Sunday, December 13, 2009
Honors World History
Don't forget: your castle projects are due the day of your final exams this week! If you need help, don't hesitate to see me before or after class. Study Guides have been given out--USE THEM! ;O)
Friday, December 4, 2009
Honors And AP Econ
Life Sim projects are due on December 10th and 11th! Anything turned in late will be for half credit.....
Honors Economics
Don't forget--EOCTs are scheduled for December 10th and 11th in class. Make sure you review and go over practice tests, handouts, etc.
Tuesday, December 1, 2009
Honors and AP Economics
Don't forget--your personal finance projects are due December 10th and 11th ( the date of EOCTs for honors classes)! Make sure you read over your instructions and create the notebook as directed.
Thursday, November 12, 2009
Honors World History--The Incas
The Inca people began as a tribe in the Cuzco area around the 12th century. Under the leadership of Manco Capac, they formed the small city-state of Cuzco. In 1438 they began a far-reaching expansion under the command of Sapa Inca (paramount leader) Pachacuti, whose name literally meant "world-shaker". During his reign, he and his son brought much of the Andes mountains (roughly modern Peru and Ecuador) under Inca control.
Pachacuti reorganized the kingdom of Cuzco into an empire, the Tahuantinsuyu, a federalist system which consisted of a central government with the Inca at its head and four provincial governments with strong leaders: Chinchasuyu (NW), Antisuyu (NE), Contisuyu (SW), and Collasuyu (SE). Pachacuti is also thought to have built Machu Picchu, either as a family home or as a summer retreat.
Pachacuti sent spies to regions he wanted in his empire; they brought reports on the political organization, military might and wealth. He would then send messages to the leaders of these lands extolling the benefits of joining his empire, offering them presents of luxury goods such as high quality textiles, and promising that they would be materially richer as subject rulers of the Inca. Most accepted the rule of the Inca and acquiesced peacefully.
The ruler’s children would then be brought to Cuzco to be taught about Inca administration systems, then return to rule their native lands. This allowed the Inca to indoctrinate the former ruler's children into the Inca nobility, and, with luck, marry their daughters into families at various corners of the empire.
The Inca Empire was a patchwork of languages, cultures and peoples. The components of the empire were not all uniformly loyal, nor were the local cultures all fully integrated. The most powerful figure in the empire was the Sapa Inca ('the unique Inca'). Only descendants of the original Inca tribe ever ascended to the level of Inca.
The Inca used terraces, a sophisticated approach to the problem of farming. The Inca Empire was spread out over several extreme climates, requiring the use of a wide range of agricultural systems. Native Americans were responsible for some of the world’s most prolific crops, including tomatoes, peppers, lima beans, ancient ancestors to modern squash and, most importantly, the potato.
Maize was also deeply integrated into Inca agriculture and daily life. However, the Inca Empire cultivated a large variety of distinctly Andean crops that were not appreciated or adapted by Pizarro or the Spanish.
The Inca Empire was quite ecologically diverse. The Empire started in the low coastal valleys along the Pacific Ocean and stretched over the second highest mountain range in the world, the Andes, all the way down into the cloud forests of the Amazon Rainforest. This vast environmental diversity was mainly responsible for the large variety of Inca crops as well as a continuous abundance of food.
Cooking in the Inca Empire was simple and rather conservative. Because so much of the Empire was in the high mountains and barren costal plains, wood was saved as much as possible. The Inca used several kinds of grain to make bread, and they raised ducks, dogs and guinea pigs as supplemental meat when there was no wild game.
Pachacuti reorganized the kingdom of Cuzco into an empire, the Tahuantinsuyu, a federalist system which consisted of a central government with the Inca at its head and four provincial governments with strong leaders: Chinchasuyu (NW), Antisuyu (NE), Contisuyu (SW), and Collasuyu (SE). Pachacuti is also thought to have built Machu Picchu, either as a family home or as a summer retreat.
Pachacuti sent spies to regions he wanted in his empire; they brought reports on the political organization, military might and wealth. He would then send messages to the leaders of these lands extolling the benefits of joining his empire, offering them presents of luxury goods such as high quality textiles, and promising that they would be materially richer as subject rulers of the Inca. Most accepted the rule of the Inca and acquiesced peacefully.
The ruler’s children would then be brought to Cuzco to be taught about Inca administration systems, then return to rule their native lands. This allowed the Inca to indoctrinate the former ruler's children into the Inca nobility, and, with luck, marry their daughters into families at various corners of the empire.
The Inca Empire was a patchwork of languages, cultures and peoples. The components of the empire were not all uniformly loyal, nor were the local cultures all fully integrated. The most powerful figure in the empire was the Sapa Inca ('the unique Inca'). Only descendants of the original Inca tribe ever ascended to the level of Inca.
The Inca used terraces, a sophisticated approach to the problem of farming. The Inca Empire was spread out over several extreme climates, requiring the use of a wide range of agricultural systems. Native Americans were responsible for some of the world’s most prolific crops, including tomatoes, peppers, lima beans, ancient ancestors to modern squash and, most importantly, the potato.
Maize was also deeply integrated into Inca agriculture and daily life. However, the Inca Empire cultivated a large variety of distinctly Andean crops that were not appreciated or adapted by Pizarro or the Spanish.
The Inca Empire was quite ecologically diverse. The Empire started in the low coastal valleys along the Pacific Ocean and stretched over the second highest mountain range in the world, the Andes, all the way down into the cloud forests of the Amazon Rainforest. This vast environmental diversity was mainly responsible for the large variety of Inca crops as well as a continuous abundance of food.
Cooking in the Inca Empire was simple and rather conservative. Because so much of the Empire was in the high mountains and barren costal plains, wood was saved as much as possible. The Inca used several kinds of grain to make bread, and they raised ducks, dogs and guinea pigs as supplemental meat when there was no wild game.
Tuesday, November 10, 2009
Honors World History--The Americas
First Americans
First human settlement and development of the Americas
North America
Hunter-gatherers
Following Ice Age herds from Asia
Also, new evidence of two other migrations:
Across Pacific by boat (Polynesian)
Across Atlantic by boat (European)
North America cont.
As people settled, they either adapted to or changed the environment
Ex: Desert Southwest agriculture/irrigation; Eastern Woodland use of available resources
Most advanced culture were the Moundbuilders of the Eastern Woodlands
--urban centers, temple mounds, expansive trade routes
Examples of Animals - Domestic
Dog – everywhere
Turkey – North America
Guinea Pig – Andean
Llama – Andean
Alpaca – Andean
Muscovy Duck –Andean
Tropical Birds – everywhere for feathers. Aztecs made cloaks from humming bird feathers
Raptors – raising eagles for feathers, North America
Turtles – penned and perhaps bred along the Amazon River near large settlements.
What NA Did Not Have
Maya had invented the wheel, but used it only on toys. Wheel was not used in New World.
Strong draft animals.
European-Asian diseases.
Mesoamerica
Beginning 1500 BC, series of civilizations emerged in central America
Olmec (1500 BC-400 BC): first Meso civilization; swampy coast of Gulf of Mexico; foundation for later Meso civilizations; extensive trade; slash/burn farming
Olmecs and Mayans
Olmecs
Earliest known ceremonial centers of the ancient Americas appeared near modern day Vera Cruz around 1200 B.C.
Served as the nerve center for the first complex society of the Americas, the Olmecs
"Olmec" was not what the people called themselves
It means "rubber people" and comes from the rubber trees that flourish in the region
Characteristics of Olmec Civilization
Intensive agricultural techniques
Area received abundant rainfall so extensive irrigation systems were unnecessary
Still the Olmecs built elaborate drainage systems to divert waters that might otherwise have caused floods
Specialization of labor
Jade craftsmen
Cities
Built around ceremonial centers at San Lorenzo, La Venta, and Tres Zapotes
A social hierarchy
Society was probably authoritarian
Common subjects provided labor and tribute to the elite
Characteristics of Olmec Civilization
Organized religion and education
Ceremonial centers, priests, temples, altars, and human sacrifice
Development of complex forms of economic exchange
Imported jade and obsidian and exported small jade, basalt, and ceramic works of art
Development of new technologies
Excellent astronomers and mathematicians who developed a calendar
Advanced development of the arts. (This can include writing.)
Created colossal human heads sculpted from basalt rock
Decline of the Olmec
Olmecs systematically destroyed their ceremonial centers at both San Lorenzo and La Venta and then deserted the sites
Statues were broken and buried, monuments defaced, and capitals burned
No one knows why, but some speculate reasons involving civil conflicts or doubts about the effectiveness or legitimacy of the ruling classes
By about 400 B.C., Olmec society had fallen on hard times and other societies soon eclipsed it
Olmec Influence on the Mayans
Maize
Ceremonial centers with temple pyramids
Calendar based on the Olmec one
Ball games
Rituals involving human sacrifice
Agriculture
Agriculture
Soil in Mesoamerican lowlands was thin and quickly lost fertility
Mayans built terraces to retain the silt and therefore greatly improved agricultural production
Raised maize, cotton, and cacao
Cacao was a precious commodity consumed mostly by nobles and even used as money
Mesoamerica cont.
The Maya(900 BC-900 AD): began as a collection of city-states in the Yucatan
Advanced society with complex religion, math and science (particularly astronomy), agriculture-based economy
Written language—one of the first in the Americas
Sudden collapse of Mayan civilization—cause unknown (civil war, attack, crops/weather)
Cities
Cities: Tikal
From about 300 to 900, the Maya built more than eight large ceremonial centers
All had pyramids, palaces, and temples
Some of the larger ones attracted dense populations and evolved into genuine cities
The most important was Tikal
Small city-kingdoms served as the means of Mayan political organization
Cities: Tikal
Tikal was the most important Mayan political center between the 4th and 9th Centuries
Reached its peak between 600 and 800 with a population of nearly 40,000
The Temple of the Jaguar dominated the skyline and represented Tikal’s control over the surrounding region which had a population of about 500,000
Social Hierarchy
King and ruling family
Priests
Hereditary nobility (from which came the merchant class)
Warriors
Professionals and artisans
Peasants
Slaves
Social Hierarchy
Professionals and artisans
Architects and sculptors supervised construction of the large monuments and public buildings
Peasants
Fed the entire society
Slaves
Provided physical labor for the construction of cities and monuments
Often had been captured in battle
Religion: Importance of Agriculture
Mayan religion reflected the fundamental role of agriculture in their society
Popol Vuh, was the Mayan creation myth that taught that the gods had created human beings out of maize and water
Gods kept the world in order and maintained the agricultural cycle in exchange for honors and sacrifices
Religion: Bloodletting Rituals
Mayans believed the shedding of human blood would prompt the gods to send rain to water the maize
Bloodletting involved both war captives and Mayan royals
Religion: The Ball Game
Mayans inherited a ball game from the Olmecs that was an important part of Mayan political and religious festivals
High-ranking captives were forced to play the game for their very lives
The losers became sacrificial victims and faced torture and execution immediately following the match
Object of the game was to propel an 8 inch ball of solid baked rubber through a ring or onto a marker without using your hands
New Technologies: Calendar
Mayan priests developed the most elaborate calendar of the ancient Americas
Interwove two kinds of year
A solar year of 365 days governed the agricultural cycle
A ritual year of 260 days governed daily affairs by organizing time into twenty "months" of thirteen days each
Believed each day derived certain characteristics from its position on both the solar and ritual calendars and carefully studied the combinations
Writing
Expanded on Olmec tradition to create the most flexible and sophisticated of all early American systems of writing
Contained both ideographic elements and symbols for syllables
Used to write works of history, poetry, and myth and keep genealogical, administrative, and astronomical records
Mayan Decline
By about 800, most Mayan populations had begun to desert their cities
Full scale decline followed everywhere but in the northern Yucatan
Possible causes include foreign invasion, internal dissension and civil war, failure of the water control system leading to agricultural disaster, ecological problems caused by destruction of the forests, epidemic diseases, and natural disasters
Aztecs
The Aztecs were a Pre-Columbian Mesoamerican people of central Mexico in the 14th, 15th and 16th centuries who built an extensive empire. They called themselves Mexicas.This is the believed origin to the name of the country Mexico, which makes up much of where the Aztec civilization used to be.
The nucleus of the Aztec Empire was the Valley of Mexico, where their capital Tenochtitlan was built upon raised islets in Lake Texcoco. The capital of the modern-day nation of Mexico, the greater metropolitan area of Mexico City now covers much of the Valley of Mexico and the now-drained Lake of Texcoco.
Aztec civilization and society possessed a vibrant culture which included mandatory education and rich and complex mythological and religious traditions. For Europeans, the most striking element of the Aztec culture was the practice of human sacrifice which was conducted throughout Mesoamerica prior to the Spanish conquest.
In what is probably the most widely known episode in the Spanish colonization of the Americas, Hernán Cortés conquered the Aztecs in 1521 thus immortalizing himself and the Aztec king, Moctezuma II (Montezuma II).
The true origin of the Mexica is uncertain. According to their legends, the Mexica's place of origin was Aztlán. It is generally thought that Aztlán was somewhere to the north of the Valley of Mexico; some experts have placed it as far north as the Southwestern United States. Others however suggest it is a mythical place, since Aztlán can be translated as "the place of the origin".
At the time of their arrival, the Valley of Mexico contained many city-states, the most powerful of which were Culhuacan to the south, and Azcapotzalco to the west. In 1299, Culhuacan ruler Cocoxtli gave them permission to settle in the empty barrens of Tizapan, where they were eventually assimilated into Culhuacan culture.
In 1323, the Mexica asked the new ruler of Culhuacan, Achicometl, for his daughter, in order to make her a goddess. Unbeknownst to the king, the Mexicas actually planned to sacrifice her. As the story goes, during a festival dinner, a priest came out wearing her flayed skin as part of the ritual. Upon seeing this, the king and the people of Culhuacan were horrified and expelled the Mexicas.
According to Aztec legend, the Aztecs were shown a vision of an eagle perched on a prickly pear cactus, clutching a snake in its talons. This vision indicated that this was the location where they were to build their home. In any event, the Aztecs eventually arrived on a small swampy island in Lake Texcoco where they founded the town of Tenochtitlan in 1325.
The Triple Alliance of Tenochtitlan, Texcoco, and Tlacopan would, in the next 100 years, come to dominate the Valley of Mexico and extend its power to both the Gulf of Mexico and the Pacific shore. Over this period, Tenochtitlan gradually became the dominant power in the alliance, and the Triple Alliance territories became known as the Aztec Empire.
First human settlement and development of the Americas
North America
Hunter-gatherers
Following Ice Age herds from Asia
Also, new evidence of two other migrations:
Across Pacific by boat (Polynesian)
Across Atlantic by boat (European)
North America cont.
As people settled, they either adapted to or changed the environment
Ex: Desert Southwest agriculture/irrigation; Eastern Woodland use of available resources
Most advanced culture were the Moundbuilders of the Eastern Woodlands
--urban centers, temple mounds, expansive trade routes
Examples of Animals - Domestic
Dog – everywhere
Turkey – North America
Guinea Pig – Andean
Llama – Andean
Alpaca – Andean
Muscovy Duck –Andean
Tropical Birds – everywhere for feathers. Aztecs made cloaks from humming bird feathers
Raptors – raising eagles for feathers, North America
Turtles – penned and perhaps bred along the Amazon River near large settlements.
What NA Did Not Have
Maya had invented the wheel, but used it only on toys. Wheel was not used in New World.
Strong draft animals.
European-Asian diseases.
Mesoamerica
Beginning 1500 BC, series of civilizations emerged in central America
Olmec (1500 BC-400 BC): first Meso civilization; swampy coast of Gulf of Mexico; foundation for later Meso civilizations; extensive trade; slash/burn farming
Olmecs and Mayans
Olmecs
Earliest known ceremonial centers of the ancient Americas appeared near modern day Vera Cruz around 1200 B.C.
Served as the nerve center for the first complex society of the Americas, the Olmecs
"Olmec" was not what the people called themselves
It means "rubber people" and comes from the rubber trees that flourish in the region
Characteristics of Olmec Civilization
Intensive agricultural techniques
Area received abundant rainfall so extensive irrigation systems were unnecessary
Still the Olmecs built elaborate drainage systems to divert waters that might otherwise have caused floods
Specialization of labor
Jade craftsmen
Cities
Built around ceremonial centers at San Lorenzo, La Venta, and Tres Zapotes
A social hierarchy
Society was probably authoritarian
Common subjects provided labor and tribute to the elite
Characteristics of Olmec Civilization
Organized religion and education
Ceremonial centers, priests, temples, altars, and human sacrifice
Development of complex forms of economic exchange
Imported jade and obsidian and exported small jade, basalt, and ceramic works of art
Development of new technologies
Excellent astronomers and mathematicians who developed a calendar
Advanced development of the arts. (This can include writing.)
Created colossal human heads sculpted from basalt rock
Decline of the Olmec
Olmecs systematically destroyed their ceremonial centers at both San Lorenzo and La Venta and then deserted the sites
Statues were broken and buried, monuments defaced, and capitals burned
No one knows why, but some speculate reasons involving civil conflicts or doubts about the effectiveness or legitimacy of the ruling classes
By about 400 B.C., Olmec society had fallen on hard times and other societies soon eclipsed it
Olmec Influence on the Mayans
Maize
Ceremonial centers with temple pyramids
Calendar based on the Olmec one
Ball games
Rituals involving human sacrifice
Agriculture
Agriculture
Soil in Mesoamerican lowlands was thin and quickly lost fertility
Mayans built terraces to retain the silt and therefore greatly improved agricultural production
Raised maize, cotton, and cacao
Cacao was a precious commodity consumed mostly by nobles and even used as money
Mesoamerica cont.
