Economics ESOL Study Guide Unit 4: Macroeconomics Chapters 9, 10, 13, 14 Test wk of 10/30 (can always change) Economics Standards covered in this unit: Macroeconomic Concepts SSEMA1 The student will illustrate the means by which economic activity is measured. By the end of this unit, you should be able to: Explain that overall levels of income, employment, and prices are determined by the spending and production decisions of households, businesses, government, and net exports. Define Gross Domestic Product (GDP), economic growth, unemployment, Consumer Price Index (CPI), inflation, stagflation, and aggregate supply and aggregate demand. Explain how economic growth, inflation, and unemployment are calculated. Identify structural, cyclical, and frictional unemployment. Define the stages of the business cycle; include peak, contraction, trough, recovery, expansion, as well as recession and depression. Describe the difference between the national debt and government deficits.
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Economics ESOL Study Guide
Unit 4: Macroeconomics
Chapters 9, 10, 13, 14
Test wk of 10/30 (can always change)
Economics Standards covered in this unit:
Macroeconomic Concepts
SSEMA1 The student will illustrate the means by which economic activity is measured.
By the end of this unit, you should be able to:
Explain that overall levels of income, employment, and prices are determined by the spending and
production decisions of households, businesses, government, and net exports.
(CPI), inflation, stagflation, and aggregate supply and aggregate demand.
Explain how economic growth, inflation, and unemployment are calculated.
Identify structural, cyclical, and frictional unemployment.
Define the stages of the business cycle; include peak, contraction, trough, recovery, expansion, as
well as recession and depression.
Describe the difference between the national debt and government deficits.
Unit 4: Macroeconomics
Key Terms
Chapters 9, 10, 13, 14
Image Definition What that means
Aggregate demand
The total quantity of goods and services demanded at
different price levels
Total demand for a country
Aggregate supply
The total value of goods and services that all firms would produce in a specific period
of time at various price levels
Total supply for a country
Business cycle
Systematic changes in real GDP marked by alternating
periods of expansion and contraction
The up and down of business
Capital
expenditures
Funds used by a company to acquire or upgrade physical
assets such as property, industrial buildings or
equipment
Money spent to improve the business
Commodity
a raw material or primary agricultural product that can be bought and sold, such as
copper or coffee
Something that can be traded
Consumer price
index
Index used to measure price changes for a market basket of
frequently used consumer items
Looking at how much something used to cost
compared to today
Creeping inflation
Relatively low rate of inflation, usually 1 to 3
percent annually
Expected rate of inflation
Current GDP Gross Domestic Product
measured in current prices, unadjusted for inflation
GDP without inflation
Cyclical
unemployment
Unemployment directly related to swings in the
business cycle
When demand is low and workers are not
needed
Deflation
Decrease in the general level of the prices of goods and services
Prices drop
Depreciation
Gradual wear on capital goods during production
Cost of something goes down over time
Depression
State of the economy with large numbers of
unemployed, declining real incomes, overcapacity in
manufacturing plants, general economic hardship
Extremely low economic growth
Estate tax
Tax on the transfer of property when a person dies
Tax paid when property is transferred
(after death)
Excise tax
General revenue tax levied on the manufacture or sale of
selected items
Tax on specific things (just paper, etc) – usually things not
needed
Expansion
Period of growth of real GDP; recovery from
recession Economy grows
External shock
An event that produces a significant change within an economy, despite occurring
outside of it
Unpredictable change in economy
War, natural disaster
FICA
Federal Insurance Contributions Act; tax levied on employers and employees
to support Social Security and Medicare
Taxes that pay Social Security &
Medicare
Flat tax
Proportional tax on individual income after a
specified threshold has been reached
Limit to how much income tax that people
have to pay
Benefits the wealthiest tier
Frictional
unemployment
Unemployment caused by workers changing jobs or waiting to go to new ones
When people are in between jobs
Full employment
A situation in which all available labor resources are
being used in the most economically efficient way.
