Unit 6 – The Free Market & The Role of Government

Day 1 – Basic Economics

  • Essential Question, Conceptual Lenses
  • Arctic Survival (Round 1 & 2)
  • Basic Economic Vocabulary

Day 2 – Basic Economics

  • Arctic Survival Notes
  • The Lorax

Day 3 – Economic Systems – US Mixed Market Economy

  • Types of Economic Systems
  • US Economic System

Day 4 – Supply & Demand

  • Law of Demand
  • Law of Supply

Day 5 – Market Price & Changes in Supply/Demand

  • Market Price
  • Changes in Supply & Demand

Day 6 – Types of Business & Competition

  • Business Organizations
  • Types of Competition

Day 7 – American Labor Force

  • Types of Workers
  • Labor Unions

Day 8 – Business Cycle/Economic Indicators

  • Business Cycle
  • Economic Indicators

Day 9 – Monetary Policy

  • Federal Reserve

Day 10 – Monetary Policy – Fiscal Policy

  • Finish Monetary Policy
  • Fiscal Policy (Federal Government)

Day 11 – Fiscal Policy

  • Fiscal Policy (State & Local Government)
  • Notebook Check & Test Review

Day 12 – Test Review & Test

  • Review Questions
  • Review Game
  • Test
UNIT 6 – The Free Market & The Role of Government
Day 1 & 2 - BASIC ECONOMIC CONCEPTS

Unit Essential Question

  • Why are individual choice and competition important in a free market economy?

Conceptual Lenses

  • Competition
  • Choices

Basic Economics

Essential Question

How does scarcity affect decision making of businesses, individuals, and countries?

Define the Following (pgs. 499-509)

  • Economics
  • Microeconomics
  • Macroeconomics
  • Economic System
  • Need
  • Want
  • Scarcity
  • Trade-Off
  • Opportunity Cost
  • 4 Factors of Production
  • 3 Basic Economic Questions

Lorax by Dr. Seuss

1)How was the concept of scarcity illustrated in the video?

2)What did the THNEED represent? (Good or Service)

3)Identify examples of each of the four factors of production in the video:

  • Natural – Human – Capital – Entrepreneur -

4)How was productivity increased by…

  • Technology, Division of Labor

5)How were each of the (3) Basic Economic questions answered?

  • What? - How? - For Whom?

6) How did the video illustrate interdependence?

Day 3 - THE AMERICAN ECONOMIC SYSTEM

Essential Question

Why may a country choose one economic system over another?

How do economic systems deal with scarcity?

Answer the Following Questions

  • Explain each of the following types of economic systems.

Traditional Economy

Command Economy

Market Economy

Mixed Economy

  • The US is considered a mixed-market economy. Why?

Centrally Planned Free Market

(p.531,622)

Answer the Following

ADAM SMITH

  • Who developed the principles of a market economy?
  • What was the Wealth of Nations (1776)?
  • What was Laissez-Faire economics?
  • What was the Invisible Hand?

6 Characteristics of the US Economy. Define & Give Example

  • Little Government Involvement
  • Freedom of Enterprise
  • Freedom of Choice
  • Private Property
  • Profit Incentive
  • Competition
Day 4 - SUPPLY & DEMAND

Essential Question

How do consumers and businesses react to the forces of supply and demand?

Chapter 21, Section 1 (pgs. 569-572)

Answer the Following

  • What is demand?
  • What are the (3) components of affective demand?
  • What is market demand?
  • What does a demand schedule show?
  • What is a demand curve?
  • What is the Law of Demand
  • What does utility mean?
  • What is the law of diminishing marginal utility?

Chapter 21, Section 2 (pgs. 574-578)

Answer the Following

  • What factors affect demand? (determinants of demand)
  • What is demand elasticity?
  • What is elastic demand?
  • What is inelastic demand?

Supply & Demand (Class Activity)

Lesson 1: The Law of Demand - Class Questions

1)How many of you would be willing to buy a doughnut at the following prices?

(.30, .40, .50, .60, .70, .80)

2)How many doughnuts would be bought at the following prices? (.55, .75)

3)What does the demand curve tell us about the relationship between price and demand?

4)What would you do if you thought the price of doughnuts was too high?

5)Based on your observations, what is the law of demand?