The Maya(900 BC-900 AD): began as a collection of city-states in the Yucatan
Advanced society with complex religion, math and science (particularly astronomy), agriculture-based economy
Written language—one of the first in the Americas
Sudden collapse of Mayan civilization—cause unknown (civil war, attack, crops/weather)
Cities
Cities: Tikal
From about 300 to 900, the Maya built more than eight large ceremonial centers
All had pyramids, palaces, and temples
Some of the larger ones attracted dense populations and evolved into genuine cities
The most important was Tikal
Small city-kingdoms served as the means of Mayan political organization
Cities: Tikal
Tikal was the most important Mayan political center between the 4th and 9th Centuries
Reached its peak between 600 and 800 with a population of nearly 40,000
The Temple of the Jaguar dominated the skyline and represented Tikal’s control over the surrounding region which had a population of about 500,000
Social Hierarchy
King and ruling family
Priests
Hereditary nobility (from which came the merchant class)
Warriors
Professionals and artisans
Peasants
Slaves
Social Hierarchy
Professionals and artisans
Architects and sculptors supervised construction of the large monuments and public buildings
Peasants
Fed the entire society
Slaves
Provided physical labor for the construction of cities and monuments
Often had been captured in battle
Religion: Importance of Agriculture
Mayan religion reflected the fundamental role of agriculture in their society
Popol Vuh, was the Mayan creation myth that taught that the gods had created human beings out of maize and water
Gods kept the world in order and maintained the agricultural cycle in exchange for honors and sacrifices
Religion: Bloodletting Rituals
Mayans believed the shedding of human blood would prompt the gods to send rain to water the maize
Bloodletting involved both war captives and Mayan royals
Religion: The Ball Game
Mayans inherited a ball game from the Olmecs that was an important part of Mayan political and religious festivals
High-ranking captives were forced to play the game for their very lives
The losers became sacrificial victims and faced torture and execution immediately following the match
Object of the game was to propel an 8 inch ball of solid baked rubber through a ring or onto a marker without using your hands
New Technologies: Calendar
Mayan priests developed the most elaborate calendar of the ancient Americas
Interwove two kinds of year
A solar year of 365 days governed the agricultural cycle
A ritual year of 260 days governed daily affairs by organizing time into twenty "months" of thirteen days each
Believed each day derived certain characteristics from its position on both the solar and ritual calendars and carefully studied the combinations
Writing
Expanded on Olmec tradition to create the most flexible and sophisticated of all early American systems of writing
Contained both ideographic elements and symbols for syllables
Used to write works of history, poetry, and myth and keep genealogical, administrative, and astronomical records
Mayan Decline
By about 800, most Mayan populations had begun to desert their cities
Full scale decline followed everywhere but in the northern Yucatan
Possible causes include foreign invasion, internal dissension and civil war, failure of the water control system leading to agricultural disaster, ecological problems caused by destruction of the forests, epidemic diseases, and natural disasters
Aztecs
The Aztecs were a Pre-Columbian Mesoamerican people of central Mexico in the 14th, 15th and 16th centuries who built an extensive empire. They called themselves Mexicas.This is the believed origin to the name of the country Mexico, which makes up much of where the Aztec civilization used to be.
The nucleus of the Aztec Empire was the Valley of Mexico, where their capital Tenochtitlan was built upon raised islets in Lake Texcoco. The capital of the modern-day nation of Mexico, the greater metropolitan area of Mexico City now covers much of the Valley of Mexico and the now-drained Lake of Texcoco.
Aztec civilization and society possessed a vibrant culture which included mandatory education and rich and complex mythological and religious traditions. For Europeans, the most striking element of the Aztec culture was the practice of human sacrifice which was conducted throughout Mesoamerica prior to the Spanish conquest.
In what is probably the most widely known episode in the Spanish colonization of the Americas, Hernán Cortés conquered the Aztecs in 1521 thus immortalizing himself and the Aztec king, Moctezuma II (Montezuma II).
The true origin of the Mexica is uncertain. According to their legends, the Mexica's place of origin was Aztlán. It is generally thought that Aztlán was somewhere to the north of the Valley of Mexico; some experts have placed it as far north as the Southwestern United States. Others however suggest it is a mythical place, since Aztlán can be translated as "the place of the origin".
At the time of their arrival, the Valley of Mexico contained many city-states, the most powerful of which were Culhuacan to the south, and Azcapotzalco to the west. In 1299, Culhuacan ruler Cocoxtli gave them permission to settle in the empty barrens of Tizapan, where they were eventually assimilated into Culhuacan culture.
In 1323, the Mexica asked the new ruler of Culhuacan, Achicometl, for his daughter, in order to make her a goddess. Unbeknownst to the king, the Mexicas actually planned to sacrifice her. As the story goes, during a festival dinner, a priest came out wearing her flayed skin as part of the ritual. Upon seeing this, the king and the people of Culhuacan were horrified and expelled the Mexicas.
According to Aztec legend, the Aztecs were shown a vision of an eagle perched on a prickly pear cactus, clutching a snake in its talons. This vision indicated that this was the location where they were to build their home. In any event, the Aztecs eventually arrived on a small swampy island in Lake Texcoco where they founded the town of Tenochtitlan in 1325.
The Triple Alliance of Tenochtitlan, Texcoco, and Tlacopan would, in the next 100 years, come to dominate the Valley of Mexico and extend its power to both the Gulf of Mexico and the Pacific shore. Over this period, Tenochtitlan gradually became the dominant power in the alliance, and the Triple Alliance territories became known as the Aztec Empire.
Monday, November 2, 2009
Honors World History
Both Copper and Black day classes will have chapter 12 quizzes on Wednesday(copper) and Thursday (black) this week. Make sure you review your notes and book materials!
Tuesday, October 27, 2009
Congratulations Econ Winners!!!!
And, the winning projects for each class are:
Black Day:
AP 2nd block---------Tori Musciano's group
Honors 3rd block-----Adam Thomas's group
Copper Day:
Honors 2nd block------Alex Thomason's group AND Taylor Fehl's group (tie)
AP 3rd block-----------Bryce Mazor's group
Congratulations and great job!!!!!!
Black Day:
AP 2nd block---------Tori Musciano's group
Honors 3rd block-----Adam Thomas's group
Copper Day:
Honors 2nd block------Alex Thomason's group AND Taylor Fehl's group (tie)
AP 3rd block-----------Bryce Mazor's group
Congratulations and great job!!!!!!
Thursday, October 22, 2009
Honors World History
There will be a closed book quiz over chapters 10 and 11 next Monday and Tuesday. We will finish notes and review in class this week. There will be study sessions Monday and Tuesday mornings for those interested.
AP and Honors Economics
Overall, the Chevy Volt projects were fantastic! I really appreciate the time and effort many of you put into your work. Hopefully judging for overall winners in each class will be completed by Friday and winners announced next Monday and Tuesday!
Tuesday, October 13, 2009
AP and Honors Economics Classes
Make sure you are wrapping up your Chevy Volt projects. Presentations will begin Friday/Monday! Check your rubrics to make sure you have everything needed to score a perfect 100 on your project! Good luck!
Honors World History
This week is turning out to be quite hectic. I will not be at school again on Thursday due to a county inservice. Since that cuts into our powerpoint/notes schedule, we will have an open book test over chapters 10 and 11 on Friday/Monday. Read over the chapters and keep up with your fill in the blank notes!
Monday, October 5, 2009
Honors Economics Unit III Notes
See the AP notes for unit III--your info is basically the same, but less mathematically involved. Make sure you understand the basic vocab/terms for this unit (begins with Chapter 8 in your textbook). Use the AP notes when completing the next several sets of handouts.
AP Macroeconomics Unit III Notes Part B
Aggregate Demand and Aggregate Supply
Earlier we learned about supply and demand curves. We learned how these relate to individual products.
Yet the single product supply and demand model does not explain
1) why prices rise or fall in general
2) What determines aggregate (combined) output
3) What determines changes in level of aggregate output.
In order to look at it from a macro level we must combine the prices of all goods. And the equilibrium quantities. This is the aggregate (combined)
Aggregate Demand: is a schedule .... which shows the various amounts of goods and services (Real Domestic Output, Real GDP) which consumers, businesses, governments and foreign buyers collectively will desire to purchase at each price level (CPI, PPI…).
This is the same thing as saying the amount of GDP that all buyers in an economy will buy at all possible levels of prices.
Price levels are measured as price indexes.
However, the inverse relationship does not apply in the same manner as the single demand curve. In the single product demand curve it had an inverse relationship because of the substitution effect (as the price of an item increases the more of a substitute they will purchase and therefore the less of this product they will want, and income effect (the more income one has the more of a product they will demand.)
In the Aggregate model we can not substitute for everything. (things do not become cheaper relative to other products.)
And all income varies with aggregate output. (Because of the circular flow model if the price is higher wages will be higher.)
What then is the explanation for the inverse relationship of the AD curve. (Why is it downward sloping?
1) Wealth, or real balances effect: When prices fall the money that people have will be worth more. (The real value will be worth more.) And vice versa
Ex: If my salary gives me 8,000 dollars in purchasing power I might buy a new car. However, if inflation goes way up and may salary only gives me 4,000 dollars in purchasing power I may not be able to afford the car.
2) Interest Rate Effect: As the price level rises so will the interest rate. This will reduce consumption. (This is because the higher prices means consumers (business, individuals...) will need more money. They will seek to borrow it and this will drive up interest rates. (We will learn about this in detail next unit) Eventually what will happen is that consumers will decide not to make purchases because interest rates are too high.
3) Foreign Purchases (NX) Effect: When price levels in the United States increase this means U.S. prices are higher than foreign prices. Purchase of exports will decrease causing amount of Goods and Services demanded to decrease.
A model should predict 1) Why prices are stable in some periods but surge in others. AD when combined with AS should predict this.
What causes AD curve to shift? (change in AD v. change in quantity of real output demanded)
Known as Determinants of Aggregate Demand because they determine the location of the demand curve.
1) Change in consumer spending caused by changes in
a) consumer wealth: When people have less money to save. This causes the curve to shift to the left. (decrease in AD) This has nothing to do with price. This is a change in real income due to non-market factors. (Decrease in stock prices will lead to less wealth.)
b) consumer expectations: If people think that their future income will decrease or that inflation will decrease (it will be cheaper to buy later) they will spend less now. This will cause the AD curve to shift left. This is why they poll people about consumer confidence.
c) Consumer indebtedness: If people have spent a lot in the past and are in debt they are going to spend less now. This will shift the curve to the left.
d) Taxes (Fiscal Policy): If taxes increase the people have less money and will then spend less. AD shifts to the left
e) interest rates (monetary policy): When interest rates increase AD decreases
C, D and E (above) all affect disposable income
2) Change in investment spending: people (businesses) changing spending on capital goods will affect AD curve.
a) Interest Rates: Increase in interest rates will decrease AD (Business will buy less capital goods). This in not the interest rate effect. It has nothing to do with the price. Rather it has to do with changes in interest rates through something like a change in the money supply (which we will learn later).
b) profit expectations on Investment projects: If the business foresee profits for investment they will increase demand for consumer goods. This will shift the AD curve.
If we are in a huge depression and i is = 0, business will still not increase I unless they have expectations for a good return on investment.
c) Business Taxes: Increase business taxes will lead to a decrease in investment spending and the AD curve will shift to left.
d) technology: new technology increases investment spending.
e) Amount of excess capacity: If they are not using the capital they have they will not purchase new capital. This will cause a decrease in AD. If they are at full capacity then they will increase I.
3) Change in government spending: Increased government spending (without change in taxes or interest rates) will increase AD. This could be a planned Fiscal policy move or they may just want to increase G. (give more money to education....)
4) Change in net exports (unrelated to price level)
a) income abroad: Increase in foreign demand will cause an increase in AD for U.S.
STRESS THIS! It will be on A.P. test.
b) Exchange Rates: If the dollar becomes worth less (depreciates) in terms to anther currency. This means they have more real income and our AD will increase.
Higher I means more Xn which makes AD increase.
Aggregate Supply: is a schedule, showing the level of real domestic output available at each possible price level.
There are three parts the AS curve.
1) Keynesian (Horizontal) Range: Here price level remains constant with substantial + output variation. The economy is below full employment and will therefore have excess capacity. This means production can be increased without fear of having costs increase.
2) Classical (Vertical) Range: The economy is at full employment and any attempt to increase production will increase prices. Real domestic output will be constant.
3) Intermediate (Upsloping) Range: Expansion of real output is accompanied by a rising price level.
Determinants of Aggregate Supply:
1) Change in input prices:
a) availability of resources: (land, labor, capital and entrepreneuralship) if these resources are more expensive the production costs increase and AS will decrease (shift left)
b) price of imported resources: If the prices increase the AS curve will decrease
c) Market power: The ability to set a price above the point that would be reached in a competitive environment. (If Oil Cartel increases prices the production costs increase. If unions increase prices the production costs increase.)
2) Changes in productivity: (technology)
Productivity = real output/input If per unit cost decrease the companies become more productive and therefore will be willing to supply more. A shift in AS to the right.
3) Change in legal-institutional environment:
a) Business taxes and subsidies: Higher taxes lead to increase unit costs. This means the AS will decrease (shift left)
b) Government Regulation: Increase government regulations will lead to increased production costs. This will mean a decrease in AS.
Equilibrium price level and Equilibrium real domestic output
The intersection of these two is the equilibrium point.
Equilibrium: situation in which there are no forces that will produce change among the variables considered.
In the Keynesian Range the economy is at less than full employment. This means that an increase in AD will not cause an increase in priced because firms just employ those resources that are remaining idol. (Workers out of work will not expect a wage increase)
In the classical range the economy is fully employed. It is on its production possibility curve. Any increase in AD will cause an increase in price with no increase in output.
In intermediate and classical ranges, demand-pull inflation occurs with the increase in aggregate demand. This means shifts in aggregate demand are pulling up the price level. (The increase in price is caused by the increase in aggregate demand.)
The long run AS curve is a vertical line indicating the amount of goods and services a nation can produce using all of its productive resources as efficiently as possible.
The Long Run AS curve is at full employment.
The LRAS curve also assumes that the nation is using all of the productive technologies available to it. In this manner it is similar to the productive possibilities curve. The LRAS curve moves outward when there is economic growth, but it is still a vertical line.
As Disposable Income increases consumption increases. Does this make sense? Of course.
As we make more and more money we tend to spend more and more.
Consumption (C) + Savings (S) = Disposable Income (DI)
DI - C = Savings.
Average Propensity to Consume = Consumption (C) /Income (Y)
APC= C/Y
This is the fraction of total income that is consumed
Average Propensity to Save = Savings (S)/Income (Y)
APS= S/Y
This is the fraction of total income that is saved.
APC + APS = 1
Once we know the average propensities we must then calculate the marginals. These tell us how much they will consume/save when income changes.
MPC = change in consumption/change in income
MPS = change in savings/change in income.
The MPC is the numerical value of the slope of the C schedule.
MPC + MPS = 1
Conclusions:
1) The sums of income and consumption appear to be approaching specific numbers. (a total will be found)
2) Income increases greater than consumption increases by an amount equal to the new income initially introduced. (When they are added together income will be x greater than consumption. x is the original amount introduced.)
3) Income and consumption both increase by a multiple of the original change in income. (both divisible by same amount: total divided original.)
4) The MPC is important because it determines the size of the multiplier by which income changes.
An algebraic formula has been developed that permits much quicker calculation for the amount by which total income changes when someone injects new spending into the economy. The formula, called the multiplier, is defined as follows:
Multiplier = 1/ (1-MPC)
Earlier we learned about supply and demand curves. We learned how these relate to individual products.
Yet the single product supply and demand model does not explain
1) why prices rise or fall in general
2) What determines aggregate (combined) output
3) What determines changes in level of aggregate output.
In order to look at it from a macro level we must combine the prices of all goods. And the equilibrium quantities. This is the aggregate (combined)
Aggregate Demand: is a schedule .... which shows the various amounts of goods and services (Real Domestic Output, Real GDP) which consumers, businesses, governments and foreign buyers collectively will desire to purchase at each price level (CPI, PPI…).
This is the same thing as saying the amount of GDP that all buyers in an economy will buy at all possible levels of prices.
Price levels are measured as price indexes.
However, the inverse relationship does not apply in the same manner as the single demand curve. In the single product demand curve it had an inverse relationship because of the substitution effect (as the price of an item increases the more of a substitute they will purchase and therefore the less of this product they will want, and income effect (the more income one has the more of a product they will demand.)
In the Aggregate model we can not substitute for everything. (things do not become cheaper relative to other products.)
And all income varies with aggregate output. (Because of the circular flow model if the price is higher wages will be higher.)
What then is the explanation for the inverse relationship of the AD curve. (Why is it downward sloping?
1) Wealth, or real balances effect: When prices fall the money that people have will be worth more. (The real value will be worth more.) And vice versa
Ex: If my salary gives me 8,000 dollars in purchasing power I might buy a new car. However, if inflation goes way up and may salary only gives me 4,000 dollars in purchasing power I may not be able to afford the car.
2) Interest Rate Effect: As the price level rises so will the interest rate. This will reduce consumption. (This is because the higher prices means consumers (business, individuals...) will need more money. They will seek to borrow it and this will drive up interest rates. (We will learn about this in detail next unit) Eventually what will happen is that consumers will decide not to make purchases because interest rates are too high.
3) Foreign Purchases (NX) Effect: When price levels in the United States increase this means U.S. prices are higher than foreign prices. Purchase of exports will decrease causing amount of Goods and Services demanded to decrease.
A model should predict 1) Why prices are stable in some periods but surge in others. AD when combined with AS should predict this.
What causes AD curve to shift? (change in AD v. change in quantity of real output demanded)
Known as Determinants of Aggregate Demand because they determine the location of the demand curve.