all of the workers are employed
Galloping inflation
Relatively intense inflation, usually ranging from 100 to
300% annually Period of high inflation
Gross Domestic
Product (GDP)
The most complete measure of total output
How much money a country makes
Hyperinflation
Extremely rapid or out of control inflation
Almost slang – inflation out of control
Implicit GDP
price deflator
Index used to measure price changes in Gross Domestic
Product
How GDP changes are measured
Inflation
Rise in the general level of prices
Prices go up
Innovation
knowledge, technology, entrepreneurship, and innovation are
positioned at the center of the model rather than seen
as independent forces
Innovation (making new things) at center of economic
model – not side factor
Luxury tax
Tax on good that has low supply and high demand
Tax on luxury items (expensive cars,
jewelry)
Mandatory
spending
Federal spending authorized by law that continues
without the need for annual approvals of Congress
Govt spending that doesn’t need approval
every year
Soc Sec, vet benefits
Marginal tax rate
Tax rate that applies to the next dollar of taxable income
Tax rate increases when income increases
The more you make,
the more taxes you pay
Medicare
Federal health-care program for senior citizens, regardless
of income Health care for elderly
Monetary factors
A cause of the business cycle that depends on
ease/availability of loans Available loan $$
Peak
Point in time when real GDP stops expanding and begins
to decline
Highest point of business cycle
Per capital
spending
Govt spending per person; total divided by population
How much the govt spends on the average
person
Can also be ‘per capita output’
– how much a person produces for the
country’, etc
Price index
Tracks price changes over time and can be used to remove the
distortions of inflation from other statistics
Method of tracking prices
Private sector
That part of the economy made up of private
individuals and businesses Private businesses
Producer price
index
Index used to measure prices received by domestic
producers; formerly called the wholesale
price index
Like consumer price index,
but only measures domestic products (stuff made in US),
and not services
Progressive taxes
A tax that imposes a higher percentage rate of taxation
on persons with higher incomes
Tax rate goes up as income goes up
Proportional taxes
Tax in which percentage of income paid in tax is the
same regardless of the level of income
Tax rate stays the same, regardless of
income
Public sector
That part of the economy made up of the local, state,
and federal govts Govt businesses
Real GDP
Constant dollar GDP How much a country
made without inflation
Real GDP per
capita
How long-term economic growth is measured
Long-term growth
Recession
Decline in real GDP lasting at least two quarters or more
When economic growth is going down
Regressive tax
Tax where percentage of income paid in tax goes
down as income rises
Tax rate goes down as income goes up
Seasonal
unemployment
Unemployment caused by annual changes in the
weather or other conditions that prevail at certain times
of the year
Some workers have less work
during certain seasons (construction, etc)
Sectors of macro
economy (4)
Consumer, investment, government, foreign sectors
GDP = C + I + G + F
Parts of the economy that control how much money a country makes
Economics: ESOL Study Guide
Unit 4: Macroeconomics
Chapters 9,10,13,14
Test 10/29 (may change)
Background Reading Read this before we begin the unit. This is from the EOCT Study Guide. This is all
the major concepts we will discuss in this unit.
Macroeconomics
If you look through the pages of a business newspaper you will see two major types of articles. One set of
articles discusses how individual firms are making profits, losing money, or making various economic
decisions. These articles deal with microeconomic issues. The second set of articles takes a larger view of
Structural
unemployment
Unemployment caused by a fundamental change in the economy that reduces the demand for some workers
When workers lose jobs because they
are not needed (skills outdated,
products no longer needed)
Technological
unemployment
Unemployment caused by technological development or automation that make
some workers’ skills obsolete
When workers are replaced by
machines/computers
Trough
Point in time when real GDP stops declining and begins to
expand
When GDP stops declining
Unemployment
rate
Ratio of unemployed individuals divided by total number of persons in the
civilian labor force, expressed as a percentage
People out of work divided by
number of able workers
Welfare
Government or private agency programs that
provide general economic and social assistance to
needy individuals
Govt agency that gives $$ to people in need
the economy and includes issues such as overall economic growth, unemployment rate, inflation, and government policies. These articles cover macroeconomic issues.
As mentioned briefly in the last section, macroeconomics means “large economics” and indeed covers
large-scale economic issues. While a single company has employees, a nation has a national employment
rate. While a single firm produces a set of goods or services, a nation has a Gross Domestic Product
(GDP), which is the sum of all goods and services produced. As you can see from these two examples,
microeconomics and macroeconomics are similar. Both are concerned with employment, goods and
services, pricing, and other basic economic topics. The difference between microeconomics and
macroeconomics is the scope of their analysis of economic behavior. While microeconomics covers
single firms and their relation to particular markets, macroeconomics sums all these individual markets together to discuss the economic health of a nation.
