Unit V Notes What is Economics? 1. Economics - the study of how limited resources are used to satisfy people's seemingly unlimited wants Resources o
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1 Unit V Notes What is Economics? 1. Economics - the study of how limited resources are used to satisfy people's seemingly unlimited wants Resources o All natural materials (ex: land & water) o All human resources (ex: labor & knowledge) There is never enough to produce everything people want, so society must decide how to allocate resources 2. Who Decides How to Use Resources? Free Market Government allows the market to determine how resources are used Government - Regulates and controls how resources are used 3. Classifying Economies: How They Work Traditional Economy- an economy based on tradition and custom Market Economy - buyers and sellers acting in their individual interests to determine what, how, and for whom goods & services are produced o Individual s decisions are similar to a vote o Consumers vote for a product by purchasing it & helps producers determine what to make Command Economy - a central authority (usually a government) that makes most of the economic decisions o State-run planning agencies determine the needs of the people & then what to produce 4. Classifying Economies: Political Beliefs Capitalism - freedom of choice and individual incentive is emphasized Major Characteristics: o Private ownership & control of property & resources o Free enterprise o Competition/Possibility of Profits o Freedom of Choice 1
2 Socialism - The government: owns the means of production, determines the use of resources, distributes the products and wages, and provides social services (education, welfare, healthcare) o System is meant for everyone to share o Conflict between the Proletariat (working class) v. Bourgeoisie (middle class) Communism - theory of Karl Marx that emphasize government control o Idea of working class v. middle class o Communism suggests there is only ONE class the working class o All property would be shared Costs & Benefits 1. Economic Questions What should be produced? How should it be produced? For whom should it be produced? 2. Decision Making Economics is all about decision-making. The goal is to reduce costs and increase benefits. Cost = what you give up Benefit = what you gain 3. Vocabulary Scarcity - when society does not have all the resources to produce all the goods and services that everyone wants Opportunity Cost - what you must give up in order to make a choice 4. Opportunity Cost - the opportunity cost is what you give up. Example: The opportunity cost of waiting in line. You give up your time. Time is your opportunity cost. As a result, you may choose to give up on the item you would get if you waited in line. 5. Opportunity Cost Example Opportunity Cost of Going to College o Choice: To go to college 2
3 o Opportunity Cost: You will give up you full time $5 per hour for 40 hours, 5 days a week, 50 weeks per year = $10,000 o If the cost of attending college is $20,100 you would seem to be losing money BUT what if you could make $30,000/year after completing college instead of $10,000/year? 6. Trade Off - giving up one good or activity in order to gain another. Based on the previous example, the trade off is giving up your $10,000/year job to attend college, but as a result gaining a $30,000/year job upon college completion. Monetary Policy 1. Business Cycle the long-term pattern of fluctuating economic activity in a nation 2. Expansion/Recovery periods of economic growth 3. Recession periods of economic decline 4. Federal Reserve (FED) non-partisan division of the federal government that controls and maintains the nation s money supply 5. Monetary Policy the actions of the Federal Reserve (FED) that influence the money supply to banks, businesses, and consumers 6. Inflation an increase in the overall level of prices in an economy meaning that the value of your money declines 7. Gross Domestic Product (GDP) the total value of all final goods and services produced within a nation s borders in a year 8. Consumer Price Index (CPI) a measure of the overall price level in the economy 9. Unemployment Rate measure the percentage of people that want a job, but can t find one Business & Agricultural Policies 1. Founders believed US manufacturers needed protection from foreign competitors 2. Ways to Promote Business Free Trade o North American Free Trade Agreement (NAFTA) between Canada, US & Mexico Federal Subsidies o Tax incentives, government loans & low interest rates 3
4 Commerce Department Aid to Business o Provide information services, financial assistance, and research and development services Help for Small Businesses o Gives free advice and information & conducts programs to help women and minorities in business 3. Regulating Business Congress has the constitutional powers to levy taxes and regulate commerce Congress uses the commerce clause to justify the regulation of a wide variety of economic activities Demand for Reform o Laissez-faire Idea that government should take a hands-off approach to the economy and allow the free market to regulate economic activities 4. Consumer Protection Protection Against Unhealthy Foods Protection Against False Advertising Consumer Product Safety Commission (CPSC) 5. Worker Protection Labor Unions - chosen by workers to help mediate disputes between labor and management o Collective bargaining = the practice of negotiating labor contracts o Unions are now a protected entity of the national government 6. Farmers & Government Through the Dept. of Agriculture, farmers receive government assistance Aid for Farmers o Marketing Services o Stabilizing Prices o Promoting Conservation 7. Protecting the Environment In the 1950s the Environmental Protection Agency (EPA) was created Air Pollution Policies 4