1) Change in consumer spending caused by changes in
a) consumer wealth: When people have less money to save. This causes the curve to shift to the left. (decrease in AD) This has nothing to do with price. This is a change in real income due to non-market factors. (Decrease in stock prices will lead to less wealth.)
b) consumer expectations: If people think that their future income will decrease or that inflation will decrease (it will be cheaper to buy later) they will spend less now. This will cause the AD curve to shift left. This is why they poll people about consumer confidence.
c) Consumer indebtedness: If people have spent a lot in the past and are in debt they are going to spend less now. This will shift the curve to the left.
d) Taxes (Fiscal Policy): If taxes increase the people have less money and will then spend less. AD shifts to the left
e) interest rates (monetary policy): When interest rates increase AD decreases
C, D and E (above) all affect disposable income
2) Change in investment spending: people (businesses) changing spending on capital goods will affect AD curve.
a) Interest Rates: Increase in interest rates will decrease AD (Business will buy less capital goods). This in not the interest rate effect. It has nothing to do with the price. Rather it has to do with changes in interest rates through something like a change in the money supply (which we will learn later).
b) profit expectations on Investment projects: If the business foresee profits for investment they will increase demand for consumer goods. This will shift the AD curve.
If we are in a huge depression and i is = 0, business will still not increase I unless they have expectations for a good return on investment.
c) Business Taxes: Increase business taxes will lead to a decrease in investment spending and the AD curve will shift to left.
d) technology: new technology increases investment spending.
e) Amount of excess capacity: If they are not using the capital they have they will not purchase new capital. This will cause a decrease in AD. If they are at full capacity then they will increase I.
3) Change in government spending: Increased government spending (without change in taxes or interest rates) will increase AD. This could be a planned Fiscal policy move or they may just want to increase G. (give more money to education....)
4) Change in net exports (unrelated to price level)
a) income abroad: Increase in foreign demand will cause an increase in AD for U.S.
STRESS THIS! It will be on A.P. test.
b) Exchange Rates: If the dollar becomes worth less (depreciates) in terms to anther currency. This means they have more real income and our AD will increase.
Higher I means more Xn which makes AD increase.
Aggregate Supply: is a schedule, showing the level of real domestic output available at each possible price level.
There are three parts the AS curve.
1) Keynesian (Horizontal) Range: Here price level remains constant with substantial + output variation. The economy is below full employment and will therefore have excess capacity. This means production can be increased without fear of having costs increase.
2) Classical (Vertical) Range: The economy is at full employment and any attempt to increase production will increase prices. Real domestic output will be constant.
3) Intermediate (Upsloping) Range: Expansion of real output is accompanied by a rising price level.
Determinants of Aggregate Supply:
1) Change in input prices:
a) availability of resources: (land, labor, capital and entrepreneuralship) if these resources are more expensive the production costs increase and AS will decrease (shift left)
b) price of imported resources: If the prices increase the AS curve will decrease
c) Market power: The ability to set a price above the point that would be reached in a competitive environment. (If Oil Cartel increases prices the production costs increase. If unions increase prices the production costs increase.)
2) Changes in productivity: (technology)
Productivity = real output/input If per unit cost decrease the companies become more productive and therefore will be willing to supply more. A shift in AS to the right.
3) Change in legal-institutional environment:
a) Business taxes and subsidies: Higher taxes lead to increase unit costs. This means the AS will decrease (shift left)
b) Government Regulation: Increase government regulations will lead to increased production costs. This will mean a decrease in AS.
Equilibrium price level and Equilibrium real domestic output
The intersection of these two is the equilibrium point.
Equilibrium: situation in which there are no forces that will produce change among the variables considered.
In the Keynesian Range the economy is at less than full employment. This means that an increase in AD will not cause an increase in priced because firms just employ those resources that are remaining idol. (Workers out of work will not expect a wage increase)
In the classical range the economy is fully employed. It is on its production possibility curve. Any increase in AD will cause an increase in price with no increase in output.
In intermediate and classical ranges, demand-pull inflation occurs with the increase in aggregate demand. This means shifts in aggregate demand are pulling up the price level. (The increase in price is caused by the increase in aggregate demand.)
The long run AS curve is a vertical line indicating the amount of goods and services a nation can produce using all of its productive resources as efficiently as possible.
The Long Run AS curve is at full employment.
The LRAS curve also assumes that the nation is using all of the productive technologies available to it. In this manner it is similar to the productive possibilities curve. The LRAS curve moves outward when there is economic growth, but it is still a vertical line.
As Disposable Income increases consumption increases. Does this make sense? Of course.
As we make more and more money we tend to spend more and more.
Consumption (C) + Savings (S) = Disposable Income (DI)
DI - C = Savings.
Average Propensity to Consume = Consumption (C) /Income (Y)
APC= C/Y
This is the fraction of total income that is consumed
Average Propensity to Save = Savings (S)/Income (Y)
APS= S/Y
This is the fraction of total income that is saved.
APC + APS = 1
Once we know the average propensities we must then calculate the marginals. These tell us how much they will consume/save when income changes.
MPC = change in consumption/change in income
MPS = change in savings/change in income.
The MPC is the numerical value of the slope of the C schedule.
MPC + MPS = 1
Conclusions:
1) The sums of income and consumption appear to be approaching specific numbers. (a total will be found)
2) Income increases greater than consumption increases by an amount equal to the new income initially introduced. (When they are added together income will be x greater than consumption. x is the original amount introduced.)
3) Income and consumption both increase by a multiple of the original change in income. (both divisible by same amount: total divided original.)
4) The MPC is important because it determines the size of the multiplier by which income changes.
An algebraic formula has been developed that permits much quicker calculation for the amount by which total income changes when someone injects new spending into the economy. The formula, called the multiplier, is defined as follows:
Multiplier = 1/ (1-MPC)
Friday, October 2, 2009
AP and Honors Economics Chevy Volt Ad Project
Resurrecting the Electric Car: The Chevy Volt Ad Campaign
Now that you’ve seen the video clips for the new Volt, let’s see how well you can promote and advertise GM’s new, crowning achievement.
In your groups, create a rough draft advertising poster as if you were an advertising firm vying for GM’s business. Remember this account could mean tens of millions of dollars for your advertising company (that equates to 10 bonus points on the next closed book test in this class).
Your pitch ad should contain the following:
I. A campaign slogan to grab consumer attention
II. Attractive layout and design to draw the consumer in
III. A list of Volt qualities:
A. value to the consumer
B. value to the environment
C. Sex Appeal/Desirability factor—make people want it!
Now that you’ve seen the video clips for the new Volt, let’s see how well you can promote and advertise GM’s new, crowning achievement.
In your groups, create a rough draft advertising poster as if you were an advertising firm vying for GM’s business. Remember this account could mean tens of millions of dollars for your advertising company (that equates to 10 bonus points on the next closed book test in this class).
Your pitch ad should contain the following:
I. A campaign slogan to grab consumer attention
II. Attractive layout and design to draw the consumer in
III. A list of Volt qualities:
A. value to the consumer
B. value to the environment
C. Sex Appeal/Desirability factor—make people want it!
Tuesday, September 29, 2009
Honors Econ Unit III Notes Part A
Please see AP Macro Unit III Notes part A--we are covering the same basics at the beginning of this unit.
AP Macro Unit III Notes Part A
Labor Force Statistics
*Produced by Bureau of Labor Statistics (BLS), in the U.S. Dept. of Labor
*Based on regular survey of 60,000 households
*Based on “adult population” (16 yrs or older)
BLS divides population into 3 groups:
•employed: paid employees, self-employed, and unpaid workers in a family business
•unemployed: people not working who have looked for work during previous 4 weeks
•not in the labor force: everyone else
The labor force is the total # of workers, including the employed and unemployed.
Unemployment rate (“u-rate”): % of the labor force that is unemployed
Labor force participation rate: % of the adult population that is in the labor force
*The BLS publishes these statistics for demographic groups within the population.
*These data reveal widely different labor market experiences for different groups.
The u-rate is not a perfect indicator of joblessness or the health of the labor market:
•excludes discouraged workers
•does not distinguish between full-time and part-time work, or people working part time because full-time jobs not available
•some people misreport their work status in the BLS survey
Despite these issues, the u-rate is still a very useful barometer of the labor market & economy
Most spells of unemployment are short:
•Typically 1/3 of the unemployed have been unemployed < 5 weeks, 2/3 have been unemployed < 14 weeks.
•Only 20% have been unemployed > 6 months.
Yet, most observed unemployment is long term.
•The small group of long-term unemployed persons has fairly little turnover, so it accounts for most of the unemployment observed over time.
Knowing these facts helps policymakers design better policies to help the unemployed.
There’s always some unemployment, though the u-rate fluctuates from year to year.
The natural rate of unemployment
•the normal rate of unemployment around which the actual unemployment rate fluctuates
cyclical unemployment
•the deviation of unemployment from its natural rate
•associated with business cycles, which we’ll study in later chapters
Even when the economy is doing well, there is always some unemployment, including:
frictional unemployment
•occurs when workers spend time searching for the jobs that best suit their skills and tastes
•short-term for most workers
structural unemployment
•occurs when there are fewer jobs than workers
•usually longer-term
Workers have different tastes & skills, and jobs have different requirements.
Job search is the process of matching workers with appropriate jobs.
Sectoral shifts are changes in the composition of demand across industries or regions of the country.
Such shifts displace some workers, who must search for new jobs appropriate for their skills & tastes.
The economy is always changing, so some frictional unemployment is inevitable.
Govt employment agencies: give out information about job vacancies to speed up the matching of workers with jobs
Public training programs: aim to equip workers displaced from declining industries with the skills needed in growing industries
Unemployment insurance (UI): a govt program that partially protects workers’ incomes when they become unemployed
UI increases frictional unemployment. To see why, recall one of the Ten Principles of Economics: People respond to incentives.
UI benefits end when a worker takes a job, so workers have less incentive to search or take jobs while eligible to receive benefits.
Benefits of UI:
*reduces uncertainty over incomes
*gives the unemployed more time to search, resulting in better job matches and thus higher productivity
The min. wage may exceed the eq’m wage for the least skilled or experienced workers, causing structural unemployment.
But this group is a small part of the labor force, so the min. wage can’t explain most unemployment.
Union: a worker association that bargains with employers over wages, benefits, and working conditions
*Unions exert their market power to negotiate higher wages for workers.
*The typical union worker earns 20% higher wages and gets more benefits than a nonunion worker for the same type of work.
“Insiders” – workers who remain employed, they are better off
“Outsiders” – workers who lose their jobs, they are worse off
*Some outsiders go to non-unionized labor markets, which increases labor supply and reduces wages in those markets.
Are unions good or bad? Economists disagree.
*Critics: Unions are cartels. They raise wages above eq’m, which causes unemployment and/or depresses wages in non-union labor markets.
*Advocates: Unions counter the market power of large firms, make firms more responsive to workers’ concerns.
§The theory of efficiency wages: firms voluntarily pay above-equilibrium wages to boost worker productivity.
§Different versions of efficiency wage theory suggest different reasons why firms pay high wages.
Four reasons why firms might pay efficiency wages:
1. Worker healthIn less developed countries, poor nutrition is a common problem. Paying higher wages allows workers to eat better, makes them healthier, more productive.
2. Worker turnoverHiring & training new workers is costly. Paying high wages gives workers more incentive to stay, reduces turnover.
3. Worker qualityOffering higher wages attracts better job applicants, increases quality of the firm’s workforce.
4. Worker effortWorkers can work hard or shirk. Shirkers are fired if caught. Is being fired a good deterrent?
Depends on how hard it is to find another job. If market wage is above eq’m wage, there aren’t enough jobs to go around, so workers have more incentive to work not shirk.
The natural rate of unemployment consists of
frictional unemployment
•it takes time to search for the right jobs
•occurs even if there are enough jobs to go around
structural unemployment
•when wage is above eq’m, not enough jobs
•due to min. wages, labor unions, efficiency wages
In later chapters, we will learn about cyclical unemployment, the short-term fluctuations in unemployment associated with business cycles.
*Produced by Bureau of Labor Statistics (BLS), in the U.S. Dept. of Labor
*Based on regular survey of 60,000 households
*Based on “adult population” (16 yrs or older)
BLS divides population into 3 groups:
•employed: paid employees, self-employed, and unpaid workers in a family business
•unemployed: people not working who have looked for work during previous 4 weeks
•not in the labor force: everyone else
The labor force is the total # of workers, including the employed and unemployed.
Unemployment rate (“u-rate”): % of the labor force that is unemployed
Labor force participation rate: % of the adult population that is in the labor force
*The BLS publishes these statistics for demographic groups within the population.
*These data reveal widely different labor market experiences for different groups.
The u-rate is not a perfect indicator of joblessness or the health of the labor market:
•excludes discouraged workers
•does not distinguish between full-time and part-time work, or people working part time because full-time jobs not available
•some people misreport their work status in the BLS survey
Despite these issues, the u-rate is still a very useful barometer of the labor market & economy
Most spells of unemployment are short:
•Typically 1/3 of the unemployed have been unemployed < 5 weeks, 2/3 have been unemployed < 14 weeks.
•Only 20% have been unemployed > 6 months.
Yet, most observed unemployment is long term.
•The small group of long-term unemployed persons has fairly little turnover, so it accounts for most of the unemployment observed over time.
Knowing these facts helps policymakers design better policies to help the unemployed.
There’s always some unemployment, though the u-rate fluctuates from year to year.
The natural rate of unemployment
•the normal rate of unemployment around which the actual unemployment rate fluctuates
cyclical unemployment
•the deviation of unemployment from its natural rate
•associated with business cycles, which we’ll study in later chapters
Even when the economy is doing well, there is always some unemployment, including:
frictional unemployment
•occurs when workers spend time searching for the jobs that best suit their skills and tastes
•short-term for most workers
structural unemployment
•occurs when there are fewer jobs than workers
•usually longer-term
Workers have different tastes & skills, and jobs have different requirements.
Job search is the process of matching workers with appropriate jobs.
Sectoral shifts are changes in the composition of demand across industries or regions of the country.
Such shifts displace some workers, who must search for new jobs appropriate for their skills & tastes.
The economy is always changing, so some frictional unemployment is inevitable.
Govt employment agencies: give out information about job vacancies to speed up the matching of workers with jobs
Public training programs: aim to equip workers displaced from declining industries with the skills needed in growing industries
Unemployment insurance (UI): a govt program that partially protects workers’ incomes when they become unemployed
UI increases frictional unemployment. To see why, recall one of the Ten Principles of Economics: People respond to incentives.
UI benefits end when a worker takes a job, so workers have less incentive to search or take jobs while eligible to receive benefits.
Benefits of UI:
*reduces uncertainty over incomes
*gives the unemployed more time to search, resulting in better job matches and thus higher productivity
The min. wage may exceed the eq’m wage for the least skilled or experienced workers, causing structural unemployment.
But this group is a small part of the labor force, so the min. wage can’t explain most unemployment.
Union: a worker association that bargains with employers over wages, benefits, and working conditions
*Unions exert their market power to negotiate higher wages for workers.
*The typical union worker earns 20% higher wages and gets more benefits than a nonunion worker for the same type of work.
“Insiders” – workers who remain employed, they are better off
“Outsiders” – workers who lose their jobs, they are worse off
*Some outsiders go to non-unionized labor markets, which increases labor supply and reduces wages in those markets.
Are unions good or bad? Economists disagree.
*Critics: Unions are cartels. They raise wages above eq’m, which causes unemployment and/or depresses wages in non-union labor markets.
*Advocates: Unions counter the market power of large firms, make firms more responsive to workers’ concerns.
§The theory of efficiency wages: firms voluntarily pay above-equilibrium wages to boost worker productivity.
§Different versions of efficiency wage theory suggest different reasons why firms pay high wages.
Four reasons why firms might pay efficiency wages:
1. Worker healthIn less developed countries, poor nutrition is a common problem. Paying higher wages allows workers to eat better, makes them healthier, more productive.
2. Worker turnoverHiring & training new workers is costly. Paying high wages gives workers more incentive to stay, reduces turnover.
3. Worker qualityOffering higher wages attracts better job applicants, increases quality of the firm’s workforce.
4. Worker effortWorkers can work hard or shirk. Shirkers are fired if caught. Is being fired a good deterrent?
Depends on how hard it is to find another job. If market wage is above eq’m wage, there aren’t enough jobs to go around, so workers have more incentive to work not shirk.
The natural rate of unemployment consists of
frictional unemployment
•it takes time to search for the right jobs
•occurs even if there are enough jobs to go around
structural unemployment
•when wage is above eq’m, not enough jobs
•due to min. wages, labor unions, efficiency wages
In later chapters, we will learn about cyclical unemployment, the short-term fluctuations in unemployment associated with business cycles.
Sunday, September 20, 2009
Honors Economics
Don't forget you have your Unit II test on Tuesday (copper)/Wednesday (Black). Make sure you have completed the "take home" portion and are ready for the closed book portion of your test. The test covers GDP, CPI, inflation, GDP deflator, etc. Best of luck!
AP Macroeconomics
Don't forget you have your Unit II test on Tuesday (copper)/Wednesday (Black). Make sure you have completed the "take home" portion and are ready for the closed book portion of your test. The test covers GDP, CPI, inflation, GDP deflator, etc. Best of luck!
Tuesday, September 15, 2009
Honors World History Rome Notes
Ancient Rome
Rome’s Geography
•·Site of Rome chosen for its ______________ and ______________
•·Located on Italian peninsula in center of ______________ Sea
•·Built on______________ hills on Tiber River
The First Romans
•·Latins, Greeks, and Etruscans compete for control of region
•·______________ found original settlement of Rome between 1000 and 500 B.C.
•·______________ native to northern Italy; influence Roman civilization
Early Rulers
•·Around 600 B.C., Etruscan kings begin to rule Rome
•·Kings build Rome’s ______________ and ______________
• ·Romans overthrow ______________ in 509 B.C.