Key economic indicators
When you go for a checkup, the doctor looks at several indicators—heart rate, blood pressure, and body
temperature—to help determine your basic level of health. The general economic health of a nation can
also be judged by looking at several basic economic indicators, which include the Gross Domestic
Product, the Consumer Price Index (CPI), aggregate supply and demand, and the unemployment rate. A
quick glance at these factors can often tell you how an economy is doing. As stated earlier, the GDP is the market value of all goods and services produced by a country over a specific period of time, usually a year.
There are different methods of measuring GDP, but the most common is known as the expenditures
approach. This approach adds up all the money spent by a country’s consumers, firms, and the
government, and then factors in net exports. The formula for GDP can then be written as
Gross Domestic Product =
Consumer Expenditures + Business Investment + Government Expenditures + Net Exports
GDP = C + I + G + Xn
The Net Exports part (Xn) is needed to take into account the amount of money that foreigners spend on
our goods and services as well as the amount we spend on foreign goods and services. Foreigners buying our goods should be part of GDP, while money we spend on foreign goods is not part of the Gross
Domestic Product.
Net Exports =
(American goods and services bought by foreigners) – (foreign goods and services bought by Americans)
Net Exports = exports – imports
Tracking GDP over a period of years can tell you if a nation’s economy is expanding or contracting. If
GDP rises by 4% from Year 1 to Year 2, then the economy appears to be doing well. However, inflation—
a rise in the price level—can distort GDP growth, since a rise in the average price level would increase
GDP. If inflation between Year 1 and Year 2 was very high, then GDP might not have grown at all. The
higher prices caused by inflation may have caused the 4% shift, but the economy was actually unchanged.
For this reason, GDP is often discussed as real GDP. A base year is used, and a price index (called the
GDP deflator) is used to measure all future GDP in terms of the base year prices. Ideally, using base-year
prices will eliminate any distortions caused by price changes and allow real GDP to accurately reflect
changes in the nation’s economy.
The GDP deflator is a price index that is designed to track inflation (and deflation, which is a decrease in
the price level). The Consumer Price Index does the same thing. The CPI takes a hypothetical basket of goods and services purchased by a typical household. It then tracks changes in the amount of money required to purchase this same basket of goods and services year after year. For a simplified example,
suppose a household’s basket of goods consists of milk, paperback books, and plastic sofas.
Quantity in Year 1 Year 1 Price Cost
300 gallons milk $1.20 $360
50 paperback books $5 $250
2 plastic sofas $110 $220
Total cost of Basket in Base Year $830
Quantity in Year 2 Year 2 Price Cost
300 gallons milk $1.80 $540
50 paperback books $5.50 $275
2 plastic sofas $100 $200
Total cost of Basket in Year 2 $1,015
Note that the quantity of each good purchased does not change from year to year. This is true when
creating a CPI. This is not exactly true in the real world, since consumers might substitute another good
for a good whose price increased too much. For this reason, CPI sometimes overstates the increase in
price levels.
Consider prices in the base year to have a standard value (known as an index) of 100. To find the increase
in price in year 2, you must divide the Year 2 basket cost by the base year basket cost, and then multiply
by 100 to find the index.
CPI = (Year 2 basket cost/base year basket cost) x 100
CPI = (1015/830) x 100
CPI = (1.22)(100)
CPI = 122
Compared to a base-year price of 100, prices in Year 2 were 122, or 22% higher. That’s a great deal of
inflation. You can see that the change is mostly attributable to the high increase in the cost of milk, whose
price increased by 50%.
Using a CPI is one way to calculate the change in price level in an economy, but it is not the only way this
can be done. Another method employs the concepts of aggregate supply and aggregate demand. After
explaining these two ideas, you will then see how they can be used as economic indicators.
Aggregate supply and demand are macroeconomic ideas that parallel supply and demand in
microeconomics. Demand for all goods and services within a nation combines to form aggregate demand, while the supply of all goods and services within a country is its aggregate supply. Graphs are often used to
illustrate aggregate demand and aggregate supply.
Aggregate demand curves are generally downward sloping. The primary reason for the negative slope is
the underlying assumption that the economy can have only one money supply at a time. The aggregate
demand curve can increase or decrease depending on certain conditions. One factor that affects the
aggregate demand curve is the amount of money that people save. If consumers collectively save less and
spend more, the increase in consumer spending would increase aggregate demand, shifting the aggregate
demand curve to the right. Higher taxes and lower transfer payments, however, could reduce aggregate
demand and shift the demand curve to the left.
