 10 additional $1 bills for each student participating in the elections, to be distributed as directed in the activities. Later, if possible, allow students to purchase inexpensive products or classroom privileges with the money they “earn” in the activities.

Information sheets for each student participating in the elections, and also from

Activity 2 if you decide to use optional Election 3.

Copies of Visuals I and 3 for each student and, if you use optional Election 3, copies of Visual 2 for each student. Or prepare overhead transparencies of the tables that students can view together.

Copies for each student of a ballot, or part of a ballot, from a recent or forthcoming election held in your community. (Copies are often available in daily newspapers printed on or just before election days, or from groups such as the League of Women Voters.) The ballot should list approximately eight candidates or referendum items. Some of these candidates or items should be familiar to the students, and some unfamiliar. Students will research positions represented by some of the candidates and issues, or you should provide fact sheets on the candidates and issues for the students.

PROCEDUREElection 1: Special Interest Effects—Introduction. Procedures 1 - 4.1. Divide the class into five groups with equal numbers of students to participate in a

series of classroom elections; use any “leftover” students to help collect ballots,

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tabulate election results, and distribute materials. (Or, choose five students to participate in these elections held in the front of the classroom, for other students to observe and discuss. Do NOT debrief the elections until you reach procedure 7.)

2. Instruct all students participating in the elections to vote according to their own self-interest. In this activity those interests will take the form of “cash,” so students should do whatever leaves them with the most money. Make payouts as directed after each election, using a classroom currency or play money from a board game. If possible, allow students to use the “money” to purchase products or classroom privileges, so they have stronger incentives to participate seriously. Start each student with a $5 bill and five $1 bills, for a total of $10.

3. Distribute copies of the appropriate student information sheets from Activity 1. Note: Each student should receive information only about their own benefits from options A and B, not about the benefits for other students or groups.

4. After making sure that all students understand that they are to vote in their own self-interest, and that they are reading the information sheets correctly in terms of their expected benefits from the different election outcomes, conduct Election 1. Record the election result on the chalkboard or an overhead transparency. Make the “cash” payouts as shown on the information sheets. If you divided the class into equal-sized groups, you should pay each student in a group the payoff that is indicated on the student information sheets, and in Visual 1.

Election 2: Special Interest Effects—Continued5. Announce that in Election 2, the same information sheets will be used that were

used in Election 1. Now, however, there will be a $4 cost of voting, collected only from those who decide to vote. Conduct election 2 after making sure students understand the new procedure. Collect the $4 from all voters. Record the election result on the chalkboard or an overhead transparency. Make the “cash” payouts as shown on the information sheets, and in Visual 2.

Groups 3 and 4 should choose not to vote. If they did vote, point out that they are spending more than they can expect to gain—not a good way to increase their “cash” positions.

Groups 1, 2, and 5 may or may not choose to Vote, depending on how optimistic they are about winning the election. If group 5 votes and groups 1 and 2 do not, announce the outcome (option A still wins). Hold another election in which the benefits to groups 1, 2, and 5 are doubled, but the benefits to groups 3 and 4 remain the same, as do the costs of voting for all students/groups. Continue raising these benefits and offering hints to groups 1 and 2, if necessary, until these two groups vote together to defeat group 5, or until group 5 does not vote and either group 1 or 2 does vote to win the election. Make the appropriate payoffs and collect the $4 from voters in each election you hold. Record the result that option B defeats option A on the chalkboard or overhead transparency.

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(Optional) Election 3: Special Interest Effects, Continued6. Collect the information sheets used in elections 1 and 2, and distribute the new

information sheets from Activity Sheet 2. Once again make sure students receive information only about their own benefits from options A and B, not about the benefits for other students or groups. Announce that you will NOT charge students for voting in this election, as you did in election 2. Conduct Election 3, after making sure that students understand all of the procedures for this election, and that they are still to vote in their own best interest. Make the payoffs shown on the students’ information sheets, and on Visual 3. Record the result (option A should defeat option B) on the chalkboard or overhead transparency.

Debriefing: Elections 1-37. Debrief Elections 1-3. Suggested guidelines for the debriefing follow:

(Election 1: When everyone votes their own self-interest, option A defeats option B by a vote of 3 to 2, because students/groups 3, 4, and 5 vote for A and students/groups 1 and 2 vote for B. In this case total social benefits of $11—$5 for group 5 and $3 each for groups 3 and 4—are chosen over total social benefits of $10, which would be paid out to groups 1 and 2 if option B won. Pass out a copy of the table on Visual 1 to all students, or show it on an overhead transparency. Ask students to calculate the best choice for each group. Make sure they understand why option A will prevail, as long as people vote in their own self-interest and equal numbers of voters are in each of the five groups.

Election 2: Referring again to the table from Visual 1, explain that in this case option B defeats option A when groups 3 and 4 choose not to vote, despite the fact that a majority of people would prefer that option A win if they did not face any costs in voting. Ideally this will happen in the first election you hold, but perhaps only on the second or third round.

Choosing B over A illustrates the special interest effect—differences in the distribution of costs or benefits associated with an election outcome give small groups of people strong incentives to organize, campaign, and vote, while a majority of the electorate chooses not to vote, or at least not to vote as a bloc for or against some candidate or issue. Although direct monetary costs of voting were used in this simulated election, point out that such poll taxes are not legal in U.S. elections. However, people do incur both time and money costs in getting to the voting place, and to different degrees in getting the information to make an informed vote (as demonstrated later, in Election 4). These costs have the same effect in leading some people not to vote as the $4 charges used in this simulated election.

Discuss examples where the special interest effect is at work in U.S. elections or other public policies—e.g., farm subsidies despite the fact that only 3% of the population works on farms; or trade protection in the form of tariffs, quotas, and voluntary export restraints provided to U.S. automobile and textile companies. Also discuss cases where voters or political leaders took a position that was not in their

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own self-interest—e.g., defenders at the Alamo, President Eisenhower signing the amendment limiting presidential terms, or see John F. Kennedy’s chapter on John Quincy Adams in Profiles in Courage.

Explain that public choice economics assumes people follow their self-interest in making political decisions, and to the extent that they do not, that represents a limitation of the ability of public choice theory to predict the behavior of individuals and groups. You may have encountered that sort of behavior in Election 2, if some students choose to vote despite the fact that the voting costs are higher than their expected gains. Discuss that in the debriefing, if it occurs, and note what percentage of these people did follow their own self-interest. Then allow the students to use the currency they have acquired in the activity to purchase products or classroom privileges that you can make available for them.

With the benefit schedule used in Visual 2 and on the student information sheets, if there were no voting costs, the democratic procedure of majority rule would result in choosing the option with the highest social benefits. However, that is not always true. If you want to provide a classroom example to show a case where it is not, conduct the optional third election.

Optional Election 3: Option A will be elected, as in election 1, but now the total benefits of that choice are $11 while the benefits of Option B are $20. Assuming the benefits to groups 1 and 2 are based on legitimate activities and not something illicit—such as rigging awards of government contracts—in this case the democratic procedure of majority rule fails to maximize overall economic welfare unless the special-interest effect can prevail, perhaps as a result of voting costs, as shown earlier in election 2, or as a result of compensation provided by groups 1 and 2 to groups 3, 4, or 5 to change the election outcome, which could be illegal in many situations.)

Election 4: Voting Costs and “Rational Ignorance.” Procedures 8-11.8. Give each student a copy of a ballot or part of the ballot from a recent or

forthcoming national, state, or local election held in your community. Keep a total of approximately eight candidates or issues on the classroom version of the ballot. Ideally, some of the candidates and issues will be well known to the students, and the rest rather obscure.

9. Randomly assign half of the class (designated group A) to collect information about the first half of candidates or issues listed on your ballot, and have the other half of the class (group B) collect information about the remaining candidates and issues. Each student should turn in a brief report on the candidates or issues he or she was assigned to study. [Or, if you prefer, prepare and distribute to group A a fact sheet on the first half of the candidates/issues, and provide a similar fact sheet to group B on the second half of the candidates/issues.] Do NOT have the students share their reports [or fact sheets] with other class members.

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10. Conduct a secret ballot election on the candidates or issues. Have each student indicate on the ballot which group (A or B) he or she was in. Tabulate the overall results and the results for each group, and note whether there were differences related to the information that each of the two groups had collected or made available to them. Did group A vote differently on the candidates/issues they had information about, compared to group B? Did group B vote differently from group A on the candidates/issues where they had more information than group A?

Debriefing: Election 411. Debrief election 4. Suggestions for the debriefing follow:

(If there were no differences in the voting patterns discuss why—perhaps the candidates’ positions were really not very different, or students voted for or against someone because of their looks or party affiliation. If there were differences, discuss how much information most people who vote have about the issues and candidates in elections.

Except in races that receive extensive media coverage, or those held in very small communities where everybody knows everybody else, most voters are not well informed. Even in elections that receive extensive coverage in the media, the coverage is often superficial and not well remembered by many voters. Point out that collecting and using this kind of information is costly, and that these costs, plus the costs of taking time off work or away from other activities, locating and getting to the polling place, and waiting in line to vote, are in fact the kind of voting costs most voters pay—not the monetary poll tax that was collected in Election 2.

The information, time, and transportation costs discussed in this activity will, however, have the same kinds of effects seen in Election 2, in terms of keeping many people away from the polls entirely. They will also cause many voters to cast votes on issues or candidates they have not studied in any depth. When people stand to gain a great deal from electing or defeating a particular candidate, or from passing or defeating some referendum, they are much more likely to acquire information and work hard to make sure the election turns out the way they want it to. If the candidate or proposal is expected to have little or no effect on them, they are much more likely to be “rationally ignorant,” opening the door for special interest groups to decide the election outcome.

Finally, note that the chances of an individual vote influencing the outcome of an election are directly related to the number of people who vote in it. Therefore, as the number of voters increases, the costs of voting, such as waiting in line, increase while the expected benefits of your vote, in terms of changing the election outcome, decrease. For that reason, unless the act of voting itself gives someone direct satisfaction, we expect higher voter turnouts in small, local elections—such as the old New England town meetings—than in statewide or national elections, assuming that the levels of controversy, interest, and expected closeness in election results are comparable.)

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Election 5: Logrolling12. Divide the class into groups of four to six students, and distribute copies of the

table in Visual 3 as a handout, or display it on an overhead for the entire class to see. Tell the students to assume that all of the relevant costs and benefits of these programs are included in the numbers shown in the table. Have each group answer the discussion questions listed below the table, and then conduct a classroom discussion of their answers, paying special attention to question 3.

Debriefing: Election 513. Debrief Election 5. Suggestions for the debriefing follow:

(This activity simulates a Senatorial committee or subcommittee vote and negotiation process. Neither the defense contract nor the farm subsidy program is efficient, since the costs for both are $60 billion and the benefits are only $50 billion. A straightforward majority vote will result in both programs being defeated if the Senators vote based strictly on what is best for their own constituents, because the costs are greater than the benefits for both programs for the constituents of two of the three Senators. Specifically, the Midwestern and Western Senators would both vote against the defense contract, and the Eastern and Western Senators would vote against the farm subsidies. Make sure students are interpreting the information on the visual correctly, in terms of the expected benefits from the different election outcomes.

Then show that the Eastern Senator might approach the Midwestern Senator and offer to vote for the farm subsidy program if, and only if, the Midwestern Senator agrees to vote for the defense contract. Or the Midwestern Senator might propose the same arrangement to the Eastern Senator. If that happens, the benefits to the constituents in both the East and the Midwest will be $45 billion, and the costs $40 billion.

This “logrolling”—also known as “You scratch my back and I’ll scratch yours”—could lead to both programs passing, despite the fact that the total costs are greater than the total benefits for both of them.

The Western Senator can try to call attention to the “back room deals” and “pork barrel” politics, to try to defeat the programs when a vote is taken in the full Senate. Or, she can try to find a project that will benefit people in her district, and “trade” her vote in support of one or both of these projects in return for the Eastern and/or Midwestern Senators’ votes. And so the log rolls on.)