Lesson 2: The Law of Supply - Class Questions

1)What people are involved in supplying doughnuts?

2)What would you do if you thought people would pay a high price for doughnuts?

3)What would you do if you thought people would only pay a small price for doughnuts?

4)How many would you produce at the following prices?

(.30, .40, .50, .60, .70, .80)

5)About how many would be sold at the following prices? (.55, .75)

6)What does the supply curve tell us about the relationship between price and supply?

7)Based on your observations, what is the law of supply?

Chapter 21, Section 3 (pgs. 581-586)

Answer the Following

  • What is supply?
  • What is the law of supply?
  • What is a supply schedule?
  • What is a supply curve?
  • What affects supply? (Determinants of Supply)
  • What is supply elasticity?
  • What is elastic supply?
  • What is inelastic supply?

Day 5 - SUPPLY AND DEMAND, MARKETS AND PRICES

Essential Question

How do consumers and businesses react to the forces of supply and demand?

Chapter 21, Section 4 (pgs. 588-592)

Define the Following

  • Equilibrium Price
  • Surplus
  • Shortage
  • Price Controls
  • Price Ceiling
  • Price Floor

Lesson 3: Market Price, Changes in Supply & Demand

1)What does the point where the supply curve and the demand curve intersect represent?

2)If another class began selling doughnuts in school, what effect would this have on supply? Graph Change, Label S1

3)Suppose Krispy Kreme had a shortage of dough, thus our class could only get a limited number of boxes. What effect would this have on supply? Graph Change, Label S2

4)Suppose it is late May, and our class is selling doughnuts. Another class began selling ice cream. What effect would this have on demand, and why? Graph Change, Label D1

5)Suppose we were the only class at school selling snack items. What effect would this have on demand? Graph Change, Label D2

6)What effect would each of these have on price?

Day 6 - TYPES OF BUSINESS & COMPETITION

Essential Question

Why is competition beneficial in a market economy?

Chapter 22, Section 1 (pgs. 601-606)

Fill in the Following Chart on Business Organizations

Sole Proprietorship / Partnership /

Corporations

Advantages

Disadvantages

Define the Following

  • Charter
  • Stock
  • Stockholders
  • Non-Profit Organization
  • Cooperatives
  • Franchise
  • Liability (limited/unlimited)
  • Life (limited/unlimited)
COMPETITION - Define the Following
  • Perfect Competition
  • Imperfect Competition

Monopoly

Monopolistic Competition

Oligopoly

  • Merger

Horizontal

Vertical

Takeover

  • Regulation (Regulatory Agencies, Anti-Trust Legislation)
  • Deregulation
Day 7 - THE AMERICAN LABOR FORCE

Essential Question

Why is competition beneficial in a market economy?

Chapter 22, Section 2 (pgs. 609-613)

Define the Following

  • Civilian Labor Force
  • Labor Union
  • Craft Union
  • Industrial Union
  • Local Unions
  • National Unions
  • AFL-CIO

Define the Following Negotiation Tactics

  • Collective Bargaining
  • Mediation
  • Arbitration

Define the Following Labor Union Tactics

  • Strike
  • Boycott
  • Picketing

Define the Following Management Tactics

  • Injunction
  • Lockout

Define each Government Action

  • Right-to-Work Laws
  • National Labor Relations Board
Day 8 – BUSINESS CYCLE/ECONOMIC INDICATORS

Essential Question

How do the different levels of government stimulate economic activity?

Chapter 23, Section (pgs. 638-644)

Fill in the Phases of the Business Cycle

  • Expansion
  • Peak
  • Contraction
  • Trough
  • Recession
  • Depression

Explain each of the Following Economic Indicators

  • GDP, Real GDP
  • Unemployment Rate
  • Delayed Deliveries
  • New Durable Good Orders
  • Stock Market
  • New Building Permits
  • CPI – Inflation

Explain the Following about the Stock Market

  • Bull Market
  • Bear Market
  • Dow Jones Industrial Average (DJIA)
  • Standard & Poor’s 500 (S&P 500)
  • New York Stock Exchange (NYSE)
  • NASDAQ

Define the Following

  • Inflation (Cost Push, Demand Pull)
  • Fiscal Policy, Monetary Policy

Business Cycle/ Economic Indicators Chart

Objective: Analyze the effect of economic indicators on the business cycle.