•·Romans found a _____________—government in ____________________________
Patricians and Plebeians
•·Different groups struggle for power in early Roman Republic
•·Patricians—____________________________
•·Plebeians—artisans, merchants, and farmers; ______________, ______________
•·Tribunes—elected representatives ____________ plebeians’ political ______________
Twelve Tables
•·In 451 B.C. officials carve Roman laws on twelve ______________
•·Called Twelve Tables
–basis for ____________________________
•·Laws confirm ____________________________ to protection of the ________
•·Citizenship limited to ____________________________
•·Twelve Tables are hung in the ____________
Government Under the Republic
•·Rome elects two consuls—one to ______________, one to ______________
•·Senate—chosen from Roman ______________; makes foreign, domestic policy
•·Democratic assemblies elect tribunes, make ____________________________people
•·Dictators are leaders ______________ briefly in ____________________________
The Roman Army
•·Roman legion—military unit of __________ infantry; supported by ____________
•·Army is powerful; key factor in ____________________________
Rome Conquers Italy
•·Romans defeat ______________ in north and Greek ______________ in south
•·By 265 B.C., Rome controls Italian peninsula
•·Conquered peoples ________________________; this enables Rome to __________
Rome’s Commercial Network
•·Rome establishes large ____________________________
•·Access to ____________________________ provides many trade routes
•·____________, powerful city-state in North Africa, soon rivals Rome
Punic Wars
•·Rome and Carthage begin Punic Wars—______________ between 264–146 B.C.
•·Rome defeats Carthage, wins Sicily, in _______ 23-year war
•·______________—Carthaginian general—avenges defeat in ______________
•·Attacks Italy through Spain and France, doesn’t take Rome
Rome Triumphs
•·Roman general ______________ defeats ______________ in 202 B.C.
•·Rome destroys Carthage (_______________________ & _______________________), enslaves people in last war (149–146 B.C.)
Economic Turmoil
•·Gap between _______and_______ widens as Roman Republic grows
•·Farmers, former soldiers, lose to large estates; become homeless
•·Two tribunes, Tiberius and Gaius, try to help ________, are _____________
•·Civil war—conflict between groups ____________________________
Military Upheaval
•·Military becomes less ______________ and ______________
•·Soldiers recruited from poor; show loyalty only to __________________
Julius Caesar Takes Control
•Military leader Julius Caesar elected _________ 59 B.C.
•·Caesar, Crassus, Pompey form a __________________
–a group of __________________
•·Military victories give Caesar increasing ____________ and _________
•·Pompey fears Caesar’s __________________ and _________ ____
•·Caesar defeats Pompey’s armies in ____________________________________
•·Caesar is named ___________________________ in 44 B.C.E
Caesar’s Reforms
•·Caesar makes reforms: grants __________________, creates jobs _________________
•·Group of senators opposes Caesar; kills him on _________ ___. ______B.C.
Beginning of the Empire
•43 B.C., Caesar’s supporters __________________; become _____________________
•_________, _________, _________alliance ends in jealousy, violence
•In 31 B.C, ______________ and _____________ forces are defeated at Actium
•Octavian accepts title of __________________, “exalted one,” and rules Rome
Peace and Prosperity
–_____ _____________
–·Under Augustus, Rome moves from a _________ to an _________
–·Power no longer resides with citizens, but __________________a single ruler
–·200 years of _________ and _________ known as Pax Romana
A Sound Government
•·Augustus, Rome’s __________________, creates lasting system of __________________
–··glorifies Rome with beautiful __________________
–··sets up a __________________ to administer the empire
Agriculture and Trade
•·Agriculture __________________industry in empire; ______% of Romans ________
•·Common _________, denarius, makes trade within empire _________
•·Rome has vast __________________, includes China and India
•·Network of Roman _________ links empire to Persia, Russia
Slaves and Captivity
•·Slavery is a _________ part of Roman life in both _________ and _________
•·Some slaves become __________________; forced to fight to _________
Gods and Goddesses
•·Early Romans honor guardian _________ and _________ Jupiter, Juno, Minerva
•·Worship of _________ becomes part of official religion of Rome
Society and Culture
•·Rich live _________; most people are _________, receive grain from government
•·150 holidays and Colosseum events created to ___________________________
The Rise of Christianity
•Romans Conquer _________
–·Rome conquers Judea, home of Jews; makes it part of empire, A.D. 6
–·Many Jews believe a Messiah, or savior, eventually will free them
•Jesus of Nazareth
–·Jesus—a Jew born in __________________ (around 6 to 4 B.C.), raised in Nazareth
–·At age 30 begins preaching monotheism, Ten Commandments
–·Does good works, reportedly ___________________________
–·Stresses personal relationship with God, love for friends and enemies
A Growing Movement
•·Apostles
–the twelve men who are _________ _______(or pupils) of Jesus
–Jesus ignores _________ and _________; his message appeals to poor
•Jesus’ Death
–·Many Jews view Jesus as the _________; others see him as a _________
–·Roman governor _________ _________ sentences Jesus to be crucified
–·Apostles believe Jesus ascended into heaven after death
–·Christos, Greek word for “savior”; Christianity derived from “_________”
Growth of Christianity
•Followers spread Christianity—new religion based on __________________
•Paul’s Mission
–·Apostle Paul—spends life _________ and _________ Christianity
–·Common languages of _________ and _________ help to spread message
–·Paul stresses Jesus is son of _________who died for __________________
– ·Paul declares that Christianity open to all converts
Jewish Rebellion
•Jews rebel against _________; Romans storm Jerusalem, destroy _________
•Rebellions in A.D. 66, 70, 132 fail; Jews driven from _____________
•Diaspora—centuries of Jewish exile (from Greek word for “dispersal”)
Persecution of the Christians
•·Christians won’t worship __________________; become enemies of Roman rule
•·Roman rulers use _________ as scapegoats for ________________
•·As Pax Romana crumbles, Christians_________ _________, _________, in arena
Christianity’s Expansion
•·Christianity becomes __________________; reasons for widespread appeal:
–embraces __________________
–gives hope to the _________
–appeals to those repelled by ________________ of Roman life
–offers personal relationship with a ________________
–promises eternal ________________ after ________________
Constantine Accepts Christianity
•·Constantine—Roman ________________ battles for control of Rome in A.D. 312
•·Has vision of _____________, Christian symbol; places on soldiers’ shields
•·Believes ________________ helped him win; ________________ Christianity
•·In A.D. 380 Emperor ________________ makes Christianity religion of empire
Early Christian Church
•·Priests direct a single ____________; _____________ supervise numerous churches
•·Apostle Peter—first _________of _______ clergy trace their authority to him
•·Pope—the ________, or ______, of Christian Church; Rome, center of Church
Church Characteristics
•A Single ________________
•·Church leaders compile standard Christian beliefs in ________________________________
•·New Testament added to Hebrew Bible (also called Old Testament)
The Fathers of the Church
•·Early writers and scholars of teachings called ____________ of the Church
•·________________, bishop in North Africa, one of the most important Fathers
•·Stressed receiving ________________ to obtain God’s grace
•·Wrote famous book, The City of God
Fall of the Roman Empire
•The Empire Declines
•·Pax Romana ends in A.D. 180 with death of emperor ________________________________
•·Subsequent emperors unable to govern ___________________________
Rome’s Economy Weakens
•·Hostile tribes outside the empire ________________
•·Inflation—drop in value of ____________and rise in ____________—weakens trade
•·Overworked soil, war-torn farmland leads to ________________
Military and Political Turmoil
•·By third century A.D. Roman military in turmoil
•·Soldiers loyal to ________________, not Rome; commanders fighting for ________________
•·Government enlists mercenaries—foreign soldiers they ________________
•·Average citizens ________________ in the affairs of Rome
Diocletian Reforms the Empire
•·In A.D. 284 Emperor Diocletian restores order, ________________empire in _______
•·Two emperors in ________-________ East, _________-_______ West
•·In A.D. 305 Diocletian retires, rivals compete for power
Constantine Moves the Capital
•·Constantine becomes emperor of ________________ in A.D. 312
•·Seizes Eastern Empire in A.D. 324; moves Roman capital to ________________
•·Byzantium eventually renamed ________________—city of Constantine
Germanic Invasions
•·Mongol nomads from Asia, ________________, invade northern borders of empire
•·Germanic tribes flee Huns, _______ Roman lands, _______ Rome A.D. 410
•Attila the Hun
•·Attila—unites the Huns in A.D. 444; ___________ 70 cities in East
•·Attacks Rome in 452; __________and ___________ prevents victory
The Fall of Rome
•·Last Roman emperor falls to Germans in ___________; end of ____________ Empire
•·East thrives for another thousand years (_______________________)
Rome and the Roots of Western Civilization
•A New Culture Emerges
•·Romans adopt aspects of Greek and Hellenistic culture
•·Results in _________________________, or classical civilization
Roman Fine Arts
•·Romans dev. ______________ sculptures to tell stories ·Artists skil in creating __________, painting frescoes
•·Pompeii—Roman town; ash from volcano eruption A.D. 79 ________________
Learning and Literature
•·Romans borrow from Greek philosophy and literature
•·Poet Virgil writes epic ________________ modeled after Homer’s Greek epics
•·Roman historian ________________ excels in writing factually accurate history
•·Annals and Histories provide comprehensive look at Roman life
The Latin Language
•·________________ was official language of Roman Catholic Church until 1900s
•·Develops into French, Spanish, Portuguese, Italian, Romanian
•·More than half the words in English stem from ________________
Master Builders
•Romans pioneer use of ________________; also used domes and ________________
•·Create ________________—structures to bring water into cities, towns
The Legacy of Rome
•Roman System of Law
•·Principles of Roman law form basis of ________________________________
•Rome’s Enduring Influence
•·By preserving and adding to Greek civilization, Rome strengthened_____________________________
Rome’s Geography
•·Site of Rome chosen for its ______________ and ______________
•·Located on Italian peninsula in center of ______________ Sea
•·Built on______________ hills on Tiber River
The First Romans
•·Latins, Greeks, and Etruscans compete for control of region
•·______________ found original settlement of Rome between 1000 and 500 B.C.
•·______________ native to northern Italy; influence Roman civilization
Early Rulers
•·Around 600 B.C., Etruscan kings begin to rule Rome
•·Kings build Rome’s ______________ and ______________
• ·Romans overthrow ______________ in 509 B.C.
•·Romans found a _____________—government in ____________________________
Patricians and Plebeians
•·Different groups struggle for power in early Roman Republic
•·Patricians—____________________________
•·Plebeians—artisans, merchants, and farmers; ______________, ______________
•·Tribunes—elected representatives ____________ plebeians’ political ______________
Twelve Tables
•·In 451 B.C. officials carve Roman laws on twelve ______________
•·Called Twelve Tables
–basis for ____________________________
•·Laws confirm ____________________________ to protection of the ________
•·Citizenship limited to ____________________________
•·Twelve Tables are hung in the ____________
Government Under the Republic
•·Rome elects two consuls—one to ______________, one to ______________
•·Senate—chosen from Roman ______________; makes foreign, domestic policy
•·Democratic assemblies elect tribunes, make ____________________________people
•·Dictators are leaders ______________ briefly in ____________________________
The Roman Army
•·Roman legion—military unit of __________ infantry; supported by ____________
•·Army is powerful; key factor in ____________________________
Rome Conquers Italy
•·Romans defeat ______________ in north and Greek ______________ in south
•·By 265 B.C., Rome controls Italian peninsula
•·Conquered peoples ________________________; this enables Rome to __________
Rome’s Commercial Network
•·Rome establishes large ____________________________
•·Access to ____________________________ provides many trade routes
•·____________, powerful city-state in North Africa, soon rivals Rome
Punic Wars
•·Rome and Carthage begin Punic Wars—______________ between 264–146 B.C.
•·Rome defeats Carthage, wins Sicily, in _______ 23-year war
•·______________—Carthaginian general—avenges defeat in ______________
•·Attacks Italy through Spain and France, doesn’t take Rome
Rome Triumphs
•·Roman general ______________ defeats ______________ in 202 B.C.
•·Rome destroys Carthage (_______________________ & _______________________), enslaves people in last war (149–146 B.C.)
Economic Turmoil
•·Gap between _______and_______ widens as Roman Republic grows
•·Farmers, former soldiers, lose to large estates; become homeless
•·Two tribunes, Tiberius and Gaius, try to help ________, are _____________
•·Civil war—conflict between groups ____________________________
Military Upheaval
•·Military becomes less ______________ and ______________
•·Soldiers recruited from poor; show loyalty only to __________________
Julius Caesar Takes Control
•Military leader Julius Caesar elected _________ 59 B.C.
•·Caesar, Crassus, Pompey form a __________________
–a group of __________________
•·Military victories give Caesar increasing ____________ and _________
•·Pompey fears Caesar’s __________________ and _________ ____
•·Caesar defeats Pompey’s armies in ____________________________________
•·Caesar is named ___________________________ in 44 B.C.E
Caesar’s Reforms
•·Caesar makes reforms: grants __________________, creates jobs _________________
•·Group of senators opposes Caesar; kills him on _________ ___. ______B.C.
Beginning of the Empire
•43 B.C., Caesar’s supporters __________________; become _____________________
•_________, _________, _________alliance ends in jealousy, violence
•In 31 B.C, ______________ and _____________ forces are defeated at Actium
•Octavian accepts title of __________________, “exalted one,” and rules Rome
Peace and Prosperity
–_____ _____________
–·Under Augustus, Rome moves from a _________ to an _________
–·Power no longer resides with citizens, but __________________a single ruler
–·200 years of _________ and _________ known as Pax Romana
A Sound Government
•·Augustus, Rome’s __________________, creates lasting system of __________________
–··glorifies Rome with beautiful __________________
–··sets up a __________________ to administer the empire
Agriculture and Trade
•·Agriculture __________________industry in empire; ______% of Romans ________
•·Common _________, denarius, makes trade within empire _________
•·Rome has vast __________________, includes China and India
•·Network of Roman _________ links empire to Persia, Russia
Slaves and Captivity
•·Slavery is a _________ part of Roman life in both _________ and _________
•·Some slaves become __________________; forced to fight to _________
Gods and Goddesses
•·Early Romans honor guardian _________ and _________ Jupiter, Juno, Minerva
•·Worship of _________ becomes part of official religion of Rome
Society and Culture
•·Rich live _________; most people are _________, receive grain from government
•·150 holidays and Colosseum events created to ___________________________
The Rise of Christianity
•Romans Conquer _________
–·Rome conquers Judea, home of Jews; makes it part of empire, A.D. 6
–·Many Jews believe a Messiah, or savior, eventually will free them
•Jesus of Nazareth
–·Jesus—a Jew born in __________________ (around 6 to 4 B.C.), raised in Nazareth
–·At age 30 begins preaching monotheism, Ten Commandments
–·Does good works, reportedly ___________________________
–·Stresses personal relationship with God, love for friends and enemies
A Growing Movement
•·Apostles
–the twelve men who are _________ _______(or pupils) of Jesus
–Jesus ignores _________ and _________; his message appeals to poor
•Jesus’ Death
–·Many Jews view Jesus as the _________; others see him as a _________
–·Roman governor _________ _________ sentences Jesus to be crucified
–·Apostles believe Jesus ascended into heaven after death
–·Christos, Greek word for “savior”; Christianity derived from “_________”
Growth of Christianity
•Followers spread Christianity—new religion based on __________________
•Paul’s Mission
–·Apostle Paul—spends life _________ and _________ Christianity
–·Common languages of _________ and _________ help to spread message
–·Paul stresses Jesus is son of _________who died for __________________
– ·Paul declares that Christianity open to all converts
Jewish Rebellion
•Jews rebel against _________; Romans storm Jerusalem, destroy _________
•Rebellions in A.D. 66, 70, 132 fail; Jews driven from _____________
•Diaspora—centuries of Jewish exile (from Greek word for “dispersal”)
Persecution of the Christians
•·Christians won’t worship __________________; become enemies of Roman rule
•·Roman rulers use _________ as scapegoats for ________________
•·As Pax Romana crumbles, Christians_________ _________, _________, in arena
Christianity’s Expansion
•·Christianity becomes __________________; reasons for widespread appeal:
–embraces __________________
–gives hope to the _________
–appeals to those repelled by ________________ of Roman life
–offers personal relationship with a ________________
–promises eternal ________________ after ________________
Constantine Accepts Christianity
•·Constantine—Roman ________________ battles for control of Rome in A.D. 312
•·Has vision of _____________, Christian symbol; places on soldiers’ shields
•·Believes ________________ helped him win; ________________ Christianity
•·In A.D. 380 Emperor ________________ makes Christianity religion of empire
Early Christian Church
•·Priests direct a single ____________; _____________ supervise numerous churches
•·Apostle Peter—first _________of _______ clergy trace their authority to him
•·Pope—the ________, or ______, of Christian Church; Rome, center of Church
Church Characteristics
•A Single ________________
•·Church leaders compile standard Christian beliefs in ________________________________
•·New Testament added to Hebrew Bible (also called Old Testament)
The Fathers of the Church
•·Early writers and scholars of teachings called ____________ of the Church
•·________________, bishop in North Africa, one of the most important Fathers
•·Stressed receiving ________________ to obtain God’s grace
•·Wrote famous book, The City of God
Fall of the Roman Empire
•The Empire Declines
•·Pax Romana ends in A.D. 180 with death of emperor ________________________________
•·Subsequent emperors unable to govern ___________________________
Rome’s Economy Weakens
•·Hostile tribes outside the empire ________________
•·Inflation—drop in value of ____________and rise in ____________—weakens trade
•·Overworked soil, war-torn farmland leads to ________________
Military and Political Turmoil
•·By third century A.D. Roman military in turmoil
•·Soldiers loyal to ________________, not Rome; commanders fighting for ________________
•·Government enlists mercenaries—foreign soldiers they ________________
•·Average citizens ________________ in the affairs of Rome
Diocletian Reforms the Empire
•·In A.D. 284 Emperor Diocletian restores order, ________________empire in _______
•·Two emperors in ________-________ East, _________-_______ West
•·In A.D. 305 Diocletian retires, rivals compete for power
Constantine Moves the Capital
•·Constantine becomes emperor of ________________ in A.D. 312
•·Seizes Eastern Empire in A.D. 324; moves Roman capital to ________________
•·Byzantium eventually renamed ________________—city of Constantine
Germanic Invasions
•·Mongol nomads from Asia, ________________, invade northern borders of empire
•·Germanic tribes flee Huns, _______ Roman lands, _______ Rome A.D. 410
•Attila the Hun
•·Attila—unites the Huns in A.D. 444; ___________ 70 cities in East
•·Attacks Rome in 452; __________and ___________ prevents victory
The Fall of Rome
•·Last Roman emperor falls to Germans in ___________; end of ____________ Empire
•·East thrives for another thousand years (_______________________)
Rome and the Roots of Western Civilization
•A New Culture Emerges
•·Romans adopt aspects of Greek and Hellenistic culture
•·Results in _________________________, or classical civilization
Roman Fine Arts
•·Romans dev. ______________ sculptures to tell stories ·Artists skil in creating __________, painting frescoes
•·Pompeii—Roman town; ash from volcano eruption A.D. 79 ________________
Learning and Literature
•·Romans borrow from Greek philosophy and literature
•·Poet Virgil writes epic ________________ modeled after Homer’s Greek epics
•·Roman historian ________________ excels in writing factually accurate history
•·Annals and Histories provide comprehensive look at Roman life
The Latin Language
•·________________ was official language of Roman Catholic Church until 1900s
•·Develops into French, Spanish, Portuguese, Italian, Romanian
•·More than half the words in English stem from ________________
Master Builders
•Romans pioneer use of ________________; also used domes and ________________
•·Create ________________—structures to bring water into cities, towns
The Legacy of Rome
•Roman System of Law
•·Principles of Roman law form basis of ________________________________
•Rome’s Enduring Influence
•·By preserving and adding to Greek civilization, Rome strengthened_____________________________
Honors World History Video T Chart Assignment
Print this off:
Name: __________
Class:___________
Brainy Barbarians -Roman “Innovations
Create a T chart using the following two groups:
Roman Innovations Barbarian Innovations
1. What innovations did the Romans take credit for that were actually a product of “Barbarian” efforts?
2. Why do you think people associate these innovations with the Romans?
3. How did the Romans define “barbarians?”
4. Is the term “barbarian” appropriate for the people labeled thusly?
Name: __________
Class:___________
Brainy Barbarians -Roman “Innovations
Create a T chart using the following two groups:
Roman Innovations Barbarian Innovations
1. What innovations did the Romans take credit for that were actually a product of “Barbarian” efforts?
2. Why do you think people associate these innovations with the Romans?
3. How did the Romans define “barbarians?”
4. Is the term “barbarian” appropriate for the people labeled thusly?
Monday, September 14, 2009
Ap Macro Notes Unit II part B
MACRO UNIT 2
Tear Down Approach
This approach will allow us to look at how much income people have for spending purposes.