Aggregate supply curves are generally upward sloping, but like most supply curves, they can be vertical
depending on what assumption you use to construct the curve. The aggregate supply curve can increase or
decrease. Most of the increases in aggregate supply are tied to the cost of production. If production costs
go down, aggregate supply tends to increase and the supply curve shifts to the right. On the other hand,
higher prices for foreign oil, higher interest rates, and lower worker productivity could tend to decrease
aggregate supply and the supply curve would shift to the left.
Shifts in aggregate demand and supply can signal changes in the economy. If the aggregate demand curve
shifts to the left, then real GDP is falling. This could mean a recession. If aggregate supply shifts to the
right, then the economy is producing more goods and services at the same price level. This could signal
improvement in production ability brought about by technological and capital improvement.
A recession is typically defined as a decrease in total output that lasts for more than two or three
consecutive quarters of a year. A depression is even worse news for an economy; this event is typically
marked by a steep fall in total output coupled with a high unemployment rate, with both these factors
lasting for more than a year.
Consider this graph:
Suppose that the economy is in a recession and unemployment is high. However, things start to pick up,
and aggregate demand moves from AD1 to AD2. Along this section of the aggregate supply curve, real
GDP grows and prices don’t. This reflects the fact that growth is occurring mainly by eliminating cyclical
unemployment. (Cyclical unemployment will be explained in the next section.) During the recession, the
nation was not working at full capacity, so it had room to grow without spurring prices.
The situation changes from AD2 to AD3. At AD2, the economy was already close to its highest aggregate
supply ability. However, the continued increase in demand “pulls” the price level to P3, even though it
does little to increase real GDP. Like a CPI, this shows that inflation has occurred, but the aggregate
demand and supply curves also illustrate that while prices have increased, real GDP has not changed.
The next graph using aggregate demand and supply curves shows how the change in prices can occur
without a change in aggregate demand. Consider the economy of an agricultural nation suffering from a
years-long drought. Aggregate supply would fall as farms fail and few crops grow. In this event, the nation’s
aggregate supply falls from AS1 to AS2. As you can see, prices rise and real GDP falls. This event is
known as stagflation, a term combining a stagnant economy with inflation.
Along with concepts like aggregate supply and demand, GDP and CPI, economists like to talk about the
unemployment rate of a nation, and whether it's rising or falling. However, the idea of unemployment is
not as simple as it may first appear. Just because you are not working doesn’t mean you are unemployed.
Two-day-old babies at a hospital are not considered unemployed, even though they aren’t working.
Ninety-three-year-old retirees aren’t unemployed. College students are not considered unemployed. If a
student holds a part-time job, however, they might be considered employed, since the unemployment rate
counts part-time and full-time employment as being employed. It is perhaps simplest to define
unemployment in the following way: A person who is able to work and is looking for work but cannot find a job is considered unemployed.
People who have given up looking for employment are called discouraged workers. Even though these
workers could eventually find work, the fact that they are not looking for it means that they are not
included as part of the unemployment rate. As you may have guessed, not all unemployment is the same.
The following information highlights three major types of unemployment.
Forms of Unemployment
1. Structural. Structural unemployment occurs when you have job skills that no one wants, or when a
company wants to hire somebody but can’t find anyone who has the necessary requirements. Suppose
you worked at a company that made old-fashioned phones with dials. Almost no one wants these phones
anymore, so once your company closes there is no place for you to use your old-fashioned-phone-making
skills. At the same time, suppose that a local company needs people who can design computer networks,
but no one in the community has experience in this area. This type of mismatch
is a typical example of structural unemployment. Learning new skills or moving to a different location can
reduce this type of unemployment. For instance, another nation might need old-fashioned dial phones, so
you could move there and have a much better chance of finding a job that matches your
skills. Or you could stay where you are and take computer-networking classes, for example. This might
give you the training needed to apply for a job as a computer networking technician. In any case, this is
considered the most serious type of unemployment because it is usually the most difficult to address.
After all, moving somewhere else might not be very easy (especially if you don’t have the money to pay for
the move) and training for a new job is costly and often takes a long time.
2. Frictional. Unemployed people don’t always take the very first job they can find. They often wait to find
a job that fits their talents and preferences. While they search for a job that is a good fit, these people are
frictionally unemployed. Other people sometimes purposefully decide to leave a job and look for one that
better fits their interests and abilities. These job seekers are also considered frictionally unemployed.
Overall, frictional unemployment is not entirely bad for an economy because it gives people time to find a
job that suits their needs.