CLOSUREExplain that many factors, including special interest effects, voting costs that lead many people not to vote in elections, information costs that lead most voters to be rationally ignorant about at least some of the things they vote on, logrolling by elected officials, and other kinds of problems identified by public choice economists—all stemming from the fact that voters, elected officials, and government employees often pursue their own self-interests—can lead to systematic inefficiencies in government policies and

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programs. That doesn’t mean there is no economic role for the government to play in a market economy. (Remind students of market failures and Lessons 12 and 13 from this volume, if you used them.) But it does add large costs to many kinds of government programs, and in that sense supports the idea of a limited role for government in a democratic market system.

ASSESSMENTHave students study the economic policies and proposals put forward by real candidates or as referendum items in a recent or imminent election, and then study the election results. The most recent presidential election is often best to use, given the extensive media coverage and post-election analysis that is available to students. Have students discuss, formally debate, or write a short paper on the following statement: “In this election, the behavior of 1) candidate, 2) groups endorsing particular candidates or a particular vote on a referendum item, and 3) voters, was more consistent with the idea of people following their own self-interest than with the outdated idea that elections are a way for people to do their civic duty and promote the public good.”

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ACTIVITY 1STUDENT INFORMATION SHEETS FOR ELECTION 1

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GROUP 1

If option A is elected, you will receive $0.

If option B is elected, you will receive $5.

GROUP 2



GROUP 3



GROUP 4



GROUP 5



ACTIVITY 2STUDENT INFORMATION SHEETS FOR ELECTION 3

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GROUP 1



GROUP 2



GROUP 3



GROUP 4



GROUP 5



PLAY MONEY

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APPENDIXBACKGROUND MATERIAL ONPUBLIC CHOICE ECONOMICS

Many people and writers have long adopted a cynical view of government and the political process. For example, some of Dickens’ characters come to mind, as does Henry Adams’ novel, Democracy, Joseph Heller’s Good as Gold, and historian Charles Beard’s famous work, An Economic Interpretation of the Constitution.

What is really different about public choice economics is the rigorous study of how people in the public sector systematically respond to the economic incentives they face. Admittedly, that still seems like a very simple idea. In fact, when the idea was summarized in the press after James Buchanan’s Nobel prize was awarded, many people wondered how such a simple idea could merit such a prestigious award. The answer is that while the idea is very simple, it is often difficult and complex to trace out the many different ways the idea shows up in real world settings. That is especially true since allegations of self-interested behavior by public officials are frequently denied and the evidence of such behavior is normally covered up by those who want to keep it hidden from the electorate.

Self-interest is a very powerful idea, however, and can lead to surprising insights when used by economists as skilled as Buchanan. He and other public choice economists, and some political scientists, used it to identify many additional concepts and issues, such as special-interest effects, “rational ignorance” on the part of voters, declining voter registration and turnout levels, inconsistencies in election results and voter preferences, the importance of controlling agendas when inconsistent outcomes are possible, models of how candidates try to package themselves to be most successful in various elections, and how they bargain to get the things they want once they are elected. Taken together, all of these ideas build up to a theory of “government failure” that often parallels economists’ work on market failures, when problems such as public goods and externalities occur. (Lessons 12 and 13 deal with market failures.)

Government policies are often suggested as ways to deal with market failures, so the idea of systematic government failure raises a fundamental question: Can we really depend on government actions to correct for market failures? Economists’ answer to that question is a firm “It all depends.” It depends on whether the expected benefits of a policy are greater than the expected costs. Public choice models show that those costs must include regular and often substantial provisions for government failures. They also force us to recognize that the very reasons markets fail to provide the right amount of certain goods and services are often likely to make it difficult for the government to determine and implement the right policies to deal with those same goods and services.

Public choice models therefore provide a modern argument for maintaining a limited role of government in a market economy on the one hand, while encouraging searches for legal and constitutional arrangements to limit some kinds of government failure on

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the other. Debates over constitutional amendments imposing term limits and requiring a federal balanced budget are often promoted on these grounds; but of course there is a great deal of debate about the economic and political desirability of such reforms.

Longer treatments of public choice economics can be found in most college principles of economics textbooks, particularly those written by James Gwartney and Richard Stroup (Economics: Private and Public Choice, 6th ed., Dryden Press, 1992), Robert Ekelund and Robert Tollison (Economics, 3rd ed., Harper Collins, 1991), or see David Johnson’s Public Choice: An Introduction to the New Political Economy, Mayfield Publishing Company, 1991.

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VISUAL 1

Benefits of Electing

Group # Option A Option B

1 $ 0 $ 5

2 0 5

3 3 0

4 3 0

5 5 0

1. What are the total benefits if Option A is chosen?

2. What are the total benefits if Option B is chosen?

3. If each of the five groups has the same number of voters, will Option A or Option B be chosen?

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VISUAL 2

Benefits of Electing

Group # Option A Option B

1 $ 0 $ 10

2 0 10

3 3 0

4 3 0

5 5 0

1. What are the total benefits if Option A is chosen?

2. What are the total benefits if Option B is chosen?

3. If each of the five groups has the same number of voters, will Option A or Option B be chosen?

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VISUAL 3

(Dollar values in billion)

Programs1) Defense Contract 2) Farm Subsidies

Benefits to Constituents

Cost to Constituents

Benefits to Constituents

Cost to Constituents

Voter:Eastern Senator $40 $20 $5 $20

Midwestern Senator $5 $20 $40 $20

Western Senator $5 $20 $5 $20

1. Which of these programs is economically efficient (total benefits exceed total costs)?

2. If majority voting is used and only these three Senators vote (perhaps on a Senate subcommittee), which of these programs will be approved?

3. If you were the Eastern Senator, what could you do to try to get one of the other Senators to vote for the defense contract?

4. What role does the Western Senator play in this election?

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Strand: III. Government

Topic: American Government and World Affairs

Grade Level Standard: E-11 Analyze U.S. economics and foreign policy.

Grade Level Benchmark: 1. Evaluate foreign policy positions in light of national

interests and American values. (III.5.HS.2)


1. Why Restrict Trade? (activity attached)

Resources

The Wide World of TradeNational Council on Economic EducationISBN: 1-56183-136-0(pp. 115-126)

New Vocabulary:

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WHY RESTRICT TRADE?

LESSON DESCRIPTIONStudents learn some things about steel and identify a variety of products that are produced with steel. They participate in an activity to help them analyze the costs and benefits of a tariff. Students learn about special-interest groups and consider the arguments people and organizations use to support the imposition of trade barriers.

ECONOMIC CONCEPTSTrade barriersSpecial interest groupsInterdependenceCost-benefit analysis

OBJECTIVES — Students will:• Define tariff, trade barriers, interdependence, and special-interest groups.• Give examples of interdependence.• Analyze the costs and benefits of policy decisions.• Explain who gains and who loses when trade barriers are imposed.• Give examples of special-interest groups.

TIME REQUIREDTwo to three class periods

MATERIALS• Transparency of Visual 9.1• One copy of Activity 9.1, cut apart to provide one card for each student or pair of

students• Approximately 500 toothpicks

PROCEDURE1. Write the word “steel” on the board. Ask students the following questions.

a. What is steel? (Students may know that steel is a product used in construction. Some may know that it is an alloy made from the combination of several metals.)

b. What is steel made from? (Students probably won’t know. Some may know that it is made primarily from a combination of iron and carbon.)

c. What is steel used to produce? (Answers will vary, but may include cars, buildings, and appliances.)

2. Display a transparency of Visual 9.1. Discuss the following points about steel.• Steel is an alloy. Alloys are mixtures of two or more metals.• The primary ingredients in steel are iron and carbon. These ingredients are

combined at high temperatures.

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• Sir Henry Bessemer received a patent for the original steel-making process in 1856. Steel was used to produce the steel rails on which the “iron horses” traveled.

• The steel-making process has changed a great deal since Sir Bessemer’s time, but steel is still a very important factor in the production of many goods. Steel is strong, flexible, and can withstand adverse weather. Steel is used to produce automobile frames, frames for houses, food cans, shipping containers, paint cans, aerosol cans, parts of appliances, water tanks, fuel tanks, bridges, precise surgical instruments used in hospital operating rooms, strong lightweight eyeglass frames, skeletons for commercial buildings, guard rails on highways, signs on highways, underground water and sewer pipes, and rocket motor cases for space shuttles.

• Many people are employed producing products that are made from steel. Many people buy and use products made from steel.

3. Write a headline on the board, “U. S. Places 30% Tariff on Steel,” and explain that a tariff is a tax on imported goods. Tariffs are barriers to trade. Trade barriers are things that make trade less desirable or more difficult. Note: Lesson 8 in The Wide World of Trade is designed to teach about different types of trade barriers.

4. Explain that students will participate in an activity in which they identify how a steel tariff — a tax placed on imported steel — would affect various groups of people in the United States and other countries.

5. Distribute a card from Activity 9.1 to each student or to pairs of students.

6. Give each student or pair of students 10 to 30 toothpicks. Tell students to count the number of toothpicks they were given. Explain that the toothpicks represent income that members of the group they represent could spend on goods and services.

7. Have students take turns reading the first paragraph on their cards to the class beginning with cards number 1 and number 2. After reading the first paragraph, students with cards number 3 through 22 should follow the directions given in the second paragraph.

8. When all cards have been read, remind students that each represented a specific group of people. Discuss the following.a. How many gave up toothpicks during this activity? (20)b. How many got additional toothpicks during this activity? (2)

9. Explain that the toothpicks given up represent costs and the toothpicks received represent benefits. Costs are things sacrificed or given up as the result of a policy or decision (negative result). Benefits are things gained or received as a result of a policy or decision (positive result). Many groups incurred costs (gave up toothpicks) but only two groups received benefits (received toothpicks).

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10. Point out that costs included paying higher prices for goods and services, earning less income, and doing without goods and services provided by government and by charities. Discuss the following.a. What was the cost of the steel tariff to consumers in the United States? (They

had to pay more for products made from steel.)b. What was the cost of the steel tariff to workers at automobile assembly plants in

the United States? (They lost their jobs.)c. What was the cost of the steel tariff to workers at manufacturing companies

such as Sony in Japan? (They lost their jobs.)d. What was the cost of the steel tariff to people in France and other countries

who work at steel manufacturing plants? (They lost their jobs.)e. What was the cost of the steel tariff to people working in Mexico and other

countries who produce products made from steel? (They lost their jobs.)f. What was the cost of the steel tariff to truck drivers and others who transport

goods in the United States? (They lost their jobs or weren’t able to work as many hours as before.)

g. What was the cost of the steel tariff to people in the United States and other countries who live in communities where there were lay-offs? (They lost jobs. There were fewer charitable contributions. Government had less tax revenue to provide goods and services in these communities.)

h. If people in the United States and in other countries were hurt by the steel tariff, why did Congress impose this policy? (Answers will vary. Some students might answer that a few groups benefited from the tariff.)

i. Who in the United States might favor such a policy? (large U. S. steel manufacturers, those who work for large U. S. steel manufacturers and their communities)

11. Explain that often the costs of trade barriers are dispersed widely over large groups of people, and the benefits of trade barriers are received by relatively small groups of people (lots of people gave up a few toothpicks). In the steel example, large U. S. steel manufacturers and employees of large U. S. steel manufacturers benefited from the policy. They received a lot of toothpicks. Those in the U. S. who produced products made from steel, who consume products made from steel, and so on bore the costs of the tariff. Those in other countries, who worked in the steel industry, produced products made from steel, and those in other countries who consumed steel and products made from steel also bore the costs of the tariff.

12. Read the following scenario to the class, and discuss the questions that follow.

“Members of the high school football team wanted new uniforms and some new equipment. They met with the school principal and convinced him to use money collected as general student fees to provide the uniforms and equipment.”

a. Who benefits from the principal’s policy decision? (members of the football team) Note: Students may point out that fans will benefit if the team is better equipped and looks better because a better-equipped team may play better

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and nicer uniforms promote school spirit. However, these are relatively small benefits for fans.

b. Which is larger, the group of students enrolled at the high school or the group of students who play football? (group enrolled at high school)

c. Who bears the costs of the principal’s policy decision? (All of the students at the high school bear the costs of the policy because all of the students are required to pay the fees)

13. Explain that in this example, the football team represents a special interest group. A special interest group is a relatively small group of people who lobby for policies or programs. Special interest groups lobby for programs that produce benefits for their group. The cost of these policies is spread among many, many people. In the football example, the team benefits a great deal from the principal’s decision. Many other people bear the costs of the principal’s decision, and the cost each of these people bears is relatively small.