Gross Domestic Product:
should show the well being of the economy. (everything that was produced)
Problem is that it includes depreciation. Is depreciation a real payment? No.
This means we must deduct it from GDP. This will give us a more realistic picture of the production available for consumption and additions to capital stock.
This give you Net Domestic Product:
You must replace the machinery. It shows the annual output that the economy (households, business, governments, and net exports might consume without impairing our capacity to produce next year.
How is this shown in the income approach? Take out consumption of fixed capital.
National Income: all income earned by American owned resources. To get this you must look at
1) Income earned by Americans outside of the United States (this must be added in to NDP)
2) Indirect business taxes. You must subtract these taxes because this goes to the government and the government is not a resource of production. In other words, they get the tax money without adding to production.
National Income (income earned) is what it costs society to obtain its output. (Its GDP)
Looking at the income approach NI is compensation to employees, rent, interest, proprietors income and corporate profits.
Personal Income: (income received) The income actually received by people.
We pay the following so we must subtract them out:
1) social security contributions
2) corporate income taxes
3) Undistributed corporate profits
You must also add back transfer payments (unemployment compensation, welfare, disability...)
This is income received but not currently earned. (Notice that is you have to add this back because it was not originally included in GDP)
Disposable Income (DI): personal income less personal taxes.
Personal Taxes: income taxes, property taxes and inheritance taxes
(Personal Income - Personal Taxes = Disposable Income
You can then use your disposable income to either save or consume.
Macro Unit 2 Lesson 4
Prices are important because that is how we measure GDP.
Price Index: measures the combined price of a particular collection of goods and services, called a market basket, in a given period relative to the combined price of an identical or similar group of goods and services in a reference period (base year).
PI = price of market basket in a given year X 100
price of same basket in the base year
* Notice that in the base year the index will always be 100
Consumer Price Index: Best known indicator. It measures the prices of a fixed market basket of around 300 Goods and services. Measures the prices of goods and services purchased by wage earners.
Producer Price Index: measures the price level of goods and services that firms purchase from other firms.
GDP Deflator: reflects the price of goods and services but not the quantities. In other words, it will show how much prices have changed without worrying about changes in quantity.
GDP deflator = Nominal GDP/Real GDP x 100
Example: if Nominal GDP is $600 and Real GDP is $350 you get
600/350 x 100 = 171 that means prices have increased 71 percent.
When you look at GDP it is important to realize that inflation may have occurred. Does the increase in GDP arise because of an increase in Q or an increase in prices. To find out you want to adjust it for inflation.
The GDP can be adjusted for inflation or recession. In so doing we find the real GDP (adjusted) as opposed to the nominal GDP (unadjusted).
Nominal GDP = real GDP
price index
This gives us the value of total output in various years as if the prices of the products had been constant from the reference or base year throughout all the years being considered.
Inflation:
Inflation: a rising general level of prices. (The opposite would be deflation.)
Inflation makes the money in your pocket worth less. If you are on a fixed salary it also makes your salary worth less because you can buy less and less with each pay check.
The amount of real goods and services that a dollar can buy is called purchasing power. Purchasing power does not vary directly with inflation.
Nominal value of dollar is the actual value. The real value is what it can buy. If I give you a dollar today and you save it until next year its real value will be less than its nominal value.
Anticipated Inflation: inflation rate that we believe will occur
Unanticipated Inflation: inflation rate that comes at a surprise.
Unanticipated Inflation hurts those that lend money (fixed rate loan is getting paid back with inflated money that buys less.
Lenders lend money make money. They must take inflation into account. If unanticipated inflation occurs they are hurt because the interest rate they charged was not large enough.
Nominal rate of interest: rate expressed in today's dollars.
Real rate of interest: nominal rate of interest minus the anticipated rate of inflation.
Inflation causes interest rates to rise.
COLA: Cost of living adjustment: an automatic increase in income when inflation rate increases.
Stock dividends generally rise with inflation.
Inflation is measured through the price indexes. Ex. CPI, PPI
Rate of inflation is determined by subtracting last years price index (2007) from this years price index (2008) and dividing that by last years index (2007). This must all then be multiplied by 100.
Price index (2008) - Price index (2007) x 100 = Rate of Inflation
Price index (2007)
Rule of 70: a method for determining how long it will take the price level to double, given the current price level. To calculate this you divide the % annual rate of increase into 70.
Demand Pull Inflation: "too much money chasing too few goods" The economy demands more than it can produce (production possibilities curve) and this drives the prices up.
Cost-Push or Supply-Side Inflation: If the per unit cost of production increases then producers will be willing to supply less goods and services at various prices. This will drive the price up. This could result from rising wages or rising costs of materials (ex. rising oil prices).
Unit 2 Lesson 5
Peak: business activity has reached a temporary maximum.
recession: period of decline in total output, income, employment, and trade, lasting six months or longer.
depression: severe and prolonged recession
trough: recession or depression is at its lowest level
recovery: output and employment expand toward full employment
Unemployment:
Frictional Unemployment: This takes into account those workers that are between jobs. They are either searching for jobs or waiting to take jobs in the future.
Structural Unemployment: change in the demand for labor over time leads some people to become unemployed because their job is no longer needed. (ex: computers are taking the jobs of some people. ) This also includes shifts in geography. (ex: companies move their headquarters.
Cyclical Unemployment: unemployment caused by the recession phase of the business cycle.
Natural Rate of Unemployment: frictional and structural unemployment.
Full employment is achieved when the number of workers seeking jobs is satisfied by the number of jobs available. (Someone may be unemployed because the jobs that are open are not to their liking.) FULL EMPLOYMENT IS NOT 0. THEIR IS ALWAYS PEOPLE LOOKING FOR JOBS.
To find the unemployment rate you must not even consider those people under 16, those people institutionalized and those people not in the labor force (work in the home, in school, retired, have no desire to work...)
Problems with unemployment rate:
1) Part time workers are considered employed. (even if they are looking for a full time job.)
2) Discourage workers (those not actively seeking employment because they have given up.) are not counted because they are not actively seeking employment.
3) Workers employed in cash jobs will report themselves as unemployed. They may however just be employed in the underground economy.
GDP Gap: amount by which actual GDP falls short of potential GDP because of unemployment.
Tear Down Approach
This approach will allow us to look at how much income people have for spending purposes.
Gross Domestic Product:
should show the well being of the economy. (everything that was produced)
Problem is that it includes depreciation. Is depreciation a real payment? No.
This means we must deduct it from GDP. This will give us a more realistic picture of the production available for consumption and additions to capital stock.
This give you Net Domestic Product:
You must replace the machinery. It shows the annual output that the economy (households, business, governments, and net exports might consume without impairing our capacity to produce next year.
How is this shown in the income approach? Take out consumption of fixed capital.
National Income: all income earned by American owned resources. To get this you must look at
1) Income earned by Americans outside of the United States (this must be added in to NDP)
2) Indirect business taxes. You must subtract these taxes because this goes to the government and the government is not a resource of production. In other words, they get the tax money without adding to production.
National Income (income earned) is what it costs society to obtain its output. (Its GDP)
Looking at the income approach NI is compensation to employees, rent, interest, proprietors income and corporate profits.
Personal Income: (income received) The income actually received by people.
We pay the following so we must subtract them out:
1) social security contributions
2) corporate income taxes
3) Undistributed corporate profits
You must also add back transfer payments (unemployment compensation, welfare, disability...)
This is income received but not currently earned. (Notice that is you have to add this back because it was not originally included in GDP)
Disposable Income (DI): personal income less personal taxes.
Personal Taxes: income taxes, property taxes and inheritance taxes
(Personal Income - Personal Taxes = Disposable Income
You can then use your disposable income to either save or consume.
Macro Unit 2 Lesson 4
Prices are important because that is how we measure GDP.
Price Index: measures the combined price of a particular collection of goods and services, called a market basket, in a given period relative to the combined price of an identical or similar group of goods and services in a reference period (base year).
PI = price of market basket in a given year X 100
price of same basket in the base year
* Notice that in the base year the index will always be 100
Consumer Price Index: Best known indicator. It measures the prices of a fixed market basket of around 300 Goods and services. Measures the prices of goods and services purchased by wage earners.
Producer Price Index: measures the price level of goods and services that firms purchase from other firms.
GDP Deflator: reflects the price of goods and services but not the quantities. In other words, it will show how much prices have changed without worrying about changes in quantity.
GDP deflator = Nominal GDP/Real GDP x 100
Example: if Nominal GDP is $600 and Real GDP is $350 you get
600/350 x 100 = 171 that means prices have increased 71 percent.
When you look at GDP it is important to realize that inflation may have occurred. Does the increase in GDP arise because of an increase in Q or an increase in prices. To find out you want to adjust it for inflation.
The GDP can be adjusted for inflation or recession. In so doing we find the real GDP (adjusted) as opposed to the nominal GDP (unadjusted).
Nominal GDP = real GDP
price index
This gives us the value of total output in various years as if the prices of the products had been constant from the reference or base year throughout all the years being considered.
Inflation:
Inflation: a rising general level of prices. (The opposite would be deflation.)
Inflation makes the money in your pocket worth less. If you are on a fixed salary it also makes your salary worth less because you can buy less and less with each pay check.
The amount of real goods and services that a dollar can buy is called purchasing power. Purchasing power does not vary directly with inflation.
Nominal value of dollar is the actual value. The real value is what it can buy. If I give you a dollar today and you save it until next year its real value will be less than its nominal value.
Anticipated Inflation: inflation rate that we believe will occur
Unanticipated Inflation: inflation rate that comes at a surprise.
Unanticipated Inflation hurts those that lend money (fixed rate loan is getting paid back with inflated money that buys less.
Lenders lend money make money. They must take inflation into account. If unanticipated inflation occurs they are hurt because the interest rate they charged was not large enough.
Nominal rate of interest: rate expressed in today's dollars.
Real rate of interest: nominal rate of interest minus the anticipated rate of inflation.
Inflation causes interest rates to rise.
COLA: Cost of living adjustment: an automatic increase in income when inflation rate increases.
Stock dividends generally rise with inflation.
Inflation is measured through the price indexes. Ex. CPI, PPI
Rate of inflation is determined by subtracting last years price index (2007) from this years price index (2008) and dividing that by last years index (2007). This must all then be multiplied by 100.
Price index (2008) - Price index (2007) x 100 = Rate of Inflation
Price index (2007)
Rule of 70: a method for determining how long it will take the price level to double, given the current price level. To calculate this you divide the % annual rate of increase into 70.
Demand Pull Inflation: "too much money chasing too few goods" The economy demands more than it can produce (production possibilities curve) and this drives the prices up.
Cost-Push or Supply-Side Inflation: If the per unit cost of production increases then producers will be willing to supply less goods and services at various prices. This will drive the price up. This could result from rising wages or rising costs of materials (ex. rising oil prices).
Unit 2 Lesson 5
Peak: business activity has reached a temporary maximum.
recession: period of decline in total output, income, employment, and trade, lasting six months or longer.
depression: severe and prolonged recession
trough: recession or depression is at its lowest level
recovery: output and employment expand toward full employment
Unemployment:
Frictional Unemployment: This takes into account those workers that are between jobs. They are either searching for jobs or waiting to take jobs in the future.
Structural Unemployment: change in the demand for labor over time leads some people to become unemployed because their job is no longer needed. (ex: computers are taking the jobs of some people. ) This also includes shifts in geography. (ex: companies move their headquarters.
Cyclical Unemployment: unemployment caused by the recession phase of the business cycle.
Natural Rate of Unemployment: frictional and structural unemployment.
Full employment is achieved when the number of workers seeking jobs is satisfied by the number of jobs available. (Someone may be unemployed because the jobs that are open are not to their liking.) FULL EMPLOYMENT IS NOT 0. THEIR IS ALWAYS PEOPLE LOOKING FOR JOBS.
To find the unemployment rate you must not even consider those people under 16, those people institutionalized and those people not in the labor force (work in the home, in school, retired, have no desire to work...)
Problems with unemployment rate:
1) Part time workers are considered employed. (even if they are looking for a full time job.)
2) Discourage workers (those not actively seeking employment because they have given up.) are not counted because they are not actively seeking employment.
3) Workers employed in cash jobs will report themselves as unemployed. They may however just be employed in the underground economy.
GDP Gap: amount by which actual GDP falls short of potential GDP because of unemployment.
Thursday, September 10, 2009
Honors Economics Unit II Part B
•Gross domestic product (GDP) is the most commonly used NIPA—it calculates the total dollar value of all final goods & services produced within a country in a year
–Calculates total production, or output
•Final output
–To avoid counting products more than once, economists include only the value of final goods & services when calculating GDP
•Example: Table is final product of
–Woodcutter (cuts down tree)
–Sawmill (processes tree into lumber)
–Furniture manufacturer (makes table)
•Tree & lumber are intermediate products—goods & services used to make other products
–Intermediate product value is built into cost of table
•Current year
–Does not include products such as used cars or secondhand clothing
–GDP is a gauge of production—not sales
•Output produced within national borders
–Does not include products produced by U.S. companies in factories outside the U.S.
–Does include output of foreign workers & firms within the U.S.
•Example: Japanese-owned Nissan factory in Tennessee
•How is GDP determined?
–Economists add the output produced by
•Personal consumption expenditures (C)
•Gross investment (I)
•Government purchases of goods & services (G)
•Net exports of goods & services, or exports minus imports (X - M)
by using the output-expenditure model
•C + I + G + (X – M) = GDP
•C+I+G+NX=GDP
•Personal consumption expenditures
–Consumer purchases
•Durable goods
–Have a useful lifetime of more than a year, such as cars & computers
•Nondurable goods
–Have a short useful lifetime, such as groceries & cosmetics
•Services
–Such as medical care, entertainment & public education
–Fastest growing area of consumer expenditures
•Gross Investment
–True investment is the use of money to produce new capital goods
–Gross investment is the total value of all capital goods produced in a given nation during one year
•Includes changes in the dollar value of business inventories
•Does not include the purchase of financial assets—such as stocks, bonds, and land that do not result in the production of new goods or services
•Gross Investment
–2 subcategories
•Fixed investment
–Spending on residential structures, nonresidential structures such as office space & factories, & capital goods such as new machinery & office equipment
•Inventory investment
–Refers to the increase or decrease in the total dollar amount of the stock of raw materials, intermediate goods, and final goods of domestic businesses during a given period
•Government purchases
–Total dollar value that federal, state, & local governments spend on goods & services such as
•Highways
•Public education
•National defense
–Transfer payments, such as Social Security payments & government aid, expenditures for which the government receives no goods or services in exchange, are not included
•Net exports
–Total U.S. exports minus total U.S. imports
•Includes the value of goods & services produced domestically but sold in other countries (exports) & does not include goods & services produced in other countries but purchased locally (imports)
•As some goods & services included in GDP are produced in other countries, and some items produced in U.S. are sold in other countries & fail to get included in the other components of GDP, economists subtract total imports from total exports
•What if a product’s price increases during the year or into the next year?
