“Economics and Economic Systems”
Warm-up Activity
Directions:- Take out a sheet of paper and number it 1-15.
- Go around the room for 8-10 minutes and find someone who can
answer the questions shown on this screen. Have that person sign your
paper next to the number of the item that they can answer.
- “Sticking together” with the same person/people is not allowed; get as
many different signatures as possible.
Find Someone Who …
1. can identify the name of the stock index that contains the 30
largest industrial companies.
2. earned money this summer working at a job (either officially or
“under the table).
3. can name the person who is in charge of the Federal Reserve
Board, which is essentially the U.S.’ central bank.
4. can identify the economic term for a loan to buy a house.
5. can identify the price of a gallon of “regular” gas.
6. knows what the economic concept is called when the prices of
most things go up.
7. has bought something in the school’s cafeteria this year.
8. went on a vacation this summer.
9. plans to go to college or vocational school after high school.
10. can define the term “business cycle”.
11. can explain the term “interest”.
12. can identify one good thing and one bad thing about a credit
card.
13. knows someone who has lost their job.
14. knows someone who has lost their house.
15. knows the difference between a stock and a bond.
Answers
1. can identify the name of the stock index that contains the 30
largest industrial companies.
- Dow Jones Industrial Average (better known as the “Dow”)
- indicates whether investors believe these companies are going
to be doing better in the future (causing level the rise) or worse
(causing level to drop)
- helps indicate (with other things) the direction in which the
overall economy may go
2. earned money this summer working at a job (either officially or
“under the table).
3. can name the person who is in charge of the Federal Reserve
Board, which is essentially the U.S.’ central bank.
- Janet Yellin
- she (and her partners) can raise or lower interest rates for
Banks &, therefore, personal, business, and government loans
- can, therefore, help to speed up the economy (by lowering
interest rates) or slowing down the economy (by raising rates)
- an extremely powerful person
4. can identify the economic term for a loan to buy a house.
- mortgage
5. can identify the price of a gallon of “regular” gas.
- approximately $3.50 per gallon
6. knows what the economic concept is called when the prices of
most things go up.
- inflation
- think of a balloon with the word “prices” written on it
- pump up (inflate) the balloon with helium and watch the
word “prices” get larger and see the balloon actually rise
(as in rising prices);
- inflation causes each dollar to be able to purchase less items
(purchasing power goes down)
- deflation is the exact opposite of this situation
7. has bought something in the school’s cafeteria this year.
8. went on a vacation this summer.
9. plans to go to college or vocational school after high school.
10. can define the term “business cycle”.
- the repetitive “ups” and “downs” of the economy;
- an economy that goes up always eventually comes down;
- an economy that goes down always eventually goes up
- knowing about this can help you to plan for the future (such as
saving money when times are good to help you get through
the times that will be bad),
11. can explain the term “interest”.
- when money is loaned, whoever lends it usually charges a fee
for lending it; this fee is a percentage of the loan and is called
interest
- people or banks are willing to lend money (and therefore give
up the ability to use that money) because people, companies or
the government are willing to pay back the amount plus an
additional amount (the interest)
- when interest rates go up, borrowing usually goes down
(because the cost of
12. can identify one good thing and one bad thing about a credit
card.
Good: 1) can allow consumers to purchase a product that they
may not currently have enough money to buy; this gets
the consumer the product and also stimulates the
economy because it allows manufacturers and stores to produce and sell products that might normally be too expensive for consumers; can help create jobs
2) using a credit card wisely can help a person establish a solid “credit history”, which can help get them loans (and ones with good interest rates) in the future
Bad: 1) it allows consumers to buy a product that they might
really not be able to afford; often causes a person to
go into long-term debt;
2) interest rates can be extremely, extremely high, which
causes the true price of a product purchased on credit
to be much higher than the “original price” at which
the consumer bought it (can often double or triple the
price if not paid quickly)
3) can artificially stimulate economic growth; once people
cut back on new spending to pay off old debts (credit cards) it causes the economy to slow, people to be laid-off, and other workers to take pay cuts to keep their jobs; these things can make it more difficult for those workers to pay off their credit card debts, thus making the cycle continue
13. knows someone who has lost their job.
14. knows someone who has lost their house.
15. knows the difference between a stock and a bond.
Stock – is a piece of ownership in a type of company called a
corporation; can be bought and sold; often bought with the hope that it will be bought at a low price and sold at a higher price (not guaranteed); gives the stockholder a claim to a corporation’s profits (the money it has made after it has paid all of its bills); their portion of the profits are called “dividends” (the profits are “divided” amongst all of the shareholders; if you own more than 50% of a corporation’s stock you can control the company because each share gives you a vote in how it is run
Bond – simply an “I.O.U.” that is issued by the government, a
corporation, or another institution; it indicates that money has been loaned to someone or something and that the original amount must be paid back over a specific period of time and at a specific interest rate; sometimes seen as being safer than a stock (but not always)
-Buying a bond from a corporation DOES NOT give you partial ownership in a company.