Assignment: Each student must draw the business cycle on a sheet of 8.5 x 11 piece of paper. Under each phase you must place which economic indicators belong in each phase. Assume that economists have made the following reports about these leading economic indicators. Where would these indicators be placed on the business cycle?

Put the number of the statement where it should go on the business cycle

Economic Indicators:

1) Stock prices show steady increases over the last six months.

2) Unemployment claims are up 5%.

3) Total inventories have slightly increased.

4) The # of building permits issued in the last six months have drastically increased.

5) Manufacturing labor hours show steady increases.

6) New plants & equipment have increased sharply.

7) Delayed deliveries have drastically reduced.

8) New durable good orders have declined slightly.

9) The number of new businesses formed has sharply increased.

Day 9 – MONEY, BANKING, & MONETARY POLICY

Essential Question

How do the different levels of government stimulate economic activity?

Chapter 24, Section 1 (pgs. 657-659)

Define the Following

  • Functions of Money

Medium of Exchange

Store of Value

Measure of Value

  • Currency
  • Commercial Banks
  • Savings & Loans Associations (S&Ls)
  • Credit Unions
  • FDIC

Chapter 24, Section 2 (pgs. 661-665)

Explain the Following about the Federal Reserve

  • Federal Reserve System
  • Monetary Policy
  • Loose Monetary Policy
  • Tight Monetary Policy
  • Tools of the Federal Reserve

Discount Rate

Reserve Requirement

Open Market Operations

Tools of the Federal Reserve

The Federal Reserve uses (3) major tools to control the nation’s money supply. These tools are the reserve requirement, the discount rate, and open market operations.

  • Describe how the Fed can use each of its tools to increase the money supply.

1)Changing the Reserve Requirement –

2)Changing the Discount Rate –

3)Open-Market Operations

  • Imagine you are a member of the Federal Reserve Board and your staff gives you this report on the money supply and the economy. “The consumer Price Index continues to rise, the money supply has increased beyond target levels. Consumers fear a return of high inflation.” Underline the appropriate words in parentheses to show the policy you would follow.

1)The Fed should now follow a (tighter/looser) monetary policy with the desired effect of (increasing/decreasing) the money supply.

2)Possible actions to implement the policy are (raising/lowering) reserve requirements, (raising/lowering) the discount rate, or (selling/buying) treasury securities on the open-market.

  • Now imagine that a year has passed and your staff gives you this report. “Business activity continues to sag, unemployment is rising, and the economy appears to be weakening. The money supply is growing at a much slower rate.”

1)The Fed should now follow a (tighter/looser) monetary policy with the desired effect of (increasing/decreasing) the money supply.

2)Possible actions to implement the policy are (raising/lowering) reserve requirements, (raising/lowering) the discount rate, or (selling/buying) treasury securities on the open-market.

Day 10 & 11 –FISCAL POLICY

Essential Question

How do the different levels of government stimulate economic activity?

Fiscal Policy

Chapter 25, Section 1 (pgs. 677-680)

Answer or Define the Following

  • Who prepares the federal budget?
  • Who must approve the federal budget?
  • Mandatory Spending & example
  • Discretionary Spending & example
  • Appropriations Bill
  • Where does the federal government get its money?
  • Progressive Tax
  • Regressive Tax
  • Proportional Tax
  • What are the biggest expenses for the federal government?
  • What are the biggest sources of revenue for the Fed Gov?

Chapter 25, Section 2 (pgs. 682-685)

Answer the Following
  • What is the largest source of state and local revenue?
  • What tax brings in the most money for the each government?
  • What is the largest expense for each government?
  • Which level is responsible for funding education?
  • What is intergovernmental revenue?
  • What are some major local government services?
  • What are entitlement programs?

Chapter 25, Section 3 (pgs. 688-692)

Answer the Following Questions

  • When the government spends more money than it collects?
  • How does the federal government borrow money?
  • What is the national debt?
  • What is the current national debt?
  • What is a balanced budget?
  • What are (2) ways the government can try to reduce the debt?
  • Why is it sometimes necessary for the government to go into deficit spending?