–Nominal GDP, or current GDP, is GDP expressed in the current prices of the period being measured
–Real GDP is GDP adjusted for price changes (inflation)
•Calculating Real GDP helps economists to determine if production increased or decreased
–A price index is a set of statistics that allows economists to compare prices over time
•Accuracy & timeliness of data
–Economists use sampling techniques to determine prices & quantities
–Gathering data is slow & time-consuming
–GDP & NIPAs are only approximations of total output & income
•Nonmarket activities
–GDP does not measure exchanges of goods & services that are not market transactions (some output does not get paid for, or may begin payment for additional goods/services midway through year)
•Underground activity
–Underground activity is illegal activities & unreported legal activities (although it is illegal not to report it)
•“Goods” & “Bads”
–The value of many things that make for a better society are often not accounted for, while things that make a society worse, are
–GDP is an imperfect reporter of economic well-being
•Example: Car emissions standards & regulations that prohibit development in ecologically sensitive areas reduce GDP but improve the nation’s well-being
•Some economists propose assigning positive values to “goods” such as leisure & urban renewal, and negative dollar values to “bads” such as pollution & traffic congestion
•Gross national product
–Stopped being used in 1991
–GNP measures the total dollar value of all final output products with factors of production owned by residents of a country during one year
•Example: If production in Russia involves any capital owned by U.S. residents, it would be counted as part of the U.S. GNP
•GDP more accurately represents short-term resource use changes in the economy
–GDP used by the United Nations & most other countries—so the Commerce Department switched to GDP
•Net national product
–As GNP includes money invested in capital goods, it also includes money spent on replacing outdated or defective equipment
–When this depreciation is subtracted from GNP, the result is a nation’s net national product
•National income
–The sum of employees’ & proprietors’ income, real & estimated rental income, corporate profits, & net interest
–Economists subtract subsidies & indirect taxes from net national product
•Personal income
–To determine the amount of income people in a nation earn, economists will subtract income not given to people, such as profits that firms keep & reinvest & money spent on corporate income taxes & employee’s Social Security
–Economists then add money given from government transfer funds such as Social Security to determine income paid to individuals in a nation
•Disposable personal income
–Disposable income is the amount of money an individual has after deductions such as Social Security & income tax are taken out.
–Economists subtract personal taxes & nontax payments from personal income
•Personal taxes include:
–Income, estate, gift, property, and motor vehicle taxes
•Nontax payments include:
–Fines & passport fees
•Business cycles are changes in a market system’s economic activity
–These changes are measured in real GDP
–Durations of upswings or downswings can last for months or years
•Phases of the business cycle
–Expansion is a period of economic expansion & growth
•Example: occurred during WWII because of high levels of spending on military
–Peaks occur as the highest point of expansion—a time when the economy is the most prosperous
•Consumer demands calls for producers to increase plant capacity & hire more workers
•Phases of the business cycle
–Contraction, or recession, is the point at with businesses slowdown
–Recessions occur when there is a decline in real GDP for 2 or more consecutive quarters (6 months or more)
–Depressions are the next step, and are a prolonged & severe recession
•Example: Great Depression of 1930s
–Troughs are the final phase of the business cycle, at which businesses reach their lowest levels
•Troughs are usually followed by a period of economic recovery
•Business investment
–Businesses invest in capital goods to increase their production (Ex.: new machinery)
–High levels of business investment promote expansion
–Low levels of investment contribute to contractions
–Business investment creates:
•Demand for goods
•Efficiency as new capital promotes better production methods
•Stimulates technological change and higher output at lower production costs
•Money & credit
–Total output changes with the availability & affordability of credit
–Individuals & businesses tend to borrow when interest rates are low
•Public expectations
–Does the consumer believe the economy is heading toward a recession or expansion?—this will influence spending
–The same goes for business owners
•External factors
–Such as changes in the world’s economic or political climate
•Example: Increases in world oil prices in 1973-74 & 1979-80 contributed to recessions in 1974-75 & 1980-92
–Wars generally strengthen business activity in the U.S. as the government spends money on national defense
•Periods of expansion accompanied U.S. involvement in WWI, WWII, and both Korean & Vietnam Wars
•Leading indicators
–Leading indicators are used by economists that anticipate the direction the economy is headed
•Such as the number of building permits issued
•The number of orders of new capital & consumer goods
•The price of raw materials & stock prices
•Coincidental indicators
–Coincidental indicators are factors that change as the economy moves from one phase of the business cycle to another
–Tells economists is there is an upturn or downturn in economy
–Includes:
•Personal income
•Sales volume
•Industrial production levels
•Lagging indicators
–Lagging indicators are indicators that change monthly after an upturn or a downturn in the economy has begun
•Help economists predict the duration of an economic upturn or downturn
•Include:
–Use of consumer installment credit
–Number & size of business incomes
•As in the number of wins & losses a sports team has, the final outcome of more wins than losses is the most important factor, so is the final outcome—more ups than downs—for an economy
•If there are more ups than downs, an economy will experience growth
–Calculates total production, or output
•Final output
–To avoid counting products more than once, economists include only the value of final goods & services when calculating GDP
•Example: Table is final product of
–Woodcutter (cuts down tree)
–Sawmill (processes tree into lumber)
–Furniture manufacturer (makes table)
•Tree & lumber are intermediate products—goods & services used to make other products
–Intermediate product value is built into cost of table
•Current year
–Does not include products such as used cars or secondhand clothing
–GDP is a gauge of production—not sales
•Output produced within national borders
–Does not include products produced by U.S. companies in factories outside the U.S.
–Does include output of foreign workers & firms within the U.S.
•Example: Japanese-owned Nissan factory in Tennessee
•How is GDP determined?
–Economists add the output produced by
•Personal consumption expenditures (C)
•Gross investment (I)
•Government purchases of goods & services (G)
•Net exports of goods & services, or exports minus imports (X - M)
by using the output-expenditure model
•C + I + G + (X – M) = GDP
•C+I+G+NX=GDP
•Personal consumption expenditures
–Consumer purchases
•Durable goods
–Have a useful lifetime of more than a year, such as cars & computers
•Nondurable goods
–Have a short useful lifetime, such as groceries & cosmetics
•Services
–Such as medical care, entertainment & public education
–Fastest growing area of consumer expenditures
•Gross Investment
–True investment is the use of money to produce new capital goods
–Gross investment is the total value of all capital goods produced in a given nation during one year
•Includes changes in the dollar value of business inventories
•Does not include the purchase of financial assets—such as stocks, bonds, and land that do not result in the production of new goods or services
•Gross Investment
–2 subcategories
•Fixed investment
–Spending on residential structures, nonresidential structures such as office space & factories, & capital goods such as new machinery & office equipment
•Inventory investment
–Refers to the increase or decrease in the total dollar amount of the stock of raw materials, intermediate goods, and final goods of domestic businesses during a given period
•Government purchases
–Total dollar value that federal, state, & local governments spend on goods & services such as
•Highways
•Public education
•National defense
–Transfer payments, such as Social Security payments & government aid, expenditures for which the government receives no goods or services in exchange, are not included
•Net exports
–Total U.S. exports minus total U.S. imports
•Includes the value of goods & services produced domestically but sold in other countries (exports) & does not include goods & services produced in other countries but purchased locally (imports)
•As some goods & services included in GDP are produced in other countries, and some items produced in U.S. are sold in other countries & fail to get included in the other components of GDP, economists subtract total imports from total exports
•What if a product’s price increases during the year or into the next year?
–Nominal GDP, or current GDP, is GDP expressed in the current prices of the period being measured
–Real GDP is GDP adjusted for price changes (inflation)
•Calculating Real GDP helps economists to determine if production increased or decreased
–A price index is a set of statistics that allows economists to compare prices over time
•Accuracy & timeliness of data
–Economists use sampling techniques to determine prices & quantities
–Gathering data is slow & time-consuming
–GDP & NIPAs are only approximations of total output & income
•Nonmarket activities
–GDP does not measure exchanges of goods & services that are not market transactions (some output does not get paid for, or may begin payment for additional goods/services midway through year)
•Underground activity
–Underground activity is illegal activities & unreported legal activities (although it is illegal not to report it)
•“Goods” & “Bads”
–The value of many things that make for a better society are often not accounted for, while things that make a society worse, are
–GDP is an imperfect reporter of economic well-being
•Example: Car emissions standards & regulations that prohibit development in ecologically sensitive areas reduce GDP but improve the nation’s well-being
•Some economists propose assigning positive values to “goods” such as leisure & urban renewal, and negative dollar values to “bads” such as pollution & traffic congestion
•Gross national product
–Stopped being used in 1991
–GNP measures the total dollar value of all final output products with factors of production owned by residents of a country during one year
•Example: If production in Russia involves any capital owned by U.S. residents, it would be counted as part of the U.S. GNP
•GDP more accurately represents short-term resource use changes in the economy
–GDP used by the United Nations & most other countries—so the Commerce Department switched to GDP
•Net national product
–As GNP includes money invested in capital goods, it also includes money spent on replacing outdated or defective equipment
–When this depreciation is subtracted from GNP, the result is a nation’s net national product
•National income
–The sum of employees’ & proprietors’ income, real & estimated rental income, corporate profits, & net interest
–Economists subtract subsidies & indirect taxes from net national product
•Personal income
–To determine the amount of income people in a nation earn, economists will subtract income not given to people, such as profits that firms keep & reinvest & money spent on corporate income taxes & employee’s Social Security
–Economists then add money given from government transfer funds such as Social Security to determine income paid to individuals in a nation
•Disposable personal income
–Disposable income is the amount of money an individual has after deductions such as Social Security & income tax are taken out.
–Economists subtract personal taxes & nontax payments from personal income
•Personal taxes include:
–Income, estate, gift, property, and motor vehicle taxes
•Nontax payments include:
–Fines & passport fees
•Business cycles are changes in a market system’s economic activity
–These changes are measured in real GDP
–Durations of upswings or downswings can last for months or years
•Phases of the business cycle
–Expansion is a period of economic expansion & growth
•Example: occurred during WWII because of high levels of spending on military
–Peaks occur as the highest point of expansion—a time when the economy is the most prosperous
•Consumer demands calls for producers to increase plant capacity & hire more workers
•Phases of the business cycle
–Contraction, or recession, is the point at with businesses slowdown
–Recessions occur when there is a decline in real GDP for 2 or more consecutive quarters (6 months or more)
–Depressions are the next step, and are a prolonged & severe recession
•Example: Great Depression of 1930s
–Troughs are the final phase of the business cycle, at which businesses reach their lowest levels
•Troughs are usually followed by a period of economic recovery
•Business investment
–Businesses invest in capital goods to increase their production (Ex.: new machinery)
–High levels of business investment promote expansion
–Low levels of investment contribute to contractions
–Business investment creates:
•Demand for goods
•Efficiency as new capital promotes better production methods
•Stimulates technological change and higher output at lower production costs
•Money & credit
–Total output changes with the availability & affordability of credit
–Individuals & businesses tend to borrow when interest rates are low
•Public expectations
–Does the consumer believe the economy is heading toward a recession or expansion?—this will influence spending
–The same goes for business owners
•External factors
–Such as changes in the world’s economic or political climate
•Example: Increases in world oil prices in 1973-74 & 1979-80 contributed to recessions in 1974-75 & 1980-92
–Wars generally strengthen business activity in the U.S. as the government spends money on national defense
•Periods of expansion accompanied U.S. involvement in WWI, WWII, and both Korean & Vietnam Wars
•Leading indicators
–Leading indicators are used by economists that anticipate the direction the economy is headed
•Such as the number of building permits issued
•The number of orders of new capital & consumer goods
•The price of raw materials & stock prices
•Coincidental indicators
–Coincidental indicators are factors that change as the economy moves from one phase of the business cycle to another
–Tells economists is there is an upturn or downturn in economy
–Includes:
•Personal income
•Sales volume
•Industrial production levels
•Lagging indicators
–Lagging indicators are indicators that change monthly after an upturn or a downturn in the economy has begun
•Help economists predict the duration of an economic upturn or downturn
•Include:
–Use of consumer installment credit
–Number & size of business incomes
•As in the number of wins & losses a sports team has, the final outcome of more wins than losses is the most important factor, so is the final outcome—more ups than downs—for an economy
•If there are more ups than downs, an economy will experience growth
Honors World History Unit II Notes part B
The Macedonians
•Ancient kingdom in the northern-most part of ancient Greece (Dorian descent)
•Viewed as inferior by most Greek city-states
•Led by Philip II, conquered most Greek city-states by 338 BC
•Philip was assassinated in 336 BC
•Eldest son of Philip was Alexander, born to Olympias (nonMacedonian Greek princess—created controversy w/marriage to Cleopatra)
•Macedonian army elected Alexander as their new king
•City-states saw opportunity to rebel
•Put down quickly by Alexander
•Alexander turned his attention eastward toward Persian Empire
•Early victories against forces of Darius III
•Battle of Issus, Darius fled back toward Persia
•Alexander turned south to Egypt
•Egyptians, resentful of Persian rule, welcomed Alexander as a pharaoh
•Finally defeated Darius III at Battle of Gaugamela
•Darius killed by his own people, Alexander proclaimed Persian empire his own
•Pushed on to Indus River Valley
•Wanted to continue eastward, but his men refused
•Headed back to Babylon
•Alexander became ill and died, 323 BC
•Empire divided among Alexander’s generals
•Inept rulers, quick decline
•Revolts led to greater divisions
•No lasting political effects
Alexander’s Greatest Achievement
•Spread of Hellenistic Culture
•Greek culture superimposed upon and eventually mixing with regional cultures
•Created a form of “universal culture”
•Spread of Greek language
•Spread of Greek learning (science, math)
•Ancient kingdom in the northern-most part of ancient Greece (Dorian descent)
•Viewed as inferior by most Greek city-states
•Led by Philip II, conquered most Greek city-states by 338 BC
•Philip was assassinated in 336 BC
•Eldest son of Philip was Alexander, born to Olympias (nonMacedonian Greek princess—created controversy w/marriage to Cleopatra)
•Macedonian army elected Alexander as their new king
•City-states saw opportunity to rebel
•Put down quickly by Alexander
•Alexander turned his attention eastward toward Persian Empire
•Early victories against forces of Darius III
•Battle of Issus, Darius fled back toward Persia
•Alexander turned south to Egypt
•Egyptians, resentful of Persian rule, welcomed Alexander as a pharaoh
•Finally defeated Darius III at Battle of Gaugamela
•Darius killed by his own people, Alexander proclaimed Persian empire his own
•Pushed on to Indus River Valley
•Wanted to continue eastward, but his men refused
•Headed back to Babylon
•Alexander became ill and died, 323 BC
•Empire divided among Alexander’s generals
•Inept rulers, quick decline
•Revolts led to greater divisions
•No lasting political effects
Alexander’s Greatest Achievement
•Spread of Hellenistic Culture
•Greek culture superimposed upon and eventually mixing with regional cultures
•Created a form of “universal culture”
•Spread of Greek language
•Spread of Greek learning (science, math)
Wednesday, September 9, 2009
Honors World History
Mr. Robinson had to be away from school on Tuesday, so he has given each class an additional two days to complete their Greek movie projects. Make sure you have everything you need to present to the class on Thursday/Friday!
AP Macro and Honors Economics
Make SURE you have your book work classwork/homework completed when you arrive to class on Thursday/Friday. There will be a short pop quiz over the reading and book work. You may use your work on the quiz.
Friday, September 4, 2009
Honors World History Movie Project
300: The Movie Activity
A. Title of movie:
B. On what historic event is this movie based?
C. Main characters:
1. Character:
a) Actor:
b) Summary of character:
c) Why this actor?
_______________________________________________________________________
2. Character:
a) Actor:
b) Summary of character:
c) Why this actor?
_______________________________________________________________________
3. Character:
a) Actor:
b) Summary of character:
c) Why this actor?
________________________________________________________________________
Main plot of the movie (Basic Story):
Questions:
1. What will your movie be rated? Why?
2. What will be your target audience?
Formative Assessment:
On a sheet of notebook/printer paper, create a movie poster for your movie. Include the title, stars of the movie and a picture that relates what the movie is about.
A. Title of movie:
B. On what historic event is this movie based?
C. Main characters:
1. Character:
a) Actor:
b) Summary of character:
c) Why this actor?
_______________________________________________________________________
2. Character:
a) Actor:
b) Summary of character:
c) Why this actor?
_______________________________________________________________________
3. Character:
a) Actor:
b) Summary of character:
c) Why this actor?
________________________________________________________________________
Main plot of the movie (Basic Story):
Questions:
1. What will your movie be rated? Why?
2. What will be your target audience?
Formative Assessment:
On a sheet of notebook/printer paper, create a movie poster for your movie. Include the title, stars of the movie and a picture that relates what the movie is about.
Thursday, September 3, 2009
Honors World History Unit II notes Part A
Geography of Greece
• Mainland and about 2,000 islands
The Sea
• Big role in dev. of Greek Civ.
• Proximity, lack of resources encouraged sea travel/trade
The Land
• ·Mountainous, slow travel, divide land into regions
• small populations (lack of arable land)
Climate
• Moderate
• Creates “outdoorsmen” identity
Origins of Mycenaean Civilization
• ·Indo-Europeans who settled on mainland (2000 B.C.E.)
• Main City: Mycenae
• Led by warrior-kings (1600–1100 B.C.E.)
• Contact with Minoans
• ·After 1500 B.C., Myc. adopt Minoan sea trade & culture
• The Trojan War
• Fought by Myc. against city of Troy (1200s B.C.E)
• (Once thought to be fictional, archaeological evidence has been found)
• Dorians Replace Mycenaeans
• ·Mycenaean civilization collapses around 1200 B.C.
