• Download article and study guide for
“Fallacies of Macro economics”
• Test #4 Thursday/Friday on first 10
homework assignments, key terms, and
recent material. Extra Credit on Robinson
C. and Friday production possibilities.
• What is an economic system?
• What are the three types of economic
• What are examples of each?
• What are the three questions each system
• How do these systems answer these
• What is socialism?
• What is capitalism?
• What are the four principles capitalism is
• What is the invisible hand?
• What is difference between self interest
And still more…
• What are three factors of production?
• What is an additional factor some
economists believe in?
• Why does Mr. Lopez and some very
intelligent economists disagree with this
• What are incentives?
• What are the two types of incentives?
• Patriotism: Love of one’s country
• Business cycle: Periods of economic
expansion followed by periods of
• Safety Net: Government programs that
protect people experiencing unfortunate
• Inflation: General increase in prices
• Deflation: General decrease in prices
Additional key terms
• Competition: A rivalry between businesses
for consumer dollars.
• Federal Reserve Bank (The FED): The
Central Bank or bank for banks of the
• Monetary policy: Actions by the FED
intended to affect the economy.
• Fiscal Policy: Actions by the government
intended to affect the economy.
Broad Social Goals
All societies (The US, Cuba,
North Korea, Iran, Spain….)
each seek similar broad social
These Goals Are:
• Economic Efficiency
• Economic Equality
• Economic Freedom
• Economic Growth
• Economic Security
• Economic Stability
They may each have different
definitions and viewpoints with
regards to these goals.
• How well are scarce productive
resources (the factors of production)
are allocated to produce goods and
• For example: Should we develop
• Policies have to be evaluated in terms
of what people think are right or wrong.
• For example: Should the rich get a tax
cut? Is it “fair” to increase the sales
Different Views of Economic
• In the United States • In other systems such
and similar economic as Cuba they look for
systems we look for equality of outcome,
equality in does everyone have
opportunity, does access to health care,
everyone have the education, housing
same chance of etc.
In Europe (Spain)
• As capitalists we agree
more with the US
versus outcome) but we
seek to provide some
measure of security with
regards to everyone
having healthcare and
increased access to
• The Freedom of
consumers to decide
how to spend or save
freedom to change
jobs or join a union, to
or close them.
• Freedom can make
us more efficient
• Efficiency will
• Productivity increases
• Growth increases
both security and
stability and raises
the standard of living
Is there a downside?
Increasing the production of
goods and services over time.
How can we increase the
standard of living (the satisfaction
of needs and wants) for our
At a minimum...
• The United States
needs to “create”
100,000 new jobs
every month just to
maintain the same
level of employment
given our increasing
Why do we require these jobs?
• The population is
increasing due to
• Millions have entered
the nation both legally
Unemployment in the US
unemployment in the
US is approximately
9.1% and 12.1% in
• The government does
not count everyone
out of work as
You are not unemployed if…
• You have given up
• You are a student
• You are illegal
• You are working part
time instead of full
time (19% plus of
• You took a lower
Protecting consumers, producers,
and owners of resources from
risks in society
• Programs intended to • Food Stamps
help individuals and • Unemployment
families experiencing • WIC
circumstances. • SSI
• Disability insurance
After Katrina the government...
• Temporary housing for
• Financial assistance such
including for the
purchases of food and
• Provided loans to
business owners and
• Grants to rebuild
and underwrite operating
The system is being strained
• Less job security as markets change and
• Companies have stopped offering traditional
pensions and health care
• Unemployment insurance is limited and the
amounts have not increased over time
• People are forced to save toward their own
retirement using IRA’s and 401s many of which
have declined in values.
• Lower housing prices results in lower “overall
savings” for millions.
Government response to the
Current Economic Crisis
• Bailouts to the banking industry
• Bailouts to auto industry
• Renegotiate mortgages and assistance to
families facing foreclosure
• Extended unemployment and increased
• Job retraining
• The $800 billion “stimulus” plan
Maintaining stable prices, “full”
employment, stable financial
markets, and the value of our
• If unemployment increases the
government can adopt policies such as tax
cuts and /or increased public spending to
stimulate the economy.
• If unemployment drops too much which
could cause inflation the government can
tighten money by raising interest rates and
cut government spending.
Desired level of
The Federal Reserve Bank (The
FED) is currently using monetary
policies to maintain
unemployment around 4.6%. They
believe if it goes below this level,
companies might compete for
workers driving up wages and
resulting in higher inflation.
Noble Prize in Economics
• One of the past
recipients of the
Nobel Prize in
Economics won it for
• As a result of the current crisis and even
with fiscal and monetary “intervention” into
the markets, the “official” unemployment
rate is currently in excess of 9% in the US
and over 12.1% in California.
Economic Systems are the
methods used by a society to
produce and distribute goods and
Your group project….
Your group project...
• Students will be chosen by random to be
in one of six groups, the leader being the
first student chosen from the hat.
• Each group will select one social goal
• A week from Monday, each group will
present a visual display board and make a
4 to 5 minute presentation on their social
Your display board….
• Should be informative as to defining your
goals and providing and explanation and
examples illustrating it’s importance.
• It should not be a “fidget” board and
please do not make it too “busy”.
• Should try to convince the class as to why
your social goal is the best.
• It should be creative, you can use music,
costumes, visual effects, etc.
• It should impress the teacher
The Free Market
Definition of a market
• A place where a transaction takes place
between a buyer and a seller.
Examples of markets
• Flee market
• Fruit market
• Stock market
• Used car market
• Person selling drugs on the corner by 7-11
Why markets exist?
• When was the last time you milked a cow
to get a glass of milk?
• Do you even own a cow?
• Do you make your own clothing?
• Do you slaughter animals to get the meat
Therefore, its simple…
• Markets exist because no one is self
sufficient. We all need to acquire goods
and services to satisfy our needs and
Whoops! Hottest Years Were in
NASA's Error Correction Fuels
Global Warming Skeptics
• Concentrating the productive efforts of
individuals and firms on a limited number
Why we specialized
• Is there an advantage in having a brain
surgeon operate on your brain and not a
• How long it take for a single individual to
manufacture an auto?
• Lopez teaching Math, English, History,
More Key Terms
• Incentive: An expectation that encourages
people to behave in a certain way.
• Competition: The struggle amongst producers
for consumer’s dollars
• Laissez faire: The belief that the government
should generally not interfere with business
• Private property: Property owned by individuals
• Privatize: To sell a government owned business
• Private property: Property owned by individuals
• Voluntary exchange: People are free to decide if
they want to buy or sell in a transaction.
• Profit motive: The desire to improve your relative
• Gross Domestic Product (GDP) The total value
of all goods and services produced by an
• Fiscal Policy: Actions taken by the government
to influence the overall economy.
• Monetary Policy: Actions taken by the
federal Reserve Bank (The Fed) to
influence the overall economy.
Still more key terms…
• Profit: The financial gain from a
• Self-interest: One’s own personal gain
• Consumer sovereignty: The consumer
decides what is produced in a market
economy by voting with their money
• Free enterprise: A system that has private
or corporate ownership of the means of