14. Explain that special interest groups, such as the American Medical Association, the American Association Retired People (AARP), the United Autoworkers, the American Dairy Association, and members of other groups and organizations often lobby congress to influence legislative decisions. Normally, they lobby for programs that will produce great benefits for their group. The costs of their actions are usually spread among many, many people.

15. Point out that in the steel tariff example, large U.S. steel manufacturers and those employed by large U.S. steel manufacturers lobbied Congress for the tariff. This is the group that benefited from the policy that established the tariff. They were the groups that received toothpicks and they received a lot of toothpicks (40).

16. Point out that the costs of the tariff were experienced by many, many other groups of people in the U.S. and in other countries. The costs these people paid were relatively small (2 toothpicks per group).

17. Explain that in other cases, for example, environmental organizations, a relatively small group of people or firms promote a policy that benefits many and imposes costs on a few. For example, pollution control regulations raise the costs for a few large firms; however, millions of people benefit from a cleaner environment.

18. Explain that many groups of people in the United States and in other countries were affected by the steel tariff. This is because people and organizations in the United States and other countries are interdependent. Economic interdependence occurs when economic conditions and policies in one community, state, or country affect economic conditions in other communities, states, or countries.

19. Write the following sentence stem on the board, “Because of steel tariffs.” Ask students to describe examples of interdependence from this activity that would complete the sentence. As students respond, write their responses on the board. Responses would include the following.

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• U.S. workers employed by companies that use steel to produce products were laid off. For example, U.S. automobile workers and construction workers.

• Workers at companies in Mexico and other countries that produce products made from steel were laid off.

• Governments in the U.S. and other countries collected less tax revenue because workers were laid off. As a result, governments were able to provide fewer goods and services in the community.

• Charities in the U.S. and other countries received fewer donations because workers were laid off. As a result, the charities were able to do less good work.

• Workers in the U.S., Saudi Arabia, Canada, and other countries who produce goods and services used by those associated with the steel industry were laid off. For example, those working for petroleum companies in Saudi Arabia, those working at companies manufacturing car parts in Canada and those who drove trucks delivering products in the U.S. were laid off.

• Workers who provide goods and services at stores, restaurants and travel agencies in communities where workers were laid off earned less income and may have lost jobs.

20. Explain that although special interest groups may lobby to impose some type of trade barrier, there are other arguments used to support policies that impose trade barriers. Discuss the following.• One argument in support of trade barriers is national security. In the event of an

international crisis or a war, it may be risky for a country to be heavily dependent on foreign suppliers of a product. For example, if the United States didn’t have an automobile industry or an aircraft industry, the U.S. would be unable to produce tanks and airplanes in the event of war. Therefore, it might be important to impose trade barriers that protect these industries so that the U.S. is able to produce these products.

• Often domestic producers argue that foreign producers have lower wage costs or receive tax concessions or government subsidies. As a result, these foreign producers are able to produce products at lower costs and sell those products at lower prices. Domestic producers want to impose tariffs that will make the price of the foreign product close to the price of the domestic product.

21. Summarize by pointing out that people offer strong arguments for and against imposing trade barriers. Whenever a policy decision is being made regarding a trade barrier, it is important to consider the impact of the policy on domestic consumers, on domestic producers of related products and on foreign producers and consumers. Any policy has far reaching costs and benefits because people, businesses, and organizations in different countries are interdependent.

CLOSUREReview the key points of the lesson using the following discussion questions.1. What are trade barriers? (things that make trade less desirable or more difficult)

2. When does interdependence occur? (Interdependence occurs when economic conditions and policies in one area affect economic conditions and policies in other

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areas. This can include economic conditions in one industry affecting people in other industries or economic conditions/policies in one country affecting people in other countries.)

3. What is a benefit? (A benefit is something gained or received as a result of a policy or decision — a positive result.)

4. What is a cost? (A cost is something sacrificed or given up as the result of a policy or decision — a negative result.)

5. Suppose that you spend an additional hour studying for a math test. What is an expected benefit of your decision to study more? (learning more, doing better on the test) What is a cost of your decision to study more? (time that could have been spent doing something else)

6. What is a special-interest group? (a relatively small group of people who lobby for policies or programs)

7. If a special interest group lobbies to impose a trade barrier, which people will most likely benefit from the policy, and which people will most likely bear the costs of the policy? (Members of the special interest group will most likely benefit from the policy, and a large group of other people — consumers, producers of other goods will bear the costs.)

8. What arguments are given to support decisions to impose trade barriers? (national defense and foreign producers receiving subsidies, tax concessions, or paying lower labor costs)

ASSESSMENTHave students answer the following questions.1. Farmers in the European Union lobby for a tariff on U.S. produced wheat. The

farmers are successful and the European Union establishes a 15% tariff on U.S. wheat.a. Which groups in the U.S. and in European Union countries bear costs as a result

of this tariff? What are the costs?b. What other businesses might be hurt by the tariff. How are these groups hurt?c. Who benefits from this tariff policy?d. Who is the special interest group in this example?

2. What is a trade barrier?

3. Your country is considering imposing a tariff on imported automobiles. Take the role of one of the following: a consumer of automobiles in your country, a producer of automobiles in your country, a producer of automobiles in another country, or a business dependent upon automobile production or consumption such as a tire manufacturer. Write a paragraph explaining the position you would take on this tariff in your role and explain why you would take this position.

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EXTENSION1. Have students locate other products produced with steel. For science, have students

conduct research on the basic oxygen steel-making (BOS) process. Have students conduct research about other alloys.

2. Have students conduct research on other products on which the U.S. and other nations have placed either quotas or tariffs. Some examples for the U.S. include peanuts, sugar, rice, wool suits, leather products, and glass products. Students should determine which people, throughout the world, benefit and which people bear the costs of these trade barriers.

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ACTIVITY 1RESTRICTION RIPPLES

1. I represent those who own and operate steel manufacturing plants in the United States. I, along with employees of steel manufacturers in the U.S., lobbied the U.S. Congress for a policy to impose a tariff on steel.

2. I represent workers at U.S. steel manufacturing plants. I, along with owners of steel manufacturing facilities in the U.S., lobbied the U.S. Congress for a policy that would impose a tariff on steel.

3. I represent people who live in Mexico and work for a U.S. company that produces various metal products using U.S. steel. Because of the tariff and increased costs of production, the price of metal products has risen. People are buying fewer metal products. Because the company is selling less, some of my fellow workers and I lose our jobs.

Give a toothpick to the U.S. steel producers and a toothpick to the employees of the U.S. steel manufacturers.

4. I represent those who work at U.S. automobile assembly plants. Because steel prices are higher, the costs of producing autos have risen, and the prices for autos have risen. U.S. consumers are buying fewer automobiles. As a result, some of my fellow autoworkers and I have lost our jobs.

Give a toothpick to the U. S. steel producers and a toothpick to the employees of the U.S. steel manufacturers.

5. I represent people who own grocery stores and other businesses in U.S. communities where there are automobile assembly plants. Many people in these communities have lost their jobs because new cars aren’t selling very well. Those who are laid off buy fewer groceries and other products from our stores,


6. I represent people who work for companies in Canada and other countries that sell parts to automobile assembly plants in the United States. The automobile assembly plants are producing fewer cars since the steel tariff, so the automobile assembly plants are buying fewer parts from companies like mine. As a result, these companies don’t need as many workers to produce car parts; others and I lose our jobs.


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7. I represent people who live in France and other countries and work for steel manufacturers. Because of the U.S. steel tariff, these companies aren’t able to export as much steel to the United States. Because of reduced sales, these companies laid off some of their workers.

Give a toothpick to the U. S. steel producers and a toothpick to the employees of the U. S. steel manufacturers.

8. I represent workers who are designers and engineers for U.S. auto companies. The price of new cars in the United States has risen because the price of steel has risen. U.S. consumers are buying fewer new cars at the higher prices. As a result, U.S. automobile producers aren’t producing as many new cars. Some designers and engineers lose their jobs.


9. I represent people living in communities where workers have been laid off because of the steel tariff or because of rising steel prices. People who aren’t working don’t pay as much tax to governments. As a result, governments don’t have money for various projects such as road and bridge improvement.

Give a toothpick to the U.S. steel producers and a toothpick to the employees of the U.S.steel manufacturers.

10. I represent owners of cafés and other small businesses located near steel companies in France and other countries.Steelworkers in these communities have lost their jobs. Because they aren’t working, people in the communities don’t eat at the café or buy from other businesses as often as they used to. I, and others who own cafés and businesses, earn less income.


11. I represent those who live in Japan and work for corporations, such as Sony, that sell many products in other countries. Because of lay-offs in the automobile industry, construction industry, and other related businesses in the United States and other countries, people in the United States and other countries are buying fewer Sony products. As a result, I, and other workers at Sony and corporations like Sony have lost our jobs.


12. I represent those who live in Saudi Arabia and other countries that export petroleum. Factories in the U.S. and other countries are producing less because of increased steel prices. As a result, they are buying less petroleum and fewer petroleum products used to operate the factories and used in production. I and other workers at petroleum companies in Saudi Arabia and other countries have lost our jobs.


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13. I represent owners of construction companies in the United States. These companies buy steel and use it to produce buildings and other structures. Because of the steel tariff, the price of steel ha gone up. It costs us more to produce buildings and other structures. Our profits are reduced.


14. I represent people who work for construction companies in the U.S. Because of the steel tariff, the price of steel has risen, meaning that it costs more for the construction companies to build things. As a result, the companies are building fewer things and fewer workers are needed. I, and others, lose our jobs.


15. I represent U.S. consumers. U.S. consumers buy products made from steel, such as eyeglass frames, cars, appliances, cans of food, cans of paint, and products in aerosol cans. Because the price of steel has risen, the cost of producing these products has risen, and the prices of these products have risen.


16. I represent travel agents in communities where workers have lost jobs. Because people have less income, they aren’t planning as many trips. Because other travel agents and I don’t have as many customers, we don’t earn as much.


17. I represent truck drivers in the U.S. We drive trucks that carry new automobiles, equipment, appliances, and other products made from steel. Because of the steel tariff and rising steel prices people are buying fewer new cars, less equipment, and so on. Fewer of these products are being transported. Trucking companies don’t need as many drivers. Some truckers lose their jobs. Some work fewer hours.


18. I represent people who operate charitable organizations in communities where people have lost jobs as a result of the steel tariff and higher steel prices. These organizations rely on donations from members of the community. The money collected is used to help poor people who need food and clothing. Many people in these communities have been laid-off from their jobs at an automobile assembly plant. Because they aren’t working, they aren’t making contributions to charity and we aren’t able to help as many people.


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VISUALWHAT IS STEEL?

• Steel is an alloy.

• Steel is made primarily from iron and carbon.

• Steel was important to the development of the railway system in the U. S.

• Today steel is used to produce many different products.

• Many people are employed producing products made from steel.

• Many people buy products that are made from steel.

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Strand: IV. Economics

Topic: Individual and Household Choices

Grade Level Standard: E-12 Analyze economic forces as to individual and

household choices.

Grade Level Benchmark: 1. Design a strategy for earning, spending, saving, and

investing their resources. (IV.1.HS.1)


1. In groups of 3 or 4, students will have to set up their own budget plan and ways of spending given only a certain amount of money.

2. Each student will be given $1,000.00 of play money. They must make choices on how they will spend the money and balance a checkbook.

Resources

New Vocabulary: Interest, savings account, money market, CD’s, credit

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household choices.

Grade Level Benchmark: 2. Evaluate the impact on households of alternative

solutions to societal problems, such as health care, housing, or energy use.