• Dorians—possibly relatives of Bronze Age Greeks—move into Greece
– Less advanced than Mycenaeans
– Dorians leave no written records (Dark Age of Greece)
• Oral tradition grows, especially epics of
• Homer—a blind storyteller
– Epic—a narrative poem about heroic deeds
– Iliad, about Trojan War, shows Greek heroic ideal
• Develop myths—traditional stories about gods
– Use myths to under mysteries of life
– Gods have human qualities (love, hate, jealousy, etc…)
– Zeus, ruler of Gods, lives on Mount Olympus with his wife, Hera
• ·Zeus’s daughter Athena: goddess of wisdom & guardian of cities
• The City-State
• By 750 B.C. the Greek city-state, or polis, is the formal government
– Polis - city & surrounding villages (50-500 sq. mi)
– Population – usu. less than 10,000
– Citizens gather in the marketplace & acropolis
• a fortified hilltop
• City-states have different forms of government
– Monarchy—rule by a king
– Aristocracy—rule by nobility
– Oligarchy—rule by small group of powerful merchants and artisans
– Tyranny - nobles and wealthy citizens w support of commoners
• They seize control and rule in the interests of ordinary people ATHENS
• 621 B.C., democracy—rule by the people—develops in Athens
– Draco develops legal code based on equality of citizens
– Solon abolishes debt slavery
– Cleisthenes has citizens make laws
• Only native-born, property-owning males are citizens
• Schooling only for sons of wealthy families
• Girls learn from mothers
Sparta
• Dominates Messenians (become helots)
– Helots—peasants forced to farm the land
• Harsh rule
• Strong state
Sparta’s Government and Society
• Three social classes:
• citizens, free noncitizens, helots—slaves
• Values:
• duty, strength, individuality, discipline over freedom
• Most powerful army in Greece
• Males
• move into barracks at age 7
• train until 30
• serve until 60
• Girls receive some military training (tough ladies)
• Girls also taught to value service to Sparta
• New Kind of Army
• Cheaper iron replaces bronze
• arms and armor cheaper
• Army includes soldiers from all classes
• Phalanx—formation of soldiers with spears, shields (induced fear)
• Battle at Marathon
• Between Greece and Persian Empire
• Persian army attacks Athens, is defeated at Marathon
– Pheidippides Brings News (runner) of Greek victory
• Thermopylae and Salamis (Greek “Victories”)
• 480 B.C., Persians invade Greece
• Many Greeks stay neutral or side with Persians
• Greeks hold Thermopylae for three days
• Salamis
• Athenians defeat Persians at sea,
• Victories force Persian retreat
• ·City-states form Delian League and continue to fight Persians (Sparta doesn’t join)
Consequences of Persian Wars
• New self-confidence due to victory
• Athens leads Delian League
– Athens uses force against opponents
– League essentially part of Athenian empire
• Rise of Athenian creativity
Democracy & the Greek Golden Age
• Pericles - skillful politician, well respected
• Stronger Democracy
• Pericles hires more public officials; creates direct democracy
– citizens rule directly, not through representatives
• Golden Age
• ·Pericles hires artisans to beautify Athens
• Architecture and Sculpture
• Parthenon—a large temple to honor goddess Athena
• Sculptors create graceful, strong, perfectly formed figures
• Classical art—values harmony, order, balance, proportion, beauty
• Tragedy and Comedy
• ·Greeks invent drama as an art form
– Two forms of drama: tragedy and comedy
• History
• ·Historians Herodotus and Thucydides
Peloponnesian Wars
• 431 B.C. city-states Sparta and Athens at war—
• Plague strikes Athens in 430 B.C.E.
– kills many—including Pericles
• Sparta (WINNER) & Athens truce (421 B.C.E)
• 415 B.C. Athens renews war
• Defeated AGAIN
– Athens and allies surrender to Sparta in 404 B.C.
• Mainland and about 2,000 islands
The Sea
• Big role in dev. of Greek Civ.
• Proximity, lack of resources encouraged sea travel/trade
The Land
• ·Mountainous, slow travel, divide land into regions
• small populations (lack of arable land)
Climate
• Moderate
• Creates “outdoorsmen” identity
Origins of Mycenaean Civilization
• ·Indo-Europeans who settled on mainland (2000 B.C.E.)
• Main City: Mycenae
• Led by warrior-kings (1600–1100 B.C.E.)
• Contact with Minoans
• ·After 1500 B.C., Myc. adopt Minoan sea trade & culture
• The Trojan War
• Fought by Myc. against city of Troy (1200s B.C.E)
• (Once thought to be fictional, archaeological evidence has been found)
• Dorians Replace Mycenaeans
• ·Mycenaean civilization collapses around 1200 B.C.
• Dorians—possibly relatives of Bronze Age Greeks—move into Greece
– Less advanced than Mycenaeans
– Dorians leave no written records (Dark Age of Greece)
• Oral tradition grows, especially epics of
• Homer—a blind storyteller
– Epic—a narrative poem about heroic deeds
– Iliad, about Trojan War, shows Greek heroic ideal
• Develop myths—traditional stories about gods
– Use myths to under mysteries of life
– Gods have human qualities (love, hate, jealousy, etc…)
– Zeus, ruler of Gods, lives on Mount Olympus with his wife, Hera
• ·Zeus’s daughter Athena: goddess of wisdom & guardian of cities
• The City-State
• By 750 B.C. the Greek city-state, or polis, is the formal government
– Polis - city & surrounding villages (50-500 sq. mi)
– Population – usu. less than 10,000
– Citizens gather in the marketplace & acropolis
• a fortified hilltop
• City-states have different forms of government
– Monarchy—rule by a king
– Aristocracy—rule by nobility
– Oligarchy—rule by small group of powerful merchants and artisans
– Tyranny - nobles and wealthy citizens w support of commoners
• They seize control and rule in the interests of ordinary people ATHENS
• 621 B.C., democracy—rule by the people—develops in Athens
– Draco develops legal code based on equality of citizens
– Solon abolishes debt slavery
– Cleisthenes has citizens make laws
• Only native-born, property-owning males are citizens
• Schooling only for sons of wealthy families
• Girls learn from mothers
Sparta
• Dominates Messenians (become helots)
– Helots—peasants forced to farm the land
• Harsh rule
• Strong state
Sparta’s Government and Society
• Three social classes:
• citizens, free noncitizens, helots—slaves
• Values:
• duty, strength, individuality, discipline over freedom
• Most powerful army in Greece
• Males
• move into barracks at age 7
• train until 30
• serve until 60
• Girls receive some military training (tough ladies)
• Girls also taught to value service to Sparta
• New Kind of Army
• Cheaper iron replaces bronze
• arms and armor cheaper
• Army includes soldiers from all classes
• Phalanx—formation of soldiers with spears, shields (induced fear)
• Battle at Marathon
• Between Greece and Persian Empire
• Persian army attacks Athens, is defeated at Marathon
– Pheidippides Brings News (runner) of Greek victory
• Thermopylae and Salamis (Greek “Victories”)
• 480 B.C., Persians invade Greece
• Many Greeks stay neutral or side with Persians
• Greeks hold Thermopylae for three days
• Salamis
• Athenians defeat Persians at sea,
• Victories force Persian retreat
• ·City-states form Delian League and continue to fight Persians (Sparta doesn’t join)
Consequences of Persian Wars
• New self-confidence due to victory
• Athens leads Delian League
– Athens uses force against opponents
– League essentially part of Athenian empire
• Rise of Athenian creativity
Democracy & the Greek Golden Age
• Pericles - skillful politician, well respected
• Stronger Democracy
• Pericles hires more public officials; creates direct democracy
– citizens rule directly, not through representatives
• Golden Age
• ·Pericles hires artisans to beautify Athens
• Architecture and Sculpture
• Parthenon—a large temple to honor goddess Athena
• Sculptors create graceful, strong, perfectly formed figures
• Classical art—values harmony, order, balance, proportion, beauty
• Tragedy and Comedy
• ·Greeks invent drama as an art form
– Two forms of drama: tragedy and comedy
• History
• ·Historians Herodotus and Thucydides
Peloponnesian Wars
• 431 B.C. city-states Sparta and Athens at war—
• Plague strikes Athens in 430 B.C.E.
– kills many—including Pericles
• Sparta (WINNER) & Athens truce (421 B.C.E)
• 415 B.C. Athens renews war
• Defeated AGAIN
– Athens and allies surrender to Sparta in 404 B.C.
Monday, August 31, 2009
Honors Econ notes Unit II Part A
* Profit Motive
* Why people engage in free enterprise (make $$)
* Open Opportunity
* anyone can compete/get in the game
* Economic Rights
* Legal equality (all get treated the same)
* Property rights
* Free Contract
* Voluntary exchange (decided what to buy and sell)
* Competition (multiple sellers)
* The purpose of free enterprsie is to get consumers to make economic choices
* How do companies know what to produce?
* Interest groups
Govt’s Role is
* Protecting Health, Safety, and Well-being
* Restrictions keep the consumers and the market safe
* Environmental restrictions on the disposal of hazardous materials
* Public Interest
* The concerns of the public as a whole
The Business Cycle
* A period of macro economic expansion followed by a period of contraction
*Government actions try to limit fluctuations
3 Ways to Stabilize:
1) Employment
nGovernment attempts to provide jobs
(the Great Depression and the TVA)
2) Growth
Increase the Gross Domestic Product (GDP)
Total value of all final goods and services produced in a particular economy n 3) Stable Prices
The government monitors and regulates certain institutions to attempt to keep prices stable
Governments can take actions to attempt to counter fluctuations
How Can We Increase Productivity?
Instill a higher Work Ethic
the commitment to the value of work and purposeful activity
Technology
Makes the process to produce a good or a service better
The government pushes for technological advancement because it eventually increases the national GDP.
PUBLIC GOODS
* shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers
Examples: Dams, Roads,
How are public goods funded?
Taxes
Yellowstone National Park
was created by the government
What does it cost to go there?
Little to nothing
Value
Not changed by multiple uses
*You can drive on a road thousands of others have used
Costs and Benefits
*Benefits must outweigh the costs in order for a public good to be created
* Why was the Grand Canyon Skywalk built by a Native America Tribe and not the government?
* Private Sector
* The part of the economy that involves the transactions of the government
* Public Goods are financed by the Public Sector
*Public Sector
*Part of the economy that involves transactions of individuals and businesses
* Free Rider
* Someone who wants to get the benefits of public goods without paying for a good or service
* EXAMPLE
* Building of a road privately funded
* Everyone wants it but a few people
* Result: Build the road
* Those who didn’t want it will use it and therefore become “Free riders”
Market Failures
* A situation in which the market does not distribute resources efficiently
* You cant just build roads where there are the most people because it neglects areas in need of transportation
EXTERNALITIES
* Economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume
* Can be both positive and negative
How the Government deals with Externalities
* Encourage positive externalities
Limit negative externalities via regulations and things like “pollution permits”
What do you think a pollution permit is?
The Poverty Problem
*Free markets
*result in uneven distribution of resources
*Poverty Threshold
* income level below what is needed to support a family or household
The GOVERNMENTS Role
* Provide a safety net
*Welfare – the US safety net of government aid for the poor
*Created following the Great Depression
* Positive: A safety net for the poor
*Negative: Some feel people become dependint upon welfare and are unable or unwilling to get off of assistance.
Government Redistribution Programs
*CASH TRANSFERS
* Direct payments of money to people eligible poor people
1. Temporary Assitance For Needy Families
2. Social Security
3. Unemployment Insurance
4. Workers Compensation
* IN-KIND BENEFITS
Goods and services provided for free or at greatly reduced prices
Food giveaways, food stamps, subsidized housing, legal aid
*MEDICAL BENEFITS
Medicare – people over 65
Medicaid – poor who are unemployed or not employer’s insurance
* EDUCATION
Government funding for basic and advanced education
* FAITH BASED INITIATIVES
Religious organizations can qualify for federal funding as of 2003 to help the poor
* Why people engage in free enterprise (make $$)
* Open Opportunity
* anyone can compete/get in the game
* Economic Rights
* Legal equality (all get treated the same)
* Property rights
* Free Contract
* Voluntary exchange (decided what to buy and sell)
* Competition (multiple sellers)
* The purpose of free enterprsie is to get consumers to make economic choices
* How do companies know what to produce?
* Interest groups
Govt’s Role is
* Protecting Health, Safety, and Well-being
* Restrictions keep the consumers and the market safe
* Environmental restrictions on the disposal of hazardous materials
* Public Interest
* The concerns of the public as a whole
The Business Cycle
* A period of macro economic expansion followed by a period of contraction
*Government actions try to limit fluctuations
3 Ways to Stabilize:
1) Employment
nGovernment attempts to provide jobs
(the Great Depression and the TVA)
2) Growth
Increase the Gross Domestic Product (GDP)
Total value of all final goods and services produced in a particular economy n 3) Stable Prices
The government monitors and regulates certain institutions to attempt to keep prices stable
Governments can take actions to attempt to counter fluctuations
How Can We Increase Productivity?
Instill a higher Work Ethic
the commitment to the value of work and purposeful activity
Technology
Makes the process to produce a good or a service better
The government pushes for technological advancement because it eventually increases the national GDP.
PUBLIC GOODS
* shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers
Examples: Dams, Roads,
How are public goods funded?
Taxes
Yellowstone National Park
was created by the government
What does it cost to go there?
Little to nothing
Value
Not changed by multiple uses
*You can drive on a road thousands of others have used
Costs and Benefits
*Benefits must outweigh the costs in order for a public good to be created
* Why was the Grand Canyon Skywalk built by a Native America Tribe and not the government?
* Private Sector
* The part of the economy that involves the transactions of the government
* Public Goods are financed by the Public Sector
*Public Sector
*Part of the economy that involves transactions of individuals and businesses
* Free Rider
* Someone who wants to get the benefits of public goods without paying for a good or service
* EXAMPLE
* Building of a road privately funded
* Everyone wants it but a few people
* Result: Build the road
* Those who didn’t want it will use it and therefore become “Free riders”
Market Failures
* A situation in which the market does not distribute resources efficiently
* You cant just build roads where there are the most people because it neglects areas in need of transportation
EXTERNALITIES
* Economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume
* Can be both positive and negative
How the Government deals with Externalities
* Encourage positive externalities
Limit negative externalities via regulations and things like “pollution permits”
What do you think a pollution permit is?
The Poverty Problem
*Free markets
*result in uneven distribution of resources
*Poverty Threshold
* income level below what is needed to support a family or household
The GOVERNMENTS Role
* Provide a safety net
*Welfare – the US safety net of government aid for the poor
*Created following the Great Depression
* Positive: A safety net for the poor
*Negative: Some feel people become dependint upon welfare and are unable or unwilling to get off of assistance.
Government Redistribution Programs
*CASH TRANSFERS
* Direct payments of money to people eligible poor people
1. Temporary Assitance For Needy Families
2. Social Security
3. Unemployment Insurance
4. Workers Compensation
* IN-KIND BENEFITS
Goods and services provided for free or at greatly reduced prices
Food giveaways, food stamps, subsidized housing, legal aid
*MEDICAL BENEFITS
Medicare – people over 65
Medicaid – poor who are unemployed or not employer’s insurance
* EDUCATION
Government funding for basic and advanced education
* FAITH BASED INITIATIVES
Religious organizations can qualify for federal funding as of 2003 to help the poor
AP Econ Unit II Notes part A
§Microeconomics: The study of how individual households and firms make decisions, interact with one another in markets.
§Macroeconomics: The study of the economy as a whole.
§We begin our study of macroeconomics with the country’s total income and expenditure.
§Gross Domestic Product (GDP) measures total income of everyone in the economy.
§GDP also measures total expenditure on the economy’s output of g&s.
For the economy as a whole, income equals expenditure, because every dollar a buyer spends is a dollar of income for the seller
The Circular-Flow Diagram
§a simple depiction of the macroeconomy
§illustrates GDP as spending, revenue, factor payments, and income
§Preliminaries:
•Factors of production are inputs like labor, land, capital, and natural resources.
•Factor payments are payments to the factors of production. (e.g., wages, rent)
What This Diagram Omits
§The government
•collects taxes
•purchases g&s
§The financial system
•matches savers’ supply of funds with borrowers’ demand for loans
§The foreign sector
•trades g&s, financial assets, and currencies with the country’s residents
Gross Domestic Product (GDP) Is
the market value of all final goods & services produced within a country in a given period of time.
Goods are valued at their market prices, so:
•all goods measured in the same units (e.g., dollars in the U.S.)
•Things that don’t have a market value are excluded, e.g., housework you do for yourself.
Gross Domestic Product (GDP) Is…
…the market value of all final goods & services produced within a country in a given period of time.
Final goods: intended for the end user
Intermediate goods: used as components or ingredients in the production of other goods
GDP only includes final goods – they already embody the value of the intermediate goods used in their production.
Gross Domestic Product (GDP) Is…
…the market value of all final goods & services produced within a country in a given period of time.
GDP includes tangible goods (like DVDs, mountain bikes, beer)
and intangible services (dry cleaning, concerts, cell phone service).
Gross Domestic Product (GDP) Is…
…the market value of all final goods & services produced within a country in a given period of time
GDP includes currently produced goods, not goods produced in the past.
Gross Domestic Product (GDP) Is…
…the market value of all final goods & services produced within a country in a given period of time.
GDP measures the value of production that occurs within a country’s borders, whether done by its own citizens or by foreigners located there.
Gross Domestic Product (GDP) Is…
…the market value of all final goods & services produced within a country in a given period of time.
usually a year or a quarter (3 months)
The Components of GDP
§Recall: GDP is total spending.
§Four components:
•Consumption (C)
•Investment (I)
•Government Purchases (G)
•Net Exports (NX)
§These components add up to GDP (denoted Y):
Y = C + I + G + NX
Consumption (C)
§is total spending by households on g&s.
§Note on housing costs:
•For renters, consumption includes rent payments.
•For homeowners, consumption includes the imputed rental value of the house, but not the purchase price or mortgage payments.
Investment (I)
§is total spending on goods that will be used in the future to produce more goods.
§includes spending on
•capital equipment (e.g., machines, tools)
•structures (factories, office buildings, houses)
•inventories (goods produced but not yet sold
Note: “Investment” does not mean the purchase of financial assets like stocks and bonds.
Government Purchases (G)
§is all spending on the g&s purchased by govt at the federal, state, and local levels.
§G excludes transfer payments, such as Social Security or unemployment insurance benefits.
They are not purchases of g&s.
Net Exports (NX)
§NX = exports – imports
§Exports represent foreign spending on the economy’s g&s.
§Imports are the portions of C, I, and G that are spent on g&s produced abroad.
§Adding up all the components of GDP gives:
Y = C + I + G + NX
Real versus Nominal GDP
§Inflation can distort economic variables like GDP, so we have two versions of GDP: One is corrected for inflation, the other is not.
§Nominal GDP values output using current prices. It is not corrected for inflation.
§Real GDP values output using the prices of a base year. Real GDP is corrected for inflation.
