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PowerPoint Presentation TUSD Economics Summer 2011 Pueblo High School Mr Klein Travis

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PowerPoint Presentation TUSD Economics Summer 2011 Pueblo High School Mr Klein Travis Powered By Docstoc
					Economics Summer 2011
        Pueblo High School
            Mr. Klein
         Travis.klein@tusd1.org
    Session 1: June 1 – June 15
                PHS
    Session 2: June 16 – June 30
                THS
      Past: 2007 – Marana HS
     2008 – Mountain View HS
1. Write 2+ items that have gotten
   more expensive in your lifetime
2. Write 3+ items that have gotten
   less expensive in your lifetime
                          Assignment only 1 variable changes)
What would happen to the GDP of the US if…(assume
1.   The government increases education spending by $12
     billion
2.   Russians demand more US made cars
3.   The US government decides the border fence is too
     expensive and cuts its funding
4.   US government places a tax on all Japanese imports
5.   Consumers get easier access to credit cards and buy 35
     % more video games this year
6.   High school graduates get excited about the stock
     market and invest 10% of their future incomes.
7. The price of food increases by 14% in 2010
8.   US consumers become fearful of the stock market and
     change their investments into cash
9.   US new commercial building permits increase by 10%
10. US unemployment rate raises to 35%!
                Inflation
• Rise in
  prices over
  time
• “cost of
  living”
• “The real
  value of
  currency”
                   GDP
• GDP = C + I + G + (Exports – Imports)

• Which one is affected by inflation?
3. Write down 10 things you think
most families would buy in a month
                     Inflation
• Rise in prices over
  time                   Always a percentage,
• “cost of living”       But unlike unemployment rate,
                         It can be more than 100, or
• Calculate using        a negative
  Consumer Price
                      1-3 % inflation = normal
  Index               Anything higher is bad for consumers


              New Prices – Old Prices
• CPI =                                        X 100

                       Old Prices
Inflation calculator
 If I buy 20 Gallons of gas per week

• At $1/Gallon
• At $2/Gallon
• At $3/Gallon

• Social Security
Recently though
         Calculate CPI
  Slovenia 2006, in Euros               Slovenia 2008, in Euros

Housing                     100     Housing                     115
Transportation               20     Transportation               25
Food                         50     Food                         55
Energy                       15     Energy                       45
Medical Care                  5     Medical Care                 10
Apparel                      10     Apparel                      15

                 Total: 200                            Total: 265


                                                    265 - 200
INFLATION= CPI current year – CPI base year    SO                     100 = 32.5%
    RATE                                            200 (2006)
             CPI base year
                          You try one
      United States 2006, in $$$$     United States 2008, in $$$$

   Housing                  700     Housing                 690
   Transportation           300     Transportation          310
   Food                     100     Food                    120
   Energy                    45     Energy                   90
   Medical Care              45     Medical Care             45
   Apparel                  100     Apparel                  95

                   Total: 1290                        Total: 1350

4. Calculate the US inflation rate
5. Is this a good rate or should we be worried?
6. What is deflation and why is it good?
Describe the economy of Uruguay from
             1998-2004?

                        Uruguay GDP
                           (in Billions)
   40
   35
   30
   25
   20
   15
   10
    5
    0
                           01
     98

            99

                   00



                          02

                          03

                          04

                          05

                          06

                          07
                        20
   19

          19

                 20



                        20

                        20

                        20

                        20

                        20

                        20
         2005 Comparison
Uruguay's GDP:           $30.66 billion

Spain’s GDP:             $1.83 trillion

United States GDP:       $12.36 trillion

Factors: population, resources, education,
 crime
               Zimbabwe
Population:
 13 million
GDP: 4.72 billion
GDP/Capita:
$402
Unemployment:
 66%
Your G3 is advising the President of Zimbabwe on how to improve
                   the economy of his country.
   Situation: Many blacks can not afford goods and food in the
 markets. Business owners are allowed to charge whatever price
    they want and since food is hard to find, its very expensive.
 Local Zimbabwe businesses have a difficult time competing with
     imports from the USA, South Africa and England. When
  Zimbabwe businesses fail, people lose their jobs causing more
                         unemployment.

98% of the farm land is owned by white farmers, which was taken
 in the 1800’s from native Africans. 90% of this country is black
 and has no access to this farm land. The white farmers pay low
           wages and often do not hire native blacks.