(IV.1.HS.2)


1. In groups of 2 or 3, compare/contrast our health care to England’s health care.

2. How would you as a person use your energy if you were limited per day? What appliances are used at home and how much are they used and needed? Write an essay.

Resources

New Vocabulary:

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household choices.

Grade Level Benchmark: 3. Analyze ways individuals can select suppliers of goods

and services and protect themselves from deception in the marketplace. (IV.1.HS.3)

Learning Activity(s)/Facts/Information Resources

New Vocabulary:

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Topic: Business Choices

Grade Level Standard: E-13 Examine business choices in the economy.

Grade Level Benchmark: 1. Outline the decision making process a business goes

through when deciding whether to export to a foreign market. (IV.2.HS.1)


New Vocabulary:

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Topic: Business Choices

Grade Level Standard: E-13 Examine business choices in the economy.

Grade Level Benchmark: 2. Evaluate ways to resolve conflicts resulting from

differences between business interests and community values. (IV.2.HS.2)


New Vocabulary:

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Topic: Role of Government

Grade Level Standard: E-14 Examine role of government in the economy.

Grade Level Benchmark: 1. Describe the use of economic indicators and assess

their accuracy. (IV.3.HS.1)


1. Mystery Almanac (activity attached)

Resources

The Wide World of Trade National Council on Economic EducationISBN: 1-56183-136-0(pp. 47-72)

New Vocabulary:

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MYSTERY ALMANAC

LESSON DESCRIPTIONWorking in groups, students participate in an activity to identify countries from around the world. Based on what they learn about these countries, students complete an Information Resources Chart. The goal is to have students recognize what information supplied about the countries can tell them about the countries’ resource endowments and standards of living.

The source for the data used in this lesson is the CIA World Fact Book, 2002 found at www.odci.gov/cia/publications/factbook/

ECONOMIC CONCEPTSProductive resourcesEconomic systemNatural resourcesHuman resourcesCapital goodsHuman capital and investment in human capitalGross domestic productPer capita gross domestic product

OBJECTIVES – Students will: Define natural human resources, capital goods, human capital, and investment in

human capital. Define gross domestic product and per capita GDP. Explain the relationship between investment in human capital and productivity. Explain that if there are more goods and services available per person in a

country, the standard of living in that country improves.

TIME REQUIREDThree class periods

MATERIALS One copy of Activity 1 for each student One copy of Activity 2 for each group (12 pages) One manila envelope or pocket folder for each group Transparency of Visual 1 Four copies of Activity 3 for each student World map from textbook or atlas for each group World wall map One copy of Activity 4 for each student

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http://www.odci.gov/cia/publications/factbook/

PROCEDUREDay One

1. Ask what detectives do. After several student responses, explain that detectives investigate and solve problems by gathering information and analyzing clues. Now, students will act as detectives. They will use clues and information they are given to identify mystery countries.

2. Explain that different countries around the world have different resources. Productive resources are the things used to produce goods and service. Different countries have different geographic characteristics that affect the types of resources the country has.

3. Distribute Activity 1 and tell students to use it for note taking. Point out that they will learn various terms to help them understand and interpret the information they will be given about the mystery countries. Discuss the following:

a. Geography includes climate, geographic features, and land formations, such as mountains, plains, deserts, and bodies of water. Ask students to describe geographic features in their county or state. Have them identify something about the climate in their country or state

b. The handout students will receive has information about the country’s economy. Every country has an economic system. An economic system (economy) is the way in which people, businesses, and governments interact as they decide how to use resources. They economy section includes information about industries found in countries. An industry is a group of businesses that provide similar products. For example, there are several automobile companies that make up the automobile industry in the United States. The economy section includes information about agriculture in the countries; that is, crops grown. Why is it so valuable to have information about the economy in a country? (It helps people know the type and variety of goods and services a country produces. It points out the valuable natural resources found in the country. It indicates what’s available for trade.)

c. Each handout has information about phone, electricity, and transportation in a country. This information helps people understand something about how goods and services are produced in a country and about the quality of life. Electricity tends to make people’s lives easier. It is easier to produce

food and other products using electricity. How does electricity make your life easier and better? (heat, cooling, cooking food, light at night). Note: Comparisons among countries regarding phones, electricity, and transportation must take into account the population and size of the country.

Communication allows people to share information more easily and it often makes it easier to educate people. Which communication methods do you use, and how do these improve your life? (phone, television,

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computer, radio, newspaper, magazines; these provide information, education, and entertainment)

d. Another piece of information provided about each country is per capita GDP. GDP stands for Gross Domestic Product. Gross means total. Domestic means within a particular country and product means goods and services. Gross Domestic Product measures a nation’s economic output; that is, it measures the total value of the nation’s goods and services that are produced in some time period, usually a year. The GDP of an economy can be computed, but people must know the

market value of the goods and services. Market value is computed by multiplying the number of goods and services by their prices.

Capita means head or person. Per capita GDP is the amount of income available for each person in the country. If a country’s GDP is $1,000 and the population is 500, what is its per capita GDP? ($2 = $1,000/500)

It is useful to know the per capita GDP in a country because it gives us an idea about how many goods and services are available for each family in a country, on average. This tells us something about the standard of living in the country.

e. A piece of information provided about each country is the percentage of arable land. Arable land is land that is fit for growing crops. So this statistic tells people what part of all the land in a country is fit for growing crops. Why is it useful to know the percentage of arable land in a country? (It helps people understand whether the country can grow many or few crops.)

f. The information about each country includes the literacy rate. Literacy means the ability to read and write. The literacy rate tells what part or percentage of a country’s entire population is able to read and write. Why is the literacy rate useful to know? (It helps people understand the types of skills and education people living in a country have.)

4. Divide the class into small groups, giving each group a world map. Distribute a copy of Activity 2 to each group. Tell students to use their notes, the clues in the handouts, and the world maps to identify each country. They should not share their answers with other groups. Allow time for the students to work.

5. Distribute a manila envelope or a pocket folder to each group. Tell students to write their names on the folder or envelope and place their handouts and answers in it. Collect the envelopes or folders.

Day 21. Create two columns on the board. Title column one, “Mystery Country Number.”

Title column two, “Country Name.” In column one, list numbers 1 trough 12.

2. Tell students to return to their groups from the previous class. Distribute the folders or envelops to each group. If needed, allow time for groups to complete their work

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3. Ask one member from one group to write the group’s answer on the board in column two next to the number for each country.

4. Tell other groups to compare their answers to the answers on the board. If a group has a different answer for a mystery country, a member from the group should go to the board and write that answer in column two, next to the answer already listed for that number. Have different groups explain on which information they based their decision for Mystery Country #1. (Explanations will vary but may include land size, population, economic data, land formations or geographic features of the country.) Repeat this process with the other mystery countries.

5. Display Visual 1 with the correct answers for the mystery country. Point out that there may have been some information that led groups to select a different answer; however, all information combined limits the answer to the single country.

6. Remind students that resources are the things used to produce goods and services. There are three broad categories of resources: natural resources, human resources, and capital goods (resources).

7. Explain that natural resources are things found in or on the earth. They are “gifts of nature” that are present without human intervention. Trees, land, and minerals are examples of natural resources.

8. Explain that human resources are the quantity and quality of human effort directed toward producing goods and services. Teachers, janitors, nurses, bus drivers, and mechanics are examples of human resources.

9. Explain that capital goods (resources) are goods produced and used to make other goods and services. The school building, desks, computers, overhead projectors, and televisions are examples of capital goods.

10.Explain that human capital refers to the skills, talents, and education that human resources have. Each student in the classroom has human capital. Students in the class can read, write and compute. Some students may be musicians. Others may be volleyball players or dancers. All these skills and talents are part of the students’ human capital. Ask for examples of human capital they possess. (Answers will vary.)

11.Explain that human capital can be improved through investments in education, training, and health care. For example, a student can improve knowledge by attending school, by reading, and by studying. A student can improve musical talent through practice.

12.Explain that people who have more education, who are healthier, and who have more skill and training have more human capital. People with more human

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capital are able to produce more and different types of goods and services than those with less human capital. Point out that students in seventh grade can produce many more school projects and different types of school projects than students in first grade. Children who have practiced piano diligently for hours each day will likely be able to play more complicated pieces than children who don’t practice.

13.Explain that when people can produce more goods and services with the same amount of resources, productivity increases. Increased productivity can improve a country’s standard of living. Standard of living is the level of goods and services people in a country have.

14.Have students work in their groups and identify information from the worksheets that might tell them something about the natural resources, human resources, and capital goods (resources) found in the countries, about the human capital people in the country possess, and about the country’s standard of living. Discuss the following:

a. What information might tell you something about the natural resources found in a country? (percentage of arable land, land formations found in the country, climate of the country, information about the economy might include minerals found in the country)

b. What information might tell you something about the human resources found in a country? (population, literacy rate, life expectancy)

c. What information might tell you something about the capital goods (resources) found in a country? (information about the economy that is related to machinery, tools, and equipment, information about phones, transportation, and electricity available as compared to the population of the country)

d. What information might tell you something about the human capital people in the country possess? (literacy rates)

e. What information might tell you something about the standard of living in the country? (per capita GDP)

15.Tell students to return the handouts to their folders and envelopes. Collect the folders and envelopes.

Day 31. Explain that students will make some comparisons among the countries.

Recording information about the countries in a chart will make it easier to read, compare, contrast, and discus the countries.

2. Have students return to their groups. Distribute folders or envelopes to groups, and give four copies of Activity 3 to each student. Provide the following instructions: Each row on Activity 3 is labeled with types of resource information.

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Divide the Mystery Country handouts among the members of your group. Find and underline the required information on your Mystery Country handouts.

Group members should take turns reading the underlined information from their Mystery Country handouts to the rest of their groups.

As group members read the information about a country, enter the name of the country in the first row. Record the reported information in the appropriate cell of the Resource Information Chart in the column for that country.

3. When groups have completed their work, discuss the following:

a. How are all countries similar? (All have natural and human resources and capital goods. All produce some goods and services.)

b. How do all countries differ? (All are located in different places. They all have some different resources. The types of industries, crops, percentage of arable land, per capita GDP, and so forth, differ from country to country.)

c. Which country has the greatest percentage of arable land? (Ukraine) Lowest percentage of arable land? (Egypt and Saudi Arabia both have 2%.)

d. How might the amount of arable land affect a country? (If there isn’t much arable land, people won’t be able to grow as many crops. Also, some crops may grow better on less arable land than others. If there isn’t much arable land, people may have to get food from other countries.)

e. What country has the highest literacy rate? (Australia) Lowest literacy rate? (Egypt)

f. How might the literacy rate affect a country? (Literacy rates tell us something about the human capital the people in a country possess. A high literacy rate indicates more human capital. People with more and better human capital should be able to produce more and different types of goods and services.)

g. If a country has low literacy rates and few resources, will it be able to produce fewer or more goods and services compared to other countries with higher levels? (fewer)

h. In which countries do people grow rice? (China, Egypt, Mexico, Peru) Soybeans? (United States, Mexico) Coffee? (Kenya, Mexico, Peru, Democratic Republic of the Congo) Cotton? (Egypt, Peru, United States, Mexico) Vegetables? (Egypt, United States, China, Ukraine) Grains? (Egypt, Australia, United States, Czech Republic, Mexico, China, Saudi Arabia, Ukraine, France) Potatoes? (Czech Republic, France, China, Peru) Sunflowers? (Ukraine) Sugarcane? (Democratic Republic of the Congo, Kenya, Australia, Peru) Tea? (China, Kenya)

i. Why do people in these countries produce these crops? (People living in these countries or in other countries want these crops of food to eat or to make other products.)

j. Which countries have petroleum (crude oil) resources? (Saudi Arabia, Egypt, Australia, Mexico, Peru, Democratic Republic of the Congo, United States, Ukraine, China) Gold? (Democratic Republic of Congo, Peru, United

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States, Kenya) Tin? (Australia, Democratic Republic of Congo, China) Iron ore? (Egypt, Australia, Democratic Republic of the Congo, United States, Ukraine, France, China) Bauxite? (Australia, Democratic Republic of the Congo, United States, France)

k. How might an abundance or lack of these resources affect the economic life of people in those countries? (If there’s an abundance of these resources, more goods and services could be produced for each person. People may be able to trade these resources or goods for other things they want but don’t have in their country. If there’s a lack of these resources the opposite is true.)

l. In which countries do people produce electronic equipment? (United States, France, China) Chemicals? (Saudi Arabia, Egypt, Australia, Mexico, United States, Ukraine, France, China) Vehicles? (Mexico, Peru, United States, Czech Republic, China) Textiles? (France, China, Kenya, Peru, Democratic Republic of the Congo, Mexico, Egypt) Cement? (Saudi Arabia, Egypt, Democratic Republic of the Congo, Peru, Kenya, China) Refined petroleum? (Saudi Arabia, United States, Kenya, China) Ships? (Peru, France) Perfume? (France) Plastic? (Kenya, United States) Why do people in these countries produce these things? (People living in that country or in other countries want these things.)

m. If a country produces a lot of electronic equipment but has little arable land, how could people obtain more food products? (Trade with people in other countries who produce food and want electronic equipment.)

n. Which country has the highest per capita GDP? (United States) Lowest per capita GDP? (Democratic Republic of the Congo)

o. What does per capita GDP tell us? (The amount of goods and services available for each person in a country)

p. If a country has a higher per capita GDP, what does that tell us about the country’s standard of living? (It is higher.)