3. Cyclical. Most economies encounter cyclical periods of growth and recession. During boom years,
unemployment drops dramatically as companies hire new workers to match the higher demand.
However, boom periods often overreach, and these are followed by recessions. People who are laid off as
a result of a contracting economy are cyclically unemployed.
Generally speaking, nations want to keep their unemployment rates low. Unemployed people are often
unhappy, not to mention out of income and unable to contribute to the economic well-being of the
nation. High rates of unemployment have a negative effect on a society. Nations can offer unemployment
benefits to help people while they are unemployed, but steady employment is much more beneficial to
the economic wealth and well-being of a society and its members.
One way a government can eliminate unemployment is by creating and paying for government jobs.
However, if a government does this too much, then it will be paying out more money (in salaries along
with other government spending) than it takes in (through taxes and other means). In this case, the
government would be running a deficit, spending more money than it takes in. Like a person running up
a credit card bill, this deficit is not always harmful, so long as the debt can be repaid or if the nation’s
economy can handle the interest on the debt easily. Unfortunately, if a government continues to operate
at a deficit for many years, these deficits build up to form what is called the national debt.
This might not seem like a big deal, but continued budget deficits lead to increased interest payments on
that national debt. To get more money, the government might have to raise taxes to pay interest on the
national debt without providing additional services to the taxpayer.
Changes in aggregate supply, aggregate demand, employment levels, and Gross Domestic Product are
closely associated with the five stages of economic activity known as the business cycle: peak, contraction,
trough, recovery, and expansion. During the peak stage of the business cycle, aggregate supply and
demand, employment levels, and Gross Domestic Product tend to be comparatively high. During the
trough stage of the business cycle, they tend to be relatively low.
The Federal Reserve
In 1913, Congress created the Federal Reserve System to act as the nation’s central bank. By creating this
“lender of last resort,” Congress hoped to insure people that the money they placed into U.S. banks
would not disappear due to shoddy business practices.
Currently, the Federal Reserve System consists of twelve different banks located throughout the United
States. Each bank covers a different district and prints its own currency. You can see which bank printed a
particular one-dollar bill by looking to the left of Washington’s portrait.
The Federal Reserve System (also called the Fed) influences monetary policy for two main reasons. It
wishes to control inflation (for reasons you have just seen) and it attempts to curb recessions. The Fed
achieves these goals by buying and selling government securities in the open market. Imagine that these
securities are pieces of paper promising that the government will eventually repay the amount of the
security (plus interest). So, if the government wants to reduce the money supply, it can simply sell these
securities, essentially trading cash for secure promises. By buying and selling these securities (called open-
market operations), the government can immediately affect the money supply and eventually change the
interest rate.
For example, suppose the Fed believes that a rapidly growing economy will cause inflation. To deter
inflation, the Fed will sell securities at prices low enough to guarantee someone will buy it. This influx of
securities causes bond prices to fall and interest rates to rise. Higher interest rates discourage business
investment and consumer spending, which reduces real GDP and in turn slows economic growth and
curbs inflation.
If the Federal Reserve wanted to stimulate the economy to reduce unemployment, it could buy securities
on the open market. This would have the opposite effect as the scenario described above.
The Federal Reserve could also manipulate the discount rate, which is the interest rate that the Fed
charges on loans it makes to banks. (The Fed is like a banker’s bank in many ways.) Altering this rate
affects whether banks take loans from the Federal Reserve Bank. For example, a low discount rate
encourages banks to borrow money, leading to more loans, which ultimately means more money in the
economy.
Finally, the Federal Reserve can influence the money supply by changing the reserve requirement. A
lower reserve rate means banks can loan out more money.
Fiscal policy and the federal government
In addition to using monetary policy to influence the economy, the federal government can affect the
national economy through taxes, expenditures, and borrowing. To see how each of these fiscal policy
factors can change GDP, recall the earlier formula:
GDP = C + I + G + Xn
The first element, taxes, can affect both consumers (C) and business investment (I). Consumers make up
more of GDP than business investment, however, so consumer taxes have a greater influence on GDP
than taxes relating to business investment.
To boost GDP, the government can reduce taxes. This would encourage most consumers to purchase
more because the government is taking a smaller portion of their income. When consumers spend more,
producers increase their output and the GDP increases.
Another way to increase GDP would be to increase government spending, G. However, consider what
would happen if tax cuts and government spending were to occur at the same time. The new tax
deduction would reduce government revenue while the government was simultaneously increasing its
spending. This could lead to a budget deficit, where the government spends more than it collects. Over
time, the government would have to borrow money in order to make up this deficit, and this could lead to
the potential problems of a high national debt.