5 o Clean Air Act required reductions in emissions Water Pollution Policies Education Policies 1. Public Education Programs According to the Constitution, education is a reserved power to the states BUT since No Child Left Behind (NCLB) in 2002, the federal government has been taking an increasing role in public education States must follow federal rules regarding education if they want to receive funds 2. Issues in Education Today Biggest issue today is the increasing involvement of the federal government in education Other Issues: o School Choice/School Vouchers o Standardized Testing o Aid to Private Colleges Healthcare & Public Assistance Programs 1. Types of Assistance Due to the severe economic crisis in the 1930s the US government unveiled new ways to assist those need: Social Insurance Public Assistance Difference: Public Assistance programs do not require recipients to contribute to the cost of the programs 2. Social Insurance Programs Social Security Act created a social insurance system with three main components: o Social Security - For Old Age, Survivors and Disability o Medicare - Health insurance o Unemployment Insurance - Insurance for the unemployed 5
6 3. Public Assistance Programs Began during the Great Depression Funded through general tax revenues State and local welfare agencies run the programs Major Programs are: o Supplemental Security Income (SSI) o Food Stamps o Medicaid o Job Opportunities and Basic Skills (JOBS) o Family Assistance 4. Promoting Public Health Health Programs Food and Drug Protection Stem Cell Research Civil Rights 1. Equal Protection Established in the 14 th Amendment No state can deny to any person within its jurisdiction the equal protection of the laws. Also addressed in the 5 th Amendment 2. Equal Rights Struggle Jim Crow Laws Plessy v. Ferguson (1896) Brown v. BOE of Topeka, Kansas (1954) 3. Civil Rights Legislation Civil Rights Act of bans discrimination in public places, federally funded programs, and private employment on the basis of race, religion, national origin, gender, etc. Voting Rights of reinforces Amendments 13, 14, & 15, no restrictions to vote other than age 6
7 Higher Education Act, Title IX forbids discrimination based on gender by universities & colleges receiving federal money 4. Affirmative Action Set of policies developed in the 1960s to remedy past discrimination Carried out by all levels of government and private employers Usually involve the targeted groups of women and minorities Goal is to better represent these groups in the workforce and in higher education University of California v. Bakke o Supreme Court ruled could NOT use a quota system but schools could consider race in admissions 5. Other Civil Rights Issues Women Roe v. Wade (1973) Government Surveillance Immigration 1. Important Vocabulary Alien someone who lives in a country where he/she is not a citizen Resident Alien a foreigner who has established a permanent residency in the US Nonresident Aliens people who expect to stay for a short, specified time Enemy Aliens citizens of nations that are at war with the US Refugees people who are fleeing persecution or danger from their home country Undocumented Aliens people residing in the US illegally 2. History of Immigration Policy For most of history, Americans have prided themselves on being a nation of immigrants Today, immigration policy is the source of major political conflict Early Restrictions o Congress originally declared a preference for European immigrants o Chinese Exclusion Act (1882) 7
8 3. National Origins Quota System Immigration Act of Established a quota system by country o Each country s immigrants were limited to 2% of foreign-born residents o Favored the groups the US had supported for a long time o This caused immigration to drop drastically over the next 40 years 4. Immigration Reform Act of 1965 Inspired by the Civil Rights Movement Abolished the quota system New Law focused on these principles: o Reunifying families o Giving priority to certain skills o Setup annual limits o Family Preference System - priority to unmarried children of US citizens 5. Immigration Reform and Control Act of 1986 Proposed by President Reagan to serve two purposes: o Slow down Illegal Immigration o Punish employers who knowingly hired illegals Not very successful because: o Penalties for employers were not severe enough o Enforcement of policy was not good 6. Current Political Issues Whether or not to grant amnesty o Offer forgiveness to those illegal immigrants with special circumstances Anchor Babies o Should illegal immigrants who have children in the US become citizens? (Their babies automatically have it by being born here) 8
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