CLOSUREReview the key points of the lesson using the following discussion questions.

1. What are resources? (things used to produce goods and services)2. What are natural resources? (Things found in or on the earth, gifts of nature)3. Give some examples of natural resources. (oil, land coal, bauxite)4. What are human resources? (the quantity and quality of human effort directed

toward producing goods and services)5. Give some examples of human resources. (farmers, mechanics, lawyers.

teachers, truck drivers)6. What are capital goods? (things made and used to produce goods and

services)7. Give some examples of capital goods used to bake cookies. (mixer, spoon,

bowl, cookie sheets, oven)8. What type of resource is arable land? (natural)9. What is human capital? (the skills, talents, and education that human resources

have)

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10. If a country has a high literacy rate, what does it tell you about the human capital people in the country possess? (People are able to read and write – they have some education.)

11. If people in a country want to improve human capital, what can they do? (provide more education and better health services)

12. How does investment in human capital benefit a country? (People with more and better human capital can produce more goods, and services; more variety of goods and services can exist; and productivity can increase.)

13. If productivity increased in a country and there were more goods and services available per person, what would happen to per capita GDP? (rise) Standard of living? (improve)

14. What is per capita GDP? (Gross Domestic Product per person)15. What is gross domestic product? (It is the total market value of all final goods

and services produced within a country’s borders during some time period, usually a year.)

16. How is market value determined to calculate GDP? (Market value is computed by multiplying the goods and services produced in the economy by their prices.)

ASSESSMENTDistribute Activity 4 to each student. Tell students to read the information about the country. Using the information provided and a world map, students should identify the country and answer the questions on the handout.

EXTENSION1. Have students visit the CIA World Fact book at

www.odci.gov/cia/publications/factbook/ to learn more about the mystery countries and other countries.

2. Have students identify natural resources with which they are unfamiliar from the detective clue sheets. Then have students conduct research to find out what these resources are and what they can be used to produce

3. If Lesson 4, “International Trade,” from The Wide World of Trade was taught, have students explain why the country with an abundance of natural resources traded, why the country rich in capital goods traded, and how trade improved the standard of living in each country.

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http://www.odci.gov/cia/publications/factbook/

ACTIVITY 1TERMS FOR MYSTERY COUNTRY DETECTIVES

Please use this page to take notes about the terms you must understand to be a Mystery Country Detective.

Geography:

Economy:

Gross Domestic Product (GDP)/per capita GDP:

Percentage of Arable Land:

Literacy Rate:

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ACTIVITY 2CLUES FOR MYSTERY COUNTRY #1

People Population: 31,138,735Economy Natural resources available include 569,250 square kilometers of

land, gold, limestone, soda ash, salt barites, rubies, fluorspar, garnets, and wildlife.

Seven percent of the land is arable. The per capita GDP in 2001 was approximately $1,000. Major industries include the production of plastic, furniture,

batteries, textiles, soap, cigarettes, flour, petroleum refining, cement, and tourism.

Agricultural products include coffee, tea, corn, wheat, sugarcane, fruit, vegetables, dairy products, beef, pork, poultry, and eggs.

Phones, Electricity, Transportation

310,000 phone lines in use; 540,000 mobile cellular phones in use – phone service is unreliable

4.433 billion kilowatts consumed 2,778 kilometers (km) of railways; 8,868 km of paved highway,

63,00 km of unpaved highway; 22 airports with paved runways.Education Literacy rate: 78.1 percent of the total population over age 15 can

read and write.Geography There are 13,400 square kilometers of water

There are mountains in this country Nearby countries include Tanzania, Ethiopia, and Somalia. The climate varies from tropical along the coast to arid in the

interior. There are 536 kilometers of coastline. There is recurring drought in the northern and eastern regions of

the country. There is flooding during the rainy seasons.Health The life expectancy is 47 years.

Mystery Country #1 is ________ ___

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CLUES FOR MYSTERY COUNTRY #2

People Population: 1,284,303,705Economy Natural resources available include 9,326,410 square kilometers of

land, coal, iron ore, petroleum, natural gas, mercury, tin, tungsten, antimony, lead, zinc, and uranium.

13.31% of the land is arable The per capita GDP in 2001 was approximately $4,300. Industries include iron and steel, coal, machine building,

armaments, textiles and apparel, petroleum, cement, chemical fertilizers, footwear, toys, food processing, automobiles, consumer electronics, and telecommunications.

Agricultural products include rice, wheat, potatoes, sorghum, peanuts, tea, millet, barely, cotton, oilseed, pork, and fish.

Phone, Electricity, Transportation

135 million phone lines in use; 65 million mobile cellular phones – phone service is increasingly more available for private use, unevenly distributed service (more for cities)

1.206 trillion kilowatts consumed 67,524 kilometers (km) of railways; 271,300 km of paved highways;

1,128,700 km of unpaved highways; 324 airports with paved runways.

Education Literacy rate: 81.5 percent of the total population over age 15 can read and write.

Geography There are 270,550 square kilometers of water. The terrain is mostly mountains and high plateaus. There are

deserts in the west and plains, deltas, and hills in the east. Nearby countries include India, Pakistan, Afghanistan, and

Kazakhstan. The climate is extremely diverse from tropical in the south to sub

arctic in the north. There are 14,500 kilometers of coastline. There are frequent typhoons along the southern and eastern coast;

damaging floods, tsunamis, earthquakes, and droughts. Health The life expectancy is 72 years.

Mystery Country #2 is

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People Population: 280,562,489Economy Natural resources available include 9,158,960 square kilometers of

land, coal, copper, lead, molybdenum, phosphates, uranium, bauxite, gold, iron, mercury, nickel, potash, silver, tungsten, zinc, petroleum, natural gas, timber.

Nineteen percent of the land is arable The per capita GDP in 2001 was approximately $36,300. Industries include crude oil production, petroleum refining, steel,

motor vehicles, plastics, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, and mining.

Agricultural products include wheat, other grains, soybeans, corn, fruits, vegetables, cotton, beef, pork, poultry, dairy products, forest products, and fish.


194 million phone lines in use; 69.2 million mobile cellular phones – very large, technically advanced system, reliable

3.613 trillion kilowatts consumed 212,433 kilometers (km) of railways; 5,733,028 km paved

highways; 637,003 km unpaved highways; 5,174 airports with paved runways

Education Literacy rate: 97 percent of the population 15 and over can read and write.

Geography There are 470,131 square kilometers of water. The terrain includes a vast central plain, mountains in the west and

hills and low mountains in the east. Nearby countries include Cuba, Canada, Mexico. The climate is mostly temperate. It is semiarid in the plains, and

there are deserts. There are 19,924 kilometers of coastline. There are tsunamis, volcanoes, earthquakes, hurricanes,

tornadoes, and flooding.Health The life expectancy is 77 years.

Mystery country #3 is

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land, coal, iron, ore, bauxite, zinc, potash, timber, and fish. Thirty-three percent of the land is arable. The per capita GDP in 2001 was approximately $25,400. Industries include machinery, chemicals, automobiles, metallurgy,

aircraft, electronics, ships, textiles, food processing, wine, perfume, and tourism.

Agricultural products include wheat, cereals, sugar beets, potatoes, wine grapes, beef, dairy products, and fish.


34.86 million phone lines in use; 11.078 million mobile cellular – highly developed system, reliable

408.514 billion kilowatts consumed 31,939 kilometers (km) of railways; 892,900 km of paved highways,

no unpaved highways; 268 airports with paved runways.Education Literacy rate: 99 percent of the population 15 and over can read

and write.Geography There are 1,400 square kilometers of water.

The terrain includes mostly flat plains or gently rolling hills in the north and west. The remainder is mountainous.

Nearby countries include Germany, Italy, and Spain. Most of the country experiences cool winters and mild summers.

There are areas of mild winters and hot summers. There are 3,427 kilometers of coastline. There are floods and avalanches.

Health The life expectancy is 79 years.


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land, petroleum, silver, copper, gold, lead, zinc, natural gas, and timber.

Thirteen percent of the land is arable. The per capita GDP in 2001 was approximately $9,000. Industries include food and beverages, tobacco, chemicals, iron

and steel, petroleum, mining, textiles, clothing, motor vehicles, and tourism.

Agricultural products include corn, wheat, soybeans, rice, beans, cotton, coffee, fruit, tomatoes, beef, poultry, dairy products, and wood products.


12.33 million phone lines in use; 2.02 million mobile cellular – adequate service for business and government, but the general population is poorly served


227,756 km of unpaved highways; 238 airports with paved runways.


Geography There are 49,510 square kilometers of water. The terrain includes high, rugged mountains, low coastal plains,

high plateaus, and desert. Nearby countries include Guatemala, Belize, and Honduras. The climate varies from tropical to desert. There are 9,330 kilometers of coastline. There are tsunamis, volcanoes, earthquakes, and hurricanes.



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land, petroleum, natural gas, iron ore, phosphates, manganese, limestone, gypsum, talc, asbestos, lead, and zinc.

Three percent of the land is arable. The per capita GDP in 2001 was approximately $3,700. Major industries include textiles, food processing, tourism,

chemicals, hydrocarbons, construction, cement, and metals. Agricultural products include cotton, rice, corn, wheat, beans, fruits,

vegetables, cattle, water buffalo, sheep, and goats. Phones, Electricity, Transportation

3,971,500 phone lines in use; 380,000 mobile cellular phones in use – large system, reasonably modern and reliable


14,000 km of unpaved highways; 69 airports with paved runways.Education Literacy rate: 51.4 percent of the population 15 and over can read


The terrain includes a vast desert plateau interrupted by a valley and a delta.

Nearby countries include Libya, Israel, and Jordan. The climate is desert—hot dry summers with moderate winters.. There are 2,450 kilometers of coastline. There are periodic droughts, frequent earthquakes, flash floods,

dust storms, and sandstorms.Health The life expectancy is 64 years.


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land, bauxite, coal, iron ore, copper, tin, silver, uranium, nickel, tungsten, mineral sands, lead, zinc, diamonds, natural gas, and petroleum.

Seven percent of the land is arable. The per capita GDP in 2001 was approximately $24,000. Industries include mining, industrial and transportation equipment,

food processing, chemicals, and steel. Agricultural products include wheat, barley, sugarcane, fruits,

cattle, sheep, and poultry. Phones, Electricity, Transportation

10.05 million phone lines in use; 8.6 million mobile cellular phones in use – excellent service




Geography There are 68,920 square kilometers of water. The terrain includes mostly low plateau with deserts and a fertile

plain in the southeast. Nearby countries include Papua New Guinea and New Zealand. The climate is generally arid to semiarid. It is temperate in the

south and east and tropical in the north. There are 25,760 kilometers of coastline. There are cyclones along the coast and severe droughts.