There is a difference between a government’s fiscal policy and its monetary policy. Monetary policy refers
to changes in the money supply of a nation in order to influence its economy. Fiscal policy refers to
expenditures, taxes, and borrowing made by a government in order to influence an economy.
Econ 10-2 Unit 4: Macroeconomics
Macroeconomics - Big picture economics. This guy wrote this book – my frat bro & college friend. If
people like you, they’ll use you again. Why Obama won – how likeability helped decide the 2012
Presidential Campaign; also, Personality Not Included. Making it personal. I’d like to buy the world a
Coke…name on a can. Presidential race – nothing about facts. But people picked their sides. While
politics divided & blamed each other…voters made choices. Ended up w same useless conclusion. Raised
debt same percentage. Emotion wins – why’d you go back to BF? ‘Cuz I loves him. Doesn’t matter if he
smells like fish. Emotion wins. Obama - unbeatable msg.
Why Obama won – Romney rolled sleeves up, Obama fist-bumps janitor. Personal moments. No
video/audio allowed – Romney…Medicaid/Medicare – said 75% people used it. Obama – selfie at Nelson
Mandela funeral! Love him! Everyone feels Obama is personable – even though it’s world leader’s
funeral. Romney – chillin’ w kids in most uptight way possible…Obama – warm & fuzzy on couch w
daughters. Obama – hugs Bruce Springsteen, Romney – shakes hands w musician; Obama – more
intimate & personal. Watching results to election – Obama on couch w wife, mother. Money = emotion.
Why Obama won election – in 6 easy graphs. Inflation rate – prices not going up much at all. Stop buying
kale ships $7 for 2oz. We don’t want crazy inflation, not deflation. Just steady – healthy. 2002 – housing
prices shot up. But we feel bad about it. I lost money. No – you never sold it. Prices rt back to where they
should be. This area – fully recovered. Now people feel ok about it. Unemployment – Should be at 5.5%.
In normal recovery, would have spiked and come back down. 4 days before Obama got reelected, under
8%. Price mentality …$9.99 – not quite $10. Psychological. He changed numbers. Said under 8%. 7.99.
Same as 8%. Just the way he said it. Percent income change – stable rt now. Dropped in 2010. Obama
gets inaugurated – then growth – 50%. Stock market doubled. But really – just went back to where it was.
Daughter photos – son “I am Kill” – came into our room last nt. Staring at us. What?!
Anyway. Useless fact – Obama raising gas prices. FB. Gas prices really high – last month went down 10%.
Obama! Gets credit/blame. 2013 – since inauguration – gas went wayyyy up. Obama! How? Pres doesn’t
control. Bank – people got mortgages. Ninga mortgage – no income, no assets. Whoa – no one paying
back. Credit freeze. Businesses, People. Messy. Fall 2008. No demand for oil/gas. Gas prices tanked.
That’s why. No pres could influence that.
More graphs. “in group” effect. Overlap republican voters w cheap oil prices. All w expensive gas. Fat
counties. Voted for Obama. Conclusion – Obama won bc there were not enough thin people in America.
Poverty rates align also w obesity maps AND Obama voters. Mississippi – slave trade…people stayed –
even though cotton went away. Hasn’t changed in 125 yrs.
Macroeconomics – have to look at the big picture. Ch. 13 Economics Performance Section 1 – National
Output. Inflation, unemployment.
National Output – GDP – heartbeat of a country. All these #s from a govt – make these decisions.
Everyone in govt. Super nerdy. Love numbers. Job secure. GT student. Shows how nation is living & how
country is prospering. Slowing growth will alert politicians. Govt peeps – lots of respect. On the ball.
Number nerd people – they help the economy. Show us what’s up w economy. We need them. If
economy slowing, they tell Congress. Hey – give tax breaks. Give them money – it will make them spend.
Don’t tell them economy is bad. They will save it. Won’t stimulate economy. Obama did plan – did it
work? We’ll see in future. Wall in Mex – public works thing. Put people back to work. Build a wall to
Canada. Who cares – whatever. Roosevelt – built dams, lots of stuff. Shovel-ready projects. Make people
money.
GDP – biggest number. If I took US’s temp, the result would be GDP. Multiply final goods & services
produced by a country in a 12-mo period by the avg price to get the total amt of production. Social issues
– immigrants, same sex marriage, it will come back. When economy is bad, no one cares about social
issues. When economy good, look at social issues. Banned gay marriage during good economy.