 Many people in Zimbabwe do not have much money to buy food
with. The Zimbabwe dollar is a strong currency which is difficult to
  get much of because the central bank doesn’t print very much
                   money for people to use.
                   Zimbabwe 1990’s
                   Gov’t
Problem            solution          EFFECT
High food           Fixed prices    Shortages
  prices
Competition from
  USA & SA          Banned          More shortages
                      imports
Blacks have         Redistributed   Still more
  no land             land             shortages
                                                       President Robert
                                                       Mugabe
Not enough          Printed up      inflation
  money                more money



                                         Technically “hyperinflation”
           What if I told you?
• Million dollars?
• 25 Billion dollars?
• 100 Billion dollars

• Fiat currency = value
  only because we
  think it does
                   Inflation
• Rise in prices
  over time
• “cost of
  living”
• “The real
  value of
  currency”
Why can’t we just print more money?
• Quantity theory of
  inflation




                       Piles of currency in Zimbabwe
    What else causes inflation?
• Cost push theory- when
  producer costs increase,
  producers raise their prices.
  For example, increase the cost
  of gasoline causes and
  increase in the price of food.

• Demand pull theory –
 When consumers demand
 increases producers will
 generally increase prices. For
 example: fads or hot xmas toys
   Of the 3 theories of inflation
• Which one can the government control?



• Which one seems like a natural
  consequence of a growing economy?



• Which one might cause deflation?
             Assignment
• Draw 3 comics showing each of the
  theories behind inflation
Why does inflation happen?
   Quiz – Macroeconomic indicators

• 12 minutes alone
• 7 minutes in groups



• Kid in Zimbabwe,
  2008
    Have someone at your table get
             out a $1
• What text is on it?
• Where was this $1 printed
• What else do you notice about the $1?
         3 functions of money
• Person #1 explains money
  as a medium of exchange
• Person #2 explains money
  as a Unit of Accounting
• Person #3 explains money
  as a Store of Value
                   Money
Anything that is traded or stores value
Accounting
                Currency




Ancient China
Currency



Rome
                 Currency

Representative
Currency



Advantages?
Disadvantages?
           Currency

Fiat
Currency
           Currency

Fiat
Currency
           Currency

Fiat
Currency
           Currency

Fiat
Currency
                 Currency
Fiat
Currency

Advantages?
Disadvantages?
     Foreign
    exchanges



http://finance.yahoo.com/currency-
investing
         Economic Rap battle
• John Maynard Keynes   • Fredrick Hayek
• Ideas? Page 424       • Ideas?
            Economic Rap battle
•   John Maynard Keynes     •   Fredrick Hayek
•   Active fiscal policy    •   “invisible hand”
•   Deficit spend           •   Monetary policy
•   Government multiplier   •   Interest rates
      Monetary
                       Fiscal Policy
       Policy
                   • Controls “G”
• Interest Rates   • Effect on “C”, “I”,
                     Unemployment
• Money Supply     • Taxes
                   • Loopholes
                   • Spending
Economists reading
      Monetary policy comics
• What role does the “Fed” play in the US
  economy?



• 1 paper per group:
• Write 10 multiple choice questions A,B,C
  based on the comic book
               Without banks
• You would have to pay cash for the
  following items:
• College ($1500-3000/year)
• New Cars $9000-35,000
• Small Business Loans ($10,000+)
• Houses ($140,000-300,000)

• Time would be spent counting and
  guarding your cash.
• Time saving + safety
How does the US banking system
            work?
  What is a Credit Union then?
• Smaller, regional, non-profit, theme based,
  lower rates
 Does the bank have to keep all the
money you deposit on hand? (Pg 400)
                      NO, fractional
                      reserve system
   Who sets the reserve rate?


• “The
  Fed”

• 1913
How does “the Fed” work?
6. Who controls “the Fed”? (pg 392)
7. What does “the Fed” do? (394-396)
                 Controls
                  Money
                  supply      Clears
     Supplies                 Checks
      Money

                 THE FED


                                Gov’t
      Sets                    Accounting
    Reserve
  Requirements    Supervise
                   Banks
Why is the Chairman of the Fed sometimes
 thought of as the “second most powerful
         man in the US”? 398-399
 • Cause: increases the
   reserve rate
 • Effect:

 • Cause: lowers
   reserve rate
 • Effect:
   What if the bank goes out of
             business?




• $250,000 per US account
What about other countries?
      Monetary         Fiscal Policy
       Policy
                   • Controls “G”
• Interest Rates   • Effect on “C”, “I”,
                     Unemployment
• Money Supply     • Taxes
                   • Loopholes
                   • Spending
Personal budget handout
                 Review

1. What is your opportunity cost of coming to
                 school today?
2. Why is opportunity cost important for large
         organizations to think about?
 3. What is the scarcest resource you have?
       Short Reading Page 18

Guns



             A                Republicans
                              Democrats?

                     B




                         Butter
Short Reading Page 18
Economists reading

				
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