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land, cobalt, copper, cadmium, petroleum, industrial and gem diamonds, gold, silver, zinc, manganese, tin, germanium, uranium, radium, bauxite, iron ore, coal, and timber.

Three percent of the land is arable. The per capita GDP in 2001 was approximately $590. Industries include mining of diamonds, copper and zinc; mineral

processing; consumer products, such as textiles, footwear, processed food and beverages; and cement.

Agricultural products include coffee, sugar, palm oil, rubber, tea, guanine, cassava, palm oil, bananas, root crops, corn, fruits, and wood products.


21,000 phone lines in use; 15,000 mobile cellular phones in use 4.55 billion kilowatts consumed 5,138 kilometers (km) of railways; 157,000 km of highways – no

information available regarding paved/unpaved; 24 airports with paved runways.


Geography There are 77,810 square kilometers of water. The terrain includes a vast central basin that is a low-lying plateau

and mountains in the east. Nearby countries include Angola, Rwanda, Tanzania, and Zambia. The climate is tropical; hot and humid in equatorial river basin;

cooler and drier in southern highlands; and cooler and wetter in eastern highlands.

There are 37 kilometers of coastline. There are periodic droughts in the south, and there is some

volcanic activity.Health The life expectancy is 49 years.


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land, copper, silver, gold, petroleum, timber, fish, iron ore, coal, phosphate, and potash.

Three percent of the land is arable. The per capita GDP in 2001 was approximately $4,800. Industries include mining of metals, petroleum, fishing, textiles,

clothing, food processing, cement, auto assembly, steel, shipbuilding, and metal fabrication.

Agricultural products include coffee, cotton, sugarcane, rice, wheat, potatoes, plantains, coca, poultry, beef, dairy products, wool, and fish.


1.509 million telephone lines in use; 504,995 mobile cellular phones in use – phone service is adequate for most requirements


64,200 km of unpaved highways; 46 airports with paved runways.Education Literacy rate: 88 percent of the population 15 and over can read


The terrain includes a coastal plain in the wet, high and rugged mountains in the center, and lowland jungle in the east.

Nearby countries include Ecuador, Bolivia, and Colombia. The climate varies from tropical in the east to dry desert in the

west. The climate is temperate to frigid in the mountains. There are 2,414 kilometers of coastline. There are earthquakes, tsunamis, floods, and mild volcanic activity.



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land, petroleum, natural gas, iron ore, gold, and copper. Two percent of the land is arable. The per capita GDP in 2001 was approximately $10,600. Industries include crude oil production, petroleum refining, basic

petrochemicals, cement, construction, fertilizer, and plastics. Agricultural products include wheat, barley, tomatoes, melons,

dates, citrus, mutton, chickens, eggs, and milk. Phones, Electricity, Transportation

3.1 million phone lines in use; 1 million mobile cellular phones in use – modern phone system



and write.Geography There are no square kilometers of water.

The terrain is mostly uninhabited, sandy desert. Nearby countries include Jordan, Iran, and Syria. The climate is harsh, dry desert with great extremes in

temperature. There are 2,640 kilometers of coastline. There are frequent sand and dust storms.



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land, hard coal, soft coal, kaolin, clay, graphite, and timber. Forty-one percent of the land is arable. The per capita GDP in 2001 was approximately $14,400. Industries include metallurgy, machinery and equipment, motor

vehicles, glass, and armaments. Agricultural products include wheat, potatoes, sugar beets, hops,

fruit, pigs, and poultry. Phones, Electricity, Transportation

3.869 million phone lines in use; 4.346 million mobile cellular phones – phone system is improving


no unpaved highways; 43 airports with paved runways.Education Literacy rate: 99 percent of the population 15 and over can read


The terrain includes rolling plains, hills and plateaus surrounded by low mountains in the west and very hilly country in the east.

Nearby countries include Germany, Slovakia, and Hungary. The climate is temperate: cool summers; cold, cloudy, and humid

winters. There are no kilometers of coastline. There is flooding.



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land, iron ore, coal, manganese, natural gas, oil, salt, sulfur, graphite, titanium, magnesium, kaolin, nickel, mercury, and timber.

Fifty-seven percent of the land is arable. The per capita GDP in 2001 was approximately $4,200. Industries include coal, electric power, ferrous and nonferrous

metals, machinery and transport equipment, chemicals and food processing.

Agricultural products include grain, sugar beets, sunflower seeds, vegetables, beef, and milk.


9.45 million phone lines in use; 236,000 mobile cellular phones in use – system is improving



and write.Geography There are no square kilometers of water.

The terrain includes fertile plains and plateaus, with mountains in the west and in the extreme south.

Nearby countries include Belarus, Slovakia, and Hungary. The climate is temperate continental. Precipitation is higher in the

west and north and lower in the east and southeast. Winters vary from cool along the coast to cold further inland. Summers are warm across the greater part of the country and hot in the south.

There are 2,782 kilometers of coastline.Health The life expectancy is 66 years.


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ACTIVITY 3RESOURCE INFORMATION CHART

DATANatural Resource Information Natura

l Resources Found

Percent of Arable Land

Square Kilometers of Water

Capital Goods Information Major

Industries

Phones

Electrical Power

Transportation

Human Resource and Human Capital Information Literac

y Rate

Population

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Per Capita GDP

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ACTIVITY 4ASSESSMENT

Use the information in the table below, a world map from your textbook or an atlas, your Resource Information Charts for the other twelve mystery countries, and your human capital to answer the questions that follow the table.

People Population: 144,978,573Economy Natural resources available include 16,995,800 square kilometers

of land, oil, natural gas, coal, strategic minerals, and timber. Eight percent of the land is arable. The per capita GDP in 2001 was approximately $8,300. Industries include mining and production of coal, oil, gas,

chemicals, metals, machine building including aircraft and space vehicles, shipbuilding, road and rail transportation equipment, agricultural machinery, electric power equipment, medical, and scientific instruments.

Agricultural products include grain, sugar beets, sunflower seeds, vegetables, fruits, beef, and milk.


30 million phone lines in use; 2.5 million mobile cellular phones in use – progress has been made but a large demand for main line services remains unmet




Geography There are 79,400 square kilometers of water. The terrain includes broad plains with low hills west of the

mountains, vast coniferous forest and tundra, and uplands and mountains along the southern border region.

Nearby countries include Belarus, Finland, Kazakhstan, and China. The climate rages from humid continental to subarctic. Winters vary

from cool along the southwest seacoast to frigid in the far northeast. Summers vary from warm in the steppes to cool in the northeast.

There are 37,653 kilometers of coastline. There are permafrost, volcanic activity, and earthquakes.


1. What country does this information describe? What information led you to this conclusion?

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2. Give some examples of natural resources found in this country.

3. Do you think that goods and services in this country are produced using many or few capital resources? What information led you to this conclusion?

4. Do you think that the human resources in this country possess high levels of human capital? Why?

5. What is Gross Domestic Product?

6. The per capita GDP is $7,700. Given this per capita GDP do you think that there are more or fewer goods and services available per person in this country than there are in China? Kenya? Given the per capita GDP of $7,700, how could you determine the GDP of this country?

7. Do you think that the standard of living in this country is higher or lower than the standard of living in China? Why?

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VISUAL 1MYSTERY COUNTRIES KEY

Mystery Country #1 Kenya

Mystery Country #2 China

Mystery Country #3 United States

Mystery Country #4 France

Mystery Country #5 Mexico

Mystery Country #6 Egypt

Mystery Country #7 Australia

Mystery Country #8 Democratic Republic of the Congo

Mystery Country #9 Peru

Mystery Country #10 Saudi Arabia

Mystery Country #11 Czech Republic

Mystery Country #12 Ukraine

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Grade Level Benchmark: 2. Distinguish between monetary and fiscal policy and

explain how each might be applied to problems, such as unemployment and

inflation. (IV.3.HS.2)


1. The May Unemployment Rate – A Case Study (May 2005) (attached)

Resources

New Vocabulary:

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A CASE STUDY: THE UNEMPLOYMENT RATEMAY 2005

(TEACHER’S COPY)

KEY ECONOMIC CONCEPTS Deflation Economic growth Economic institutions Inflation Productivity Tools of the Federal Reserve

DESCRIPTIONThe unemployment rate for the month of May was 5.1 percent, down from 5.2 percent in April. Total employment increased by 78,000 in May. The relatively small increase in employment has received the most attention in the news.

Date of Announcement

June 3, 2005

Dates of Future Announcements

July 8 , 2005

Key Economic Indicators as of May 26, 2005Inflation CPI decreased by .1% in May 2005Unemployment 5.1 % in May 2005Real GDP + 3.5% annual rate of increase 1st

quarter, 2005Federal Reserve

The Federal Reserve increased the target federal funds rate by .25% to 3%.

(Click on an indicator above to be directed to most recent case study.)

Unemployment rate decreases to 5.1 percent.

Employment continues to increase but at a slower than expected pace.

An increase of 78,000 jobs.

ANNOUNCEMENTThe unemployment rate for the month of May was 5.1 percent, down from 5.2 percent in April. Total employment increased by 78,000 in May. The relatively small increase in employment has received the most attention in the news.The original press release is available at: http://www.bls.gov/news.release/empsit.nr0.htm.

TEACHERS' NOTESMaterial in italics in this case does not appear in the student version. Each case describes the most current data and trends and expands expectations of student understanding. In this case, the costs of unemployment and the definitions of frictional, structural, and cyclical unemployment are discussed.You may wish to use the following larger versions of the graphs and tables from this lesson for overhead projection or handouts in class:

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http://www.bls.gov/news.release/empsit.nr0.htm

http://www.econedlink.org/lessons/index.cfm?lesson=EM220&page=teacher





PDF Attached

INTERACTIVE QUESTIONS Some months the unemployment rate falls and the number of employed falls; other months the unemployment rates rises while the number of employed rises. This month, unemployment rate fell slightly and the number of unemployed rose by less than expected and by less than the amount necessary simply to provide enough jobs over time for expansion in the working age population. See if you can explain these events.

DEFINITION OF THE UNEMPLOYMENT RATEThe unemployment rate is the percentage of the U.S. labor force that is unemployed. It is calculated by dividing the number of unemployed individuals by the sum of the number of people unemployed and the number of people employed. The number of people unemployed plus the number of people employed equals the number of individuals in the labor force. See the current calculation in table 1.

An individual is counted as unemployed if the individual is over the age of 16 and is actively looking for a job, but cannot find one. For example, students over 16, who choose to not work, and retirees are not in the labor force, and therefore not counted in the unemployment rate. Both are counted as part of the working age population in table 1.

Table 1: Calculation of the Unemployment Rate

Description

Total civilian population

225,669,000

(excluding those under 16, members of the military, and persons in institutions)

- Not in Labor force 76,547,000

(retired, students, individuals choosing not to work)

= Labor force149,122,00

0

(total population minus those not in labor force)

- Employed 141,475,000

(individuals with jobs)

= Unemployed 7,647,000 (individuals without a job and actively searching)

Unemployment Rate =7,647,000

7,647,000 + 141,475,000 = 5.1%

Note to teachers. The number of individuals employed reported in this table differ from the number of employed discussed later in the case. This is because the unemployment statistics and the number of employed used to calculate the unemployment rate come from different surveys than those used to track changes in the number of employed.

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A CAUTION As discussed later in the case, the increase in the number of employed individuals has increased by a smaller than expected amount and by an amount that will not provide sufficient jobs to provide for population growth.

However this is a single month change and does not necessarily indicate a change in the trend. In the last fifteen months, employment has been growing by an average of 192,000 jobs per month. That is rapid enough to provide new entrants jobs and to bring down unemployment rates. While this month's relatively small increase is receiving attention in newspapers, it does not necessarily signal a change in the trend. We should always be cautious about a single month's change in any of the economic data we study.

RELEVANCE OF UNEMPLOYMENT ANNOUNCEMENTSThe monthly unemployment announcements receive headline treatment almost every month. Changes are significant indicators of national economic conditions and have relevance to every local community as unemployment has significant costs to the individuals who are unemployed and to the entire community and the U.S. economy. Those costs are explored later in this case study.