How Income Taxes Affect the Economy

Below you will find the 2008 Federal Income Tax Brackets. This shows the percentage of tax that single and married citizens pay the federal government on their income. Use the table below to do this sheet, and see how taxes impact the individual and the economy as a whole. In doing the math, each part of your income is taxed as it applies to the tax bracket. For example a single person earning $30,000 would pay 10% on the first $8,025 which is $802.50, and 15% on the remaining $21,975 which is $3,296, for a total of $4,098.50 in federal income tax.

Use Single Bracket to calculate Income Tax amounts.

2008 Federal Income Tax Brackets

Tax Rate / Single / Married Filing Jointly
10% / Not over $8,025 / Not over $16,050
15% / $8,025-$32,550 / $16,050-$65,100
25% / $32,550-$78,850 / $65,100-$131,450
28% / $78,850-164,550 / $131,450-$200,300
33% / $164,550-$357,700 / $200,300-$357,700
35% / Over $357,700 / Over $357,700

Directions: Calculate the income tax paid using the single income bracket.

1)$40,000 -

2)$15,000 -

3)$60,000 -

4)$300,000 –

What might happen to the US economy if people were able to keep more of their income? Tell how each of these areas would be impacted.

1)Demand for products and services

2)Unemployment

3) Savings Accounts

Unit 6 – The Free Market & Role of Government (Test Review)

Essential Question

Why are individual choice and competition important in a free market economy?

Multiple Choice – 20 Questions – 3 Points Each – 60 Points Total

Business Cycle

Competition

Demand and changes to Demand

Economics

Equilibrium Price

Federal Budget

Fiscal Policy changes

Free-enterprise system

Monetary Policy changes

Monopoly

Productivity

Scarcity

Strikes

Supply and changes to Supply

Surplus

Trade-off

Unemployment

Constructed Responses – Honors & Seminar – Do Both. Standard – Choose (1)

1) The United States is in a period of economic contraction, or a recession.

- Explain the type of monetary policy the Federal Reserve should use during this period, and what effect this would have on the money supply.

- Explain a tool that the Federal Reserve has to impact the money supply and how they would use this tool to solve a period of recession.

2) The United States is considered to be a mixed economy.

- Identify and explain the two economic systems that the United States combines.

- For each of the two economic systems, give a specific example from the US economy that illustrates it.

Arctic Survival Vocabulary Quiz

1)An organized system of production.

2)What are the (4) Factors of Production?

3)What are the (3) Basic Economic Questions?

4)The relationship among people that make the actions of one necessary for the well-being of the others.

5)A worker, or group of workers, concentrates on one task to increase productivity.

6)The ability to produce a greater quantity of goods in better and faster ways.

7)The study of how people use their scarce resources to satisfy their wants and needs.

8)An abundance of needs and wants and a limited means to satisfy them.

9)What are your (3) basic needs?

10) The general term for materials used in order to survive.

Arctic Survival Vocabulary Quiz

(Word Bank)

Capital ResourcesHow to Produce

ClothingHuman Resources

Division of LaborFor Whom to Produce

Economic ResourcesInterdependence

EconomicsNatural Resources

Economic SystemProductivity

EntrepreneurshipScarcity

FoodShelter

What to Produce

Demand & Supply Quiz

1)What is necessary for demand to exist? (3)

2)What is diminishing marginal utility?

3)What are (2) factors that affect demand?

4)What is demand elasticity?

5)What is the law of supply?

6)What are (2) factors that affect supply?

7)The point where supply & demand are equal.

8)Define a surplus using supply & demand.

9)Define a shortage using supply & demand.

10) What is a price ceiling?

Business & Labor Quiz

1)What (2) types of business organizations have unlimited liability?

2)Who grants a corporation a charter?

3)What is a labor union?

4)What is collective bargaining?

5)What is a strike?

Federal Reserve Quiz

1)Who created the Federal Reserve?

2)Who appoints members to the Federal Reserve Board of Governors?

3)What is the purpose of the Federal Reserve?

4)What are the (3) tools of the Federal Reserve?

5)If the Fed increases the reserve requirement, what effect would it have on the money supply? (increase/decrease)

6)When would the Fed want to do this? (recession/inflation)

7)If the Fed sells securities on the open market, what effect would it have on the money supply? (increase/decrease)

8)When would the Fed want to do this? (recession/inflation)

9)If the Fed lowers the discount rate, what effect would it have on the money supply? (increase/decrease)

10) When would the Fed want to do this? (recession/inflation)