GDP Per Capita – US, China, Japan, Germany. Per Capita – Per Person. 350mil person in US
(something like that). Divide GDP by the number of people in a country. Ofetn a signal or indicator of a
country’s wealth. How much we produce. 2nd longest rt now to get out of (besides G Depression). Congo –
poor & sick. Doesn’t increase.
Best video all yr – Hans Rosling 200yrs 200 countries. BBC – The Joy of Stats. Data Visualizer. 4.5 mins
– life expectancy vs how much money country makes. What would increase wea;th health – Industrial
revolution (Europe, Americas…Africa, Asia says where it is). Spanish flu epidemic – goes down.
Hiroshima – Asian down. 1948 – England leaves India. Colonies pull out. 1960 – China dropped by
half…cultural revolution. Fertility – richer you are, less kids you have. Theory – richer we get, lower our
population.
GDP excludes- intermediate products (counts once – flour in donut counted, not donut); secondhand
sales – already counted (G Brooks…secondhand sales – CD stores..I don’t get a cut? Tried to get bill
passed…artist should make $ off all sales – nope. Can’t count again. Ebay stuff – no. Just fees); non-value
Cinderella Man – what contributed to Great Depression. Movie. Before FDR. Before govt had safety
nets. Supply & demand. Pick any object and provide examples. What factors led to the Great
Depression? How did it have advantages in mixed economy? Warm fuzziness. Watch movies – see
warm fuzziness. Why did Pres give $$? Heading towards recession. People save it. Makes them feel
happier. Final fight do? What did it do? Scene coming up…govt – other scenes…bar w friend talking
about past & wealth & what happens when Depression hits. Behind the scenes - $$ he needs to live on.
Everything true to life. This is pretty accurate. Madison Square Gardens on this date in 1933. Same
boxer. People’s names same. Was making $8000. $90,00 these days. Due Oct 17 – solid 2 wks. Next wk
solid – the wk after…2 days off & PSAT. Don’t forget this assignment.
**Great Depression – time period in 1930s when the US was super poor.
You need to write a paper. You need to talk about a) the movie, b) the Great Depression, and c) how the
govt affects an economy. The questions below need to be answered in your paper. This is due FRIDAY
OCT 17. You need to type it. It needs to be 3 pages. You need to make a “Works Cited” page with the
websites you used to find the information for the first 2 parts.
Part I: The Great Depression
Source (use Google Scholar or a decent website – NO WIKIPEDIA): (pbs.org or history.com are both
good sites)_________________________________________________________________
What economic factors contributed to the Great Depression:
What factors contributed to the length (+10yrs) of the GD:
How does the Great Depression show the negative aspects of a pure market economy:
How could the Great Depression be explained in terms of supply & demand. Explain in detail.
o Provide examples:
Part II: How the Govt Affects the Economy
Source (use Google Scholar or a decent website – NO WIKIPEDIA): (pbs.org or history.com are both
good sites)_________________________________________________________________________
What factors led to end of the Great Depression and eventual upswing (improvement) in the US
economy:
How do these factors illustrate the advantages of a mixed market economy:
How could this eventual upswing in the US economy be explained in terms of supply and
demand. Explain in detail and give examples.
Part III: The Movie
How were the characters in the movie negatively affected by the Great Depression:
How did the individual characters react to these adversities:
o Provide examples.
Use specific scenes to tell of how people survived during this time.
Explain the interplay btwn Braddock & the govt.
What did the final fight do for the downtrodden people in the country:
About James Braddock (the guy in Cinderella Man):
James J Braddock earned his nickname, Cinderella Man, from his seemingly fairytale
like rise from a poor local fighter to the heavyweight boxing champion of the world.
Braddock, born in New York City, had a powerful right hand and a successful
amateur career. He turned pro in 1926. Braddock had victories over fighters like
Jimmy Slattery and Pete Latzo. Braddock fought light heavyweight champ Tommy
Loughran in 1929 for the title, but was defeated in a heartbreaking 15-round decision.
Following the Loughran fight and the stock market crash of 1929, Jim Braddock was
down on his luck. He had a hard time struggling to win fights and put food on the
table for his young family.
Eventually Jim's luck began to change. In 1934 he had upset wins against Corn Griffin and John Henry
Lewis. With these two wins, Braddock set himself up for a shot for the title against heavyweight
champion Max Baer.