Changes in levels of employment are also included in the announcements and have increasingly received more attention. The employment data are equally, perhaps even more, important indicators of the direction of the U.S. economy.

Part of the reason for the new focus on employment has been the recent history of employment. Employment reached a peak in February 2001, just before the beginning of the most recent recession. The recovery from the recession has often been described as a jobless recovery as it has taken a relatively long time for the number of jobs to return to its previous high. We only did so in January of 2005. See figure 1.

GOALS OF THE UNEMPLOYMENT CASE STUDYThe purpose of this case study is to report the unemployment and employment data, to provide interpretations of the significance of the changes in conditions, and to discuss a number of related economic concepts. The case study includes additional data on the distribution of unemployment, definitions of unemployment and the costs of unemployment. The causes of

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unemployment are presented along with discussion of possible alternative policies. The case ends with exercises for students and activities that teachers can use in classrooms. The case offers an opportunity to enhance our understanding of the relevance of the announcements and the causes and consequences of one of the more important challenges economic policymakers face.

DATA TRENDSThe trend over the 1990s, since the recession in 1990 - 1991 and up to the 2001 recession, was a decrease in the unemployment rate and an increase in employment. Employment expanded by over 15 million jobs during that decade and unemployment fell from 7.8 percent to 3.8 percent.

Figure 2 shows the rise in unemployment associated with the two recessions in 1990/1991 and 2001 with the almost decade long fall in unemployment in between. Unemployment reached a high following each recession of 7.8 percent in 1992 and 6.3 percent in 2003.

At its low in 2000 prior to the most recent recession, unemployment equaled 3.8 percent. From March 2001 to the summer 2003, however, the trend was reversed - generally one of increasing unemployment rates and decreasing employment. Figure 3 focuses on unemployment just prior to, during, and following the most recent recession.

In the summer of 2003, unemployment rates began to fall gradually and have come down slightly more than one full percentage point. The unemployment rate in May (5.1 percent) continues a very gradual fall since the beginning of the year.

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Figure 4 shows the even higher unemployment rates during the recessions in the 1970s and early 1980s, reaching a high for the last 50 years of 10.8 percent in November and December of 1982.

A second important part of each month's unemployment announcement is the report of the number of individuals employed. Unemployment and unemployment rates receive much of the press attention and rightfully so. But employment and a loss or gain in jobs are also important indicators of progress in the economy. The failure of the economy to produce as many jobs as we have experienced in the past has been of particular interest and concern.

The failure of employment to increase at the same rate as population growth ultimately means higher unemployment or lower labor force participation. Estimates of the number of new jobs needed each month simply to provide new entrants with jobs and not have unemployment rates increase is between 125,000 and 150,000.

184

In some months during and following the recession, the labor force actually declined as some of the newly unemployed dropped out of the labor force and many who would normally enter the labor force have not.

Much of the fall in employment from 2001 to 2003 was in manufacturing. Blame in the press is often placed on competition from firms abroad and due to U.S. firms locating new and existing plants abroad. Such conditions often lead to controversies about the effectiveness of international trade and result in increased pressures to establish barriers to trade. While trade is partially responsible, larger influences were the lingering effects of the recession and continuing increases in productivity.

Figure 5 shows that growth in employment slowed in the last part of 2000 and stopped in March of 2001. Employment decreased in all but six of the months from the beginning of the recession in March of 2001 to September of 2003. Finally in September of 2003, employment began to grow and has grown since. (See the most recent GDP case study.)

Employment has been increasing since the summer of 2003 and for the last year has been increasing at rates fast enough to begin to lower unemployment rates and to provide new jobs for new entrants into the job market.

Total nonfarm payroll employment (seasonally adjusted) rose by 78,000 in May to more 133 million jobs. The increase in employment in the last year has averaged more than 200,000 jobs per month and that is sufficient to keep unemployment rates falling.

The largest increases in jobs in May were in services, particularly in education and health services and in retail trade. Construction employment also increased. Manufacturing jobs continued to fall.

DISTRIBUTION OF UNEMPLOYMENTUnemployment varies significantly among groups of individuals and parts of the country. Table two shows the unemployment rates for a number of groups of

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individuals, with unemployment rates ranging from 4.4 for adult men to 17.9 percent for teenagers.

Table 2: Unemployment Statistics by Gender, Race & Age

Adult Men 4.4%Adult Women 4.6%

Whites 4.4%Blacks 10.1%Hispanics 6.0%

Teenagers 17.9%

CLASSROOM DISCUSSION ACTIVITYGo to the BLS website and check the Local Area Unemployment Statistics for your city and state (http://www.bls.gov/news.release/metro.t01.htm).

1. Is unemployment in your area higher, lower, or roughly the same as the national average?

2. What factors contribute to your area's growth or lack of growth? Which industries have expanded? Which industries have contracted? A good idea is to ask students to talk to your local or state employment office and report on local and state trends. The local or state employment office should be about to explain why your local statistics differ from the national data.

3. Will the recent changes affect students hunting for jobs this summer?

THE COSTS OF UNEMPLOYMENT There are significant personal costs to unemployment. Unemployed workers often do not have the income to support themselves or their families. The stress of being unemployed is reflected through increases in alcohol and drug abuse, marital problems, and criminal activity among those who are unemployed.

One observer has said that even though the overall unemployment rate is 5.1 percent, it is 100 percent for a person who does not have a job. The intention of the statement is to emphasize how serious unemployment can be for individuals.

State and federal governments reduce the personal financial cost of being unemployed through the unemployment compensation provided to many unemployed workers. Government spending is funded, in the largest part, from tax revenues. Therefore, unemployment compensation spreads out the cost of being unemployed among taxpayers, instead of having the entire burden fall on the unemployed worker.

Increases in unemployment also mean that the economy is wasting an important scarce resource – labor. Real GDP is less than it otherwise could be and that additional output is lost forever. If more individuals had been employed, production of goods and services would have been higher. Average standards of living are lower as a result.

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TYPES OF UNEMPLOYMENTThere are three types of unemployment, each of which describes the particular circumstances of the individual and their employment situation. Frictional unemployment is temporary unemployment arising from the normal job search process. Frictional unemployment helps the economy function more efficiently as it simply refers to those people who are seeking better or more convenient jobs and will always exist in any economy.

Structural unemployment is the result of changes in the economy caused by technological progress and shifts in the demand for goods and services. Structural changes eliminate some jobs in certain sectors of the economy and create new jobs in faster growing areas. Persons who are structurally unemployed do not have marketable job skills and may face prolonged periods of unemployment, as they must often be retrained or relocate in order to find employment.

Cyclical unemployment is unemployment caused by a drop in economic activity. This type of unemployment can hit many different industries and is caused by a general downturn in the business cycle. It is the type of unemployment we experienced as a result of the recession four years ago.

At the levels of unemployment that economists consider to be the lowest possible sustainable levels, the only unemployment that exists is due to friction in labor markets and structural changes in the economy.

CASE STUDY DISCUSSION QUESTIONS1. What are the key parts of the unemployment announcement?

[The unemployment rate fell slightly. Employment increased once again this month, but less than the amount necessary to maintain low unemployment rates over time.]

2. What are the relevant economic concepts?[The rate of unemployment, the amount of employment, and the change in labor force.]

3. What does this mean for workers? [Employment is rising but did not rise rapidly enough to provide jobs for new workers entering the work force. If this rate of growth in employment would continue, unemployment rates are likely to rise.]

4. What should monetary policy be, given the changes this month?[(See the most recent Federal Reserve case study.) A one month's change in employment growth should not change monetary policy. Monetary policy has been one of raising target interest rates and slowing the growth of the money supply in order to reduce the amount of economic stimulus of recent policy. If the change in the growth of the number of employed this month would continue for several months it would indicate that monetary policy should change to one that is more stimulative.]

SOURCES OF ADDITIONAL ACTIVITIESAdvanced Placement Economics: Macroeconomics. (National Council on Economic Education)

Activity 13. Types of unemployment. (Also see activities 21 and 22. Full Employment in a Capitalist Economy.)

Advanced Placement Economics: Microeconomics (National Council on Economic Education) Unit Two: The Nature and Function of Markets

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http://store.ncee.net/adplacec.html

http://www.econedlink.org/lessons/index.cfm?lesson=em220&page=teacher

Economics USA: A Resource Guide for Teachers Lesson 12: Monetary Policy: How Well Does It Work?Lesson 13: Stabilization Policy: Are We Still in Control?

Focus on Economics: High School Economics (National Council on Economic Education) Lesson 2. Broad Social Goals of an EconomyLesson 18. Economics Ups and Downs

Focus on Economics: Civics and Government (National Council on Economic Education) Lesson 11. What can a Government Do About Unemployment?

Handbook of Economic Lessons (California Council on Economic Education) Lesson 5. Unemployment in the United States: How is it Measured?

High School Economics Courses: Teaching Strategies Lesson 2: Different Means of Organizing an EconomyLesson 15: Economic Goals

All are available in Virtual Economics, An Interactive Center for Economic Education (National Council on Economic Education) or directly through the National Council on Economic Education.

Case Study Index:The Unemployment Rate

Following is a list of past Unemployment Rate case studies:

6/3/2005 5/6/2005 3/10/2005 2/6/2004 1/9/2004 12/5/2003 11/7/2003 10/3/2003 9/5/2003 8/10/2003 7/3/2003 5/2/2003 2/7/2003 11/1/2002 10/4/2002 9/6/2002 5/3/2002 4/5/2002 3/8/2002 2/1/2002 1/4/2002 12/10/2001 11/2/2001 10/5/2001 9/7/2001

6/1/2001

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http://store.ncee.net/virec.html

http://store.ncee.net/foconeccivan.html

http://store.ncee.net/fochigschool.html

A CASE STUDY: THE UNEMPLOYMENT RATE - MAY 2005

Date of Announcement

June 3, 2005

Dates of Future Announcements

July 8 , 2005

Key Economic Indicators as of May 26, 2005Inflation CPI decreased by .1% in May 2005Unemployment

5.1 % in May 2005

Real GDP + 3.5% annual rate of increase 1st quarter, 2005

Federal Reserve

The Federal Reserve increased the target federal funds rate by .25% to 3%

(Click on an indicator above to be directed to most recent case study.)

Unemployment rate decreases to 5.1 percent.

Employment continues to increase but at a slower than expected pace. An increase of

78,000 jobs.

ANNOUNCEMENTThe unemployment rate for the month of May was 5.1 percent, down from 5.2 percent in April. Total employment increased by 78,000 in May. The relatively small increase in employment has received the most attention in the news.

The original press release is available at: http://www.bls.gov/news.release/empsit.nr0.htm.

INTERACTIVE QUESTIONS Some months the unemployment rate falls and the number of employed falls; other months the unemployment rates rises while the number of employed rises. This month, unemployment rate fell slightly and the number of unemployed rose by less than expected and by less than the amount necessary simply to provide enough jobs over time for expansion in the working age population. See if you can explain these events.

Click here for an online activity.

DEFINITION OF THE UNEMPLOYMENT RATEThe unemployment rate is the percentage of the U.S. labor force that is unemployed. It is calculated by dividing the number of unemployed individuals by the sum of the number of people unemployed and the number of people employed. The number of people unemployed plus the number of people employed equals the number of individuals in the labor force. See the current calculation in table 1.

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An individual is counted as unemployed if the individual is over the age of 16 and is actively looking for a job, but cannot find one. For example, students over 16, who choose to not work, and retirees are not in the labor force, and therefore not counted in the unemployment rate. Both are counted as part of the working age population in table 1.

Table 1: Calculation of the Unemployment Rate

Description

Total civilian population

225,669,000

(excluding those under 16, members of the military, and persons in institutions)

- Not in Labor force

76,547,000

(retired, students, individuals choosing not to work)

= Labor force 149,122,000

(total population minus those not in labor force)

- Employed 141,475,000

(individuals with jobs)

= Unemployed

7,647,000 (individuals without a job and actively searching)

Unemployment Rate =

7,647,000

7,647,000 + 141,475,000

= 5.1%

A CAUTION As discussed later in the case, the increase in the number of employed individuals has increased by a smaller than expected amount and by an amount that will not provide sufficient jobs to provide for population growth.

However this is a single month change and does not necessarily indicate a change in the trend. In the last fifteen months, employment has been growing by an average of 192,000 jobs per month. That is rapid enough to provide new entrants jobs and to bring down unemployment rates. While this month's relatively small increase is receiving attention in newspapers, it does not necessarily signal a change in the trend. We should always be cautious about a single month's change in any of the economic data we study.

RELEVANCE OF UNEMPLOYMENT ANNOUNCEMENTSThe monthly unemployment announcements receive headline treatment almost every month. Changes are significant indicators of national economic conditions and have relevance to every local community as unemployment has significant costs to the individuals who are unemployed and to the entire community and the U.S. economy. Those costs are explored later in this case study.

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Changes in levels of employment are also included in the announcements and have increasingly received more attention. The employment data are equally, perhaps even more, important indicators of the direction of the U.S. economy.

Part of the reason for the new focus on employment has been the recent history of employment. Employment reached a peak in February 2001, just before the beginning of the most recent recession. The recovery from the recession has often been described as a jobless recovery as it has taken a relatively long time for the number of jobs to return to its previous high. We only did so in January of 2005. See figure 1.

DATA TRENDSThe trend over the 1990s, since the recession in 1990 - 1991 and up to the 2001 recession, was a decrease in the unemployment rate and an increase in employment. Employment expanded by over 15 million jobs during that decade and unemployment fell from 7.8 percent to 3.8 percent.

Figure 2 shows the rise in unemployment associated with the two recessions in 1990/1991 and 2001 with the almost decade long fall in unemployment in between. Unemployment reached a high following each recession of 7.8 percent in 1992 and 6.3 percent in 2003.

191

At its low in 2000 prior to the most recent recession, unemployment equaled 3.8 percent. From March 2001 to the summer 2003, however, the trend was reversed - generally one of increasing unemployment rates and decreasing employment. Figure 3 focuses on unemployment just prior to, during, and following the most recent recession.

In the summer of 2003, unemployment rates began to fall gradually and have come down slightly more than one full percentage point. The unemployment rate in May (5.1 percent) continues a very gradual fall since the beginning of the year.

Figure 4 shows the even higher unemployment rates during the recessions in the 1970s and early 1980s, reaching a high for the last 50 years of 10.8 percent in November and December of 1982.

192

A second important part of each month's unemployment announcement is the report of the number of individuals employed. Unemployment and unemployment rates receive much of the press attention and rightfully so. But employment and a loss or gain in jobs are also important indicators of progress in the economy. The failure of the economy to produce as many jobs as we have experienced in the past has been of particular interest and concern.

The failure of employment to increase at the same rate as population growth ultimately means higher unemployment or lower labor force participation. Estimates of the number of new jobs needed each month simply to provide new entrants with jobs and not have unemployment rates increase is between 125,000 and 150,000.

In some months during and following the recession, the labor force actually declined as some of the newly unemployed dropped out of the labor force and many who would normally enter the labor force have not.

Much of the fall in employment from 2001 to 2003 was in manufacturing. Blame in the press is often placed on competition from firms abroad and due to U.S. firms locating new and existing plants abroad. Such conditions often lead to controversies about the effectiveness of international trade and result in increased pressures to establish barriers to trade. While trade is partially responsible, larger influences were the lingering effects of the recession and continuing increases in productivity.

193

Figure 5 shows that growth in employment slowed in the last part of 2000 and stopped in March of 2001. Employment decreased in all but six of the months from the beginning of the recession in March of 2001 to September of 2003. Finally in September of 2003, employment began to grow and has grown since. (See the most recent GDP case study.)

Employment has been increasing since the summer of 2003 and for the last year has been increasing at rates fast enough to begin to lower unemployment rates and to provide new jobs for new entrants into the job market.

Total nonfarm payroll employment (seasonally adjusted) rose by 78,000 in May to more 133 million jobs. The increase in employment in the last year has averaged more than 200,000 jobs per month and that is sufficient to keep unemployment rates falling.

The largest increases in jobs in May were in services, particularly in education and health services and in retail trade. Construction employment also increased. Manufacturing jobs continued to fall.

DISTRIBUTION OF UNEMPLOYMENTUnemployment varies significantly among groups of individuals and parts of the country. Table two shows the unemployment rates for a number of groups of individuals, with unemployment rates ranging from 4.4 for adult men to 17.9 percent for teenagers.

Table 2: Unemployment Statistics by Gender, Race & Age

Adult Men 4.4%Adult Women 4.6%

Whites 4.4%Blacks 10.1

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%Hispanics 6.0%

Teenagers 17.9%

THE COSTS OF UNEMPLOYMENT There are significant personal costs to unemployment. Unemployed workers often do not have the income to support themselves or their families. The stress of being unemployed is reflected through increases in alcohol and drug abuse, marital problems, and criminal activity among those who are unemployed.

One observer has said that even though the overall unemployment rate is 5.1 percent, it is 100 percent for a person who does not have a job. The intention of the statement is to emphasize how serious unemployment can be for individuals.

State and federal governments reduce the personal financial cost of being unemployed through the unemployment compensation provided too many unemployed workers. Government spending is funded, in the largest part, from tax revenues. Therefore, unemployment compensation spreads out the cost of being unemployed among taxpayers, instead of having the entire burden fall on the unemployed worker.

Increases in unemployment also mean that the economy is wasting an important scarce resource – labor. Real GDP is less than it otherwise could be and that additional output is lost forever. If more individuals had been employed, production of goods and services would have been higher. Average standards of living are lower as a result.

TYPES OF UNEMPLOYMENTThere are three types of unemployment, each of which describes the particular circumstances of the individual and their employment situation. Frictional unemployment is temporary unemployment arising from the normal job search process. Frictional unemployment helps the economy function more efficiently as it simply refers to those people who are seeking better or more convenient jobs and will always exist in any economy.

Structural unemployment is the result of changes in the economy caused by technological progress and shifts in the demand for goods and services. Structural changes eliminate some jobs in certain sectors of the economy and create new jobs in faster growing areas. Persons who are structurally unemployed do not have marketable job skills and may face prolonged periods of unemployment, as they must often be retrained or relocate in order to find employment.

Cyclical unemployment is unemployment caused by a drop in economic activity. This type of unemployment can hit many different industries and is caused by a general downturn in the business cycle. It is the type of unemployment we experienced as a result of the recession four years ago.

195

At the levels of unemployment that economists consider to be the lowest possible sustainable levels, the only unemployment that exists is due to friction in labor markets and structural changes in the economy.

CASE STUDY DISCUSSION QUESTIONS1. What are the key parts of the unemployment announcement?

2. What are the relevant economic concepts?

3. What does this mean for workers?

4. What should monetary policy be, given the changes this month?


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Grade Level Standard: E-14 Examine role of government in economy.

Grade Level Benchmark: 3. Compare governmental approaches to economic growth

in developing countries. (IV.3.HS.3)


New Vocabulary:

197







Grade Level Benchmark: 4. Evaluate a government spending program on the basis

of its intended and unintended results. (IV.3.HS.4)


New Vocabulary:

198







Grade Level Benchmark: 5. Select criteria to use in evaluating tax policy. (IV.3.HS.5)


New Vocabulary:

199





Topic: Economic Systems

Grade Level Standard: E-15 Examine various economic systems.

Grade Level Benchmark: 1. Use case studies to exemplify how supply and demand,

prices, incentives, and profits determine what is produced and distributed in a

competitive world. (IV.4.HS.1)


New Vocabulary:

200







Grade Level Benchmark: 2. Describe relationships between a domestic economy and

the international economic system. (IV.4.HS.2)


New Vocabulary:

201







Grade Level Benchmark: 3. Evaluate the United States and other economic systems

on their ability to achieve broad social goals, such as freedom, efficiency, equity,

security, development, and stability. (IV.4.HS.3)


New Vocabulary:

202







Grade Level Benchmark: 4. Describe relationships among the various economic

institutions. (IV.4.HS.4)


New Vocabulary:

203







Grade Level Benchmark: 5. Compare and contrast a free market economic system

with other economic systems. (IV.4.HS.5)


New Vocabulary:

204





Topic: Trade

Grade Level Standard: E-16 Examine how trade generates development and

interdependence.

Grade Level Benchmark: 1. Evaluate the benefits and problems of an economic

system built on voluntary exchange. (IV.5.HS.1)


New Vocabulary:

205





Topic: Trade


interdependence.

Grade Level Benchmark: 2. Trace the historical development of international

trading ties. (IV.5.HS.2)


New Vocabulary:

206





Topic: Trade


interdependence.

Grade Level Benchmark: 3. Explain how specialization, interdependence, and

economic development are related. (IV.5.HS.3)


New Vocabulary:

207





Topic: Trade


interdependence.

Grade Level Benchmark: 4. Describe the effect of currency exchange, tariffs, quotas,

and product standards on world trade and domestic economic activity. (IV.5.HS.4)


New Vocabulary:

208




Strand: V. Inquiry

Topic: Information Processing

Grade Level Standard: E-17 Analyze information from various sources.

Grade Level Benchmark: 1. Locate information on a specific social science topic

in-depth using a variety of sources and electronic technologies. (V.1.HS.1)


New Vocabulary:

209




Strand: V. Inquiry



Grade Level Benchmark: 2. Use traditional and electronic means to organize and

interpret information pertaining to a specific social science topic and prepare it for

in-depth presentation. (V.1.HS.2)


New Vocabulary:

210




Strand: V. Inquiry



Grade Level Benchmark: 3. Develop generalizations pertaining to a specific social

science topic by interpreting information from a variety of sources. (V.1.HS.3)


New Vocabulary:

211




Strand: V. Inquiry

Topic: Conducting Investigations

Grade Level Standard: E-18 Conduct investigations in economics.

Grade Level Benchmark: 1. Conduct an investigation prompted by a social science

question and compare alternative interpretations of their findings. (V.2.HS.1)


New Vocabulary:

212




Strand: V. Inquiry

Topic: Conducting Investigations

Grade Level Standard: E-18 Conduct investigations in economics.

Grade Level Benchmark: 2. Report the results of their investigation including

procedures followed and a rationale for their conclusions. (V.2.HS.2)


New Vocabulary:

213




Strand: VI. Public Discourse and Decision Making

Topic: Identifying and Analyzing Issues

Grade Level Standard: E-19 Analyze various economic issues.

Grade Level Benchmark: 1. Generate possible alternative resolutions to public issues

and evaluate them using criteria that have been identified. (VI.1.HS.1)


New Vocabulary:

214





Topic: Group Discussion

Grade Level Standard: E-20 Examine and discuss economic issues in groups.

Grade Level Benchmark: 1. Engage each other in elaborated conversations that

deeply examine public policy issues and help make reasoned and informed

decisions. (VI.2.HS.1)


New Vocabulary:

215





Topic: Persuasive Writing

Grade Level Standard: E-21 Compose persuasive writing.

Grade Level Benchmark: 1. Compose extensively elaborated essays expressing and

justifying decisions on public policy issues. (VI.3.HS.1)


New Vocabulary:

216




Strand: VII. Citizen Involvement

Topic: Responsible Personal Conduct

Grade Level Standard: E-22 Develop responsible personal conduct.

Grade Level Benchmark: 1. Act out of respect for the rule of law and hold others

accountable to the same standard. (VII.1.HS.1)


New Vocabulary:

217




Strand: VII. Citizen Involvement

Topic: Responsible Personal Conduct

Grade Level Standard: E-22 Develop responsible personal conduct.

Grade Level Benchmark: 2. Plan and conduct activities intended to advance their

views on matters of public policy, report the results of their efforts, and evaluate their

effectiveness. (VII.1.HS.2)


New Vocabulary:

218

Documents

MATHEMATICS€¦ · Web view1. Write the word “steel” on the board. Ask students the following questions. a. What is steel? (Students may know that steel is a product used in