On June 13th, 1935, in Long Island City, N.Y., Braddock, as a 10 to 1 underdog, won the heavyweight
championship of the world from Max Baer. The general reaction in most quarters was described as, "the
greatest fistic upset since the defeat of John L. Sullivan by Jim Corbett". Braddock would lose his
heavyweight title two years later in an 8 round KO to "The Brown Bomber", Joe Louis. He retired after a
final win over Tomomy Farr in 1938. Jim was inducted into the Ring Boxing Hall of Fame in 1964, the
Hudson County Hall of Fame in 1991 and the International Boxing Hall of Fame in 2001.
Econ 10-6 Unit 4: Macroeconomics
Cinderella Man
The story takes place in New York and New Jersey during the Great Depression, a
time when people experienced the worst economic hardship in U.S. history.
James J. Braddock (Russell Crowe) was a light heavyweight boxer, who was forced to
retired from the ring after breaking his hand in his last fight.
His wife Mae (Renee Zellweger) had prayed for years that he would quit boxing,
before becoming permanently injured.
To support his family, Braddock works as a laborer at the docks, but he still has a
dream to box.
Several years after his last fight, Braddock's old manager wants him to be a
last-minute substitute to fight against the second-ranked world contender.
In this case, Braddock is one of those hungry fighters who astonishes everyone by
winning the fight.
Braddock is back in the ring and begins to win all his fights against
younger, stronger, and heavier boxers.
In a sports article, Braddock is named the "Cinderella Man" for his miraculous
comeback.
Braddock gets a chance to fight the heavyweight champion, Max Baer
(Craig Bierko), for the title.
Max Baer had killed two men in the ring, and everybody believed
Braddock would be number three.
As the underdog, Braddock became the champion of the
downtrodden masses.
Econ 10-6B Unit 4: Macroeconomics
DO NOT COPY THESE WORDS – THAT IS AN HONOR CODE VIOLATION. Rephrase them in your own way
by answering the Qs on his handout.
The Great Depression: from history.com
Article Details: The Great Depression Author History.com Staff Website Name History.com Year Published 2009 Title The Great Depression URL http://www.history.com/topics/great-depression Access Date October 06, 2014 Publisher
A+E Networks
The Great Depression (1929-39) was the deepest and longest-lasting economic downturn in the history of
the Western industrialized world. In the United States, the Great Depression began soon after the stock
market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors.
Over the next several years, consumer spending and investment dropped, causing steep declines in
industrial output and rising levels of unemployment as failing companies laid off workers. By 1933, when
the Great Depression reached its nadir, some 13 to 15 million Americans were unemployed and nearly
half of the country’s banks had failed. Though the relief and reform measures put into place by President
Franklin D. Roosevelt helped lessen the worst effects of the Great Depression in the 1930s, the economy
would not fully turn around until after 1939, when World War II kicked American industry into high
gear.
THE GREAT DEPRESSION BEGINS: THE STOCK MARKET CRASH OF 1929
The American economy entered an ordinary recession during the summer of 1929, as consumer
spending dropped and unsold goods began to pile up, slowing production. At the same time, stock prices
continued to rise, and by the fall of that year had reached levels that could not be justified by anticipated
future earnings. On October 24, 1929, the stock market bubble finally burst, as investors began dumping
shares en masse. A record 12.9 million shares were traded that day, known as “Black Thursday.” Five
days later, on “Black Tuesday” some 16 million shares were traded after another wave of panic swept
Wall Street. Millions of shares ended up worthless, and those investors who had bought stocks “on
margin” (with borrowed money) were wiped out completely.
As consumer confidence vanished in the wake of the stock market crash, the downturn in spending and
investment led factories and other businesses to slow down production and construction and begin firing
their workers. For those who were lucky enough to remain employed, wages fell and buying power
decreased. Many Americans forced to buy on credit fell into debt, and the number of foreclosures and
repossessions climbed steadily. The adherence to the gold standard, which joined countries around the
world in a fixed currency exchange, helped spread the Depression from the United States throughout the
world, especially in Europe.
THE GREAT DEPRESSION DEEPENS: BANK RUNS AND THE HOOVER
ADMINISTRATION
Despite assurances from President Herbert Hoover and other leaders that the crisis would run its course,
matters continued to get worse over the next three years. By 1930, 4 million Americans looking for work
could not find it; that number had risen to 6 million in 1931. Meanwhile, the country’s industrial