The GDP Deflator
§The GDP deflator is a measure of the overall level of prices.
GDP deflator = 100 x nominal/real GDP
One way to measure the economy’s inflation rate is to compute the percentage increase in the GDP deflator from one year to the next
§Real GDP per capita is the main indicator of the average person’s standard of living.
§But GDP is not a perfect measure of well-being.
§Macroeconomics: The study of the economy as a whole.
§We begin our study of macroeconomics with the country’s total income and expenditure.
§Gross Domestic Product (GDP) measures total income of everyone in the economy.
§GDP also measures total expenditure on the economy’s output of g&s.
For the economy as a whole, income equals expenditure, because every dollar a buyer spends is a dollar of income for the seller
The Circular-Flow Diagram
§a simple depiction of the macroeconomy
§illustrates GDP as spending, revenue, factor payments, and income
§Preliminaries:
•Factors of production are inputs like labor, land, capital, and natural resources.
•Factor payments are payments to the factors of production. (e.g., wages, rent)
What This Diagram Omits
§The government
•collects taxes
•purchases g&s
§The financial system
•matches savers’ supply of funds with borrowers’ demand for loans
§The foreign sector
•trades g&s, financial assets, and currencies with the country’s residents
Gross Domestic Product (GDP) Is
the market value of all final goods & services produced within a country in a given period of time.
Goods are valued at their market prices, so:
•all goods measured in the same units (e.g., dollars in the U.S.)
•Things that don’t have a market value are excluded, e.g., housework you do for yourself.
Gross Domestic Product (GDP) Is…
…the market value of all final goods & services produced within a country in a given period of time.
Final goods: intended for the end user
Intermediate goods: used as components or ingredients in the production of other goods
GDP only includes final goods – they already embody the value of the intermediate goods used in their production.
Gross Domestic Product (GDP) Is…
…the market value of all final goods & services produced within a country in a given period of time.
GDP includes tangible goods (like DVDs, mountain bikes, beer)
and intangible services (dry cleaning, concerts, cell phone service).
Gross Domestic Product (GDP) Is…
…the market value of all final goods & services produced within a country in a given period of time
GDP includes currently produced goods, not goods produced in the past.
Gross Domestic Product (GDP) Is…
…the market value of all final goods & services produced within a country in a given period of time.
GDP measures the value of production that occurs within a country’s borders, whether done by its own citizens or by foreigners located there.
Gross Domestic Product (GDP) Is…
…the market value of all final goods & services produced within a country in a given period of time.
usually a year or a quarter (3 months)
The Components of GDP
§Recall: GDP is total spending.
§Four components:
•Consumption (C)
•Investment (I)
•Government Purchases (G)
•Net Exports (NX)
§These components add up to GDP (denoted Y):
Y = C + I + G + NX
Consumption (C)
§is total spending by households on g&s.
§Note on housing costs:
•For renters, consumption includes rent payments.
•For homeowners, consumption includes the imputed rental value of the house, but not the purchase price or mortgage payments.
Investment (I)
§is total spending on goods that will be used in the future to produce more goods.
§includes spending on
•capital equipment (e.g., machines, tools)
•structures (factories, office buildings, houses)
•inventories (goods produced but not yet sold
Note: “Investment” does not mean the purchase of financial assets like stocks and bonds.
Government Purchases (G)
§is all spending on the g&s purchased by govt at the federal, state, and local levels.
§G excludes transfer payments, such as Social Security or unemployment insurance benefits.
They are not purchases of g&s.
Net Exports (NX)
§NX = exports – imports
§Exports represent foreign spending on the economy’s g&s.
§Imports are the portions of C, I, and G that are spent on g&s produced abroad.
§Adding up all the components of GDP gives:
Y = C + I + G + NX
Real versus Nominal GDP
§Inflation can distort economic variables like GDP, so we have two versions of GDP: One is corrected for inflation, the other is not.
§Nominal GDP values output using current prices. It is not corrected for inflation.
§Real GDP values output using the prices of a base year. Real GDP is corrected for inflation.
The GDP Deflator
§The GDP deflator is a measure of the overall level of prices.
GDP deflator = 100 x nominal/real GDP
One way to measure the economy’s inflation rate is to compute the percentage increase in the GDP deflator from one year to the next
§Real GDP per capita is the main indicator of the average person’s standard of living.
§But GDP is not a perfect measure of well-being.
Tuesday, August 25, 2009
Honors World History Unit I test Information
Unit I test covers chapters 1-4 in your textbook. Read over all your notes and make sure you have read the chapters.
Bonus Opportunity: The First ten (10) students to bring Mr. Robinson the answers to the following questions will receive 10 bonus points on the unit test:
1) Who was Hammurabi?
2) Who was Narmer?
3) Who was Sargon I?
Bonus Opportunity: The First ten (10) students to bring Mr. Robinson the answers to the following questions will receive 10 bonus points on the unit test:
1) Who was Hammurabi?
2) Who was Narmer?
3) Who was Sargon I?
AP and honors unit I test info
Don't forget your "CHEAT SHEETS" which should include (1) the shift factors for supply and demand, and (2)the factors affecting elasticity (with the formula from your last handout)!
Bonus opportunity: The first ten (10) students to bring Mr. Robinson the answer to the following question will receive 10 bonus points on their unit test:
1. What qualifies a resource as being scarce?
2. Explain the difference between a straight line and a concave PPC.
3. What causes some PPCs to be concave--what does it tell you about the opportunity costs?
Bonus opportunity: The first ten (10) students to bring Mr. Robinson the answer to the following question will receive 10 bonus points on their unit test:
1. What qualifies a resource as being scarce?
2. Explain the difference between a straight line and a concave PPC.
3. What causes some PPCs to be concave--what does it tell you about the opportunity costs?
Monday, August 24, 2009
Attention AP and Honors Econ Students!
Unit test 1 will be this Wednesday/Thursday! 36 multiple choice questions. There will be study sessions tomorrow (Tuesday) afternoon, Wednesday Morning and afternoon, and Thursday morning. Morning sessions are 7:30-8ish, Afternoon sessions are 3:25-4:00. Hope to see you at one of these sessions!
Friday, August 21, 2009
AP Macro Notes Unit 1 Part D
Demand
Market: an institution or mechanism, which brings together buyers ("demanders") and sellers ("suppliers") of particular goods and services.
Notice that the remainder of this unit assumes a perfectly competitive market. This means that there are a large number of independently acting buyers and sellers.
Three questions the market can answer. Any economic system should be able to answer these questions.
1) The market decides what will be produced.
2) The market decides how things will be produced?
3) The market decides for whom the products will be produced.
Demand-
The number of units of a good or service that a buyer
is willing (I am not willing to buy sweet potatoes)
and able (I am not able to buy a Porsche)
to buy at various prices. (a range of prices)
Quantity Demanded: the total amount of a commodity that all households wish to purchase. (These commodities must meet the definition of demand.)
Suppose you owned a C.D. player and c.d.'s cost $50 a piece. How many a year would you buy? Now suppose they cost $35 a piece. How many a year would you buy then? What if the cost was $20 dollars a year? Finally how many would you buy if they cost $5 a piece. Let’s look at this on a chart.
This is what we call a demand schedule. It is a table that shows how much consumers are willing and able to purchase at various prices.
You can have a demand schedule for an individual or a market. The market demand curve is just the summation of all the individual demand curves.
In looking at the table you will notice that as the price decreases quantity demanded (notice not your demand) increases. As price increases your quantity demanded for C.D.'S. This is called the law of demand.
The law of demand: as price increases your quantity demanded for a good or service will decrease and vice versa
This is what is called a DEMAND CURVE: A graph of a demand schedule: a demand curve is drawn on the assumption that everything except the commodity's own price is held constant (ceteris paribus); a change in any of the variables previously held constant will shift the demand curve to a new positions.
There are two main reasons for a downwardly sloping demand curve.
1) The income and substitution effect and
2) The Law of Diminishing Marginal Utility.
Income effect: The lower the price the more one can afford of a good without giving up other goods. If you make $20 per week you could buy 10 steaks at $2 per steak. If the price decreased to $1 per steak your income has in effect increased because your purchasing power has increased. You can now buy 20 steaks. At the same time, if the price of steaks went down you have more money to buy steaks and more money to buy other goods.
Substitution effect: at a lower price, you have the incentive to substitute the cheaper goods for similar goods, which are now relatively more expensive. If steaks now drop in price to $1 per pound you have an incentive to substitute steak for hamburger.
Utility: Satisfaction derived from consuming a commodity. Measured with “Utils”
TOTAL UTILITY: The total satisfaction from consuming some commodity
MARGINAL UTILITY: The change in satisfaction resulting from consuming a little more or a little less of a commodity
LAW OF DIMINISHING MARGINAL UTILITY: The utility any household derives from successive units of a particular commodity diminishes as total consumption of the commodity increases while the consumption of all other commodities remains constant
UTILITY THEORY OF DEMAND: Each household demands each good up to the point at which the marginal utility per dollar spent on it is the same as the marginal utility of the dollar spent on another good. When this condition is met, the household cannot shift a dollar of expenditures from one commodity to another and still increase its utility.
MUx = MUy
px py
This says that the household will allocate its expenditure so that the utility gained from the last dollar spent on a commodity is equal.
Change in Quantity Demanded
A decrease in price leads to an increase in Quantity Demanded
An increase in price leads to a decrease in Quantity Demanded
DETERMINANTS OF DEMAND:
When a determinant changes the demand curve shifts. The direction of the shift comes from the determinant that causes the change.
1) CONSUMERS’ INCOMES: a rise in average household income shifts the demand curve for most commodities to the right. This indicates that more will be demanded at each possible price. The direction of the shift depends on whether the good is inferior or normal (also called superior).
SUPERIOR GOODS (also called normal): those goods whose demand varies directly with income. (Examples: Steak, Luxury cars...)
Increase in income will lead to increase in demand for the normal good
Decrease in income will lead to decrease in demand for the normal good
INFERIOR GOODS: those goods whose demand varies inversely with income. (Ex: Hamburgers, used cars...)
2) CONSUMERS’ TASTES AND PREFERENCES: A change in tastes and preferences in favor of a commodity shifts the demand curve to the right more will be bought at each price. (C.d.'s change demand for records)
If people prefer more of a product you will get an increase in demand. If they prefer less of a product you will get a decrease in demand.
3) THE PRICE OF COMPLEMENTARY GOODS:
A fall in the price of a complementary commodity will shift a commodity’s demand curve to the right.
Example: A decrease in the price of baked potatoes means the demand curve for sour cream will increase. Notice this means more sour cream will be bought at each price.
Decrease in price of baked potatoes
Increase in demand for sour cream
An increase in the price of baked potatoes will cause demand curve for sour cream to decrease.
(Can you graph this?)
4) THE PRICE OF SUBSTITUTES:
A rise in the price of a substitute for a commodity shifts the demand curve for the commodity to the right.
Example: An increase in the price of margarine leads to an increase in the demand for butter.
Increase in price of margarine
Increase in demand for butter
A decrease in the price of beef leads to a decrease in demand for pork.
5) CHANGE IN POPULATION:
A rise in population will shift the demand curves for commodities to the right, indicating that more will be bought at each price. (THIS ALSO INCLUDES NEW MARKETS.) (Baby boom, Germany)
A decrease in population will shift the demand curve for the commodity to the left.
6) CONSUMER EXPECTATIONS ABOUT PRICE:
If consumers expect prices to rise in the near future the demand for goods will increase. (Increase in Demand)
If consumers expect prices to fall in the near future the demand for goods will decrease. (Decrease in Demand)
7) CONSUMER EXPECTATIONS ABOUT INCOME: If consumers expect overall incomes to fall the demand will decrease now.
(Ex: an announced increase in future sin taxes will increase demand for those goods before the tax goes in effect.)
When students are in their last year of college they often get job offers a few months before they graduate. They then run out and buy new clothes, a new car… because they expect higher wages.
SPEND TIME MAKING SURE YOU UNDERSTAND THE DIFFERENCE BETWEEN A CHANGE IN DEMAND AND A CHANGE IN QUANTITY DEMANDED.
Micro Unit 2 Lesson 2 & 3
SUPPLY: The number of units of a good or service that a seller is willing and able to sell at various prices.
SUPPLY SCHEDULE: A table that shows how much sellers are willing and able to supply at various prices.
LAW OF SUPPLY: As price of goods and services increase, sellers usually will want to supply more of those goods or services, and vice versa
A decrease in price leads to a decrease in Quantity Supplied.
A increase in price leads to a increase in Quantity Supplied.
DETERMINANTS OF SUPPLY
1) RESOURCE PRICES:
A rise in the price of inputs shifts the supply curve to the left indicating that less will be supplied at any given price.
A fall in the price of inputs shifts the supply curve to the right.
2) TECHNOLOGICAL CHANGE:
A decrease in production costs will increase the profits that can be earned at any given price of the commodity. This change shifts the supply curve to the right.
An increase in production costs will decrease the profits that can be earned at any given price of the commodity. This change shifts the supply curve to the left.
3) TAXES
An increase in the taxes will shift the supply curve to the left.
4) SUBSIDIES:
A subsidy is a payment to a company to produce (or not produce) something. This makes it cheaper for the company to produce so the supply curve shifts to the right.
5) EXPECTATIONS:
If the supplier expects future profits of their good to rise they will decrease the supply of the good now. This will shift the curve to the left.
If the supplier expects future profits of their good to fall they will increase the supply of the good now. This will shift the curve to the right.
6) NUMBER OF SELLERS:
An increase in the number of sellers will shift the supply curve for the product to the right.
The price at which the quantity demanded equals the quantity supplied is called the equilibrium price.
Notice that equilibrium is defined as a state of balance between opposing forces
Shortage:
In this case the producer has set the price too low. This means quantity demanded is much higher than quantity supplied.
This market is not in equilibrium. As sellers realize they can not keep the product on the shelves, they will raise the price. The market will work its way to equilibrium.
Surplus
In this case the producer has set the price too high. This means quantity demanded is much lower than quantity supplied.
This market is not in equilibrium. As sellers realize they are not selling as much of their product as they want at this price, they will lower the price. The market will work its way to equilibrium.
What happens to equilibrium when one of the determinants of demand change?
In this case a determinant of demand causes an increase in demand. This caused the price to increase and the quantity to increase.
What happens to equilibrium when the one of the determinants of supply change?
In this case a determinant of supply causes an increase in supply. This caused the price to decrease and the quantity to increase.
PRICE CEILING: The maximum legal price a seller may charge for a product or service.
This allows people to purchase G&S at a lower price than they would have otherwise been able to get it for. This allows many a chance to afford these things.
A price ceiling is below equilibrium point.
Notice that a ceiling keeps the price low and does not allow the market to drive the price up. This keeps buyers in the market that would have otherwise gotten out. At that price the quantity supplied and the quantity demanded cannot reach equilibrium. Hence a shortage.
PRICE FLOORS: Minimum prices fixed by government which are above equilibrium prices.
Ex: minimum wage, price floors of agriculture products.
Notice that the floor keeps the price above the equilibrium. Suppliers are willing to increase Qs at this artificial price while some demanders are driven out of the market. The net result is a surplus.
Consumer Surplus: the difference between the market price and the maximum price the consumer would pay to obtain that unit
Producer Surplus: the difference between the market price and the minimum price the producer would be willing to take for the product.
What happens when both supply and demand change?
In economics we do not deal with absolute terms. That means we do not really know how far the curves shift. This means that any time you shift both curves, either Quantity or Price will not be able to be determined. (Indeterminant)
With and increase in S and an increase in D Quantity increases and price is indeterminant.
With and decrease in S and an decrease in D Quantity decreases and price is indeterminant.
Decrease D and Increase supply means that Price decrease and Q is indeterminant.
Increase D and Decrease supply means that Price increase and Q is indeterminant.
Unit 2: Lesson 5 (Activities 20-23)
Discuss the subject of the slope of a line. How is it found? (rise over run) or the vertical axis divided by the horizontal axis. Notice that this is elasticity.
The responsiveness, or sensitivity, of consumers to a change in the price of a product is measured by the concept of Price elasticity of demand. Simply put, if consumers respond (relatively) to a change in price it is said to be elastic. If they do not respond (relatively) to a change in price the product is said to be inelastic.
There are four things that go into determining the elasticity of a demand curve.
1) Luxuries versus necessities. This is what we have been discussing. Your quantity demanded for heart surgery will not change much with the change in price.
Ex of elastic demands: Sports cars, riding lawn mowers, V.C.R's.
Ex of inelastic demands: food, electricity, health care.
2) Availability of substitutes. The greater the number of substitute the more elastic the product. If the price of beef went way up you would just switch to chicken. Therefore we can say that the demand curve for beef is very elastic. Its quantity demanded changes with a change in price.
elastic: c.d.'s, sugar,
inelastic: U.S. mail, local telephone company, gasoline
3) Proportion of income. The greater the price of a good relative to one's budget, the greater the elasticity of demand. If the price for candy bars increased 10% (or 4 cents) your quantity demanded would not change much. However if the price of a 100,000-dollar house increase 10% (or $10,000) your quantity demanded would most likely change a lot. A house would have an inelastic demand curve.
elastic: automobiles, houses, boats
inelastic: soft drinks, computer disks
4) Time: The longer the time period the more elastic a demand curve becomes. A person will not run out and buy a smaller car if the price of gas goes up. Instead they will wait until their older car wears out.
Have students do Activity 21. Answer any questions they have about elasticity.
Examples of Elastic curves: steak, ice cream, riding lawn mowers...
Examples of Inelastic curves: water, electricity, medicine...
Ask what happens when price decreases? Qd increases. The measurement of the responsiveness to this price change is elasticity.
What would you expect elasticity to be if the price decreased by 1% and Qd increased by 4%. (ELASTIC)
A one percent change in price leads to a smaller change in Qd is inelastic.
Percent Change: Old-New
Old
Ed= % change in quantity demanded of product X
% change in price of product X
This is the same as saying
Ed= change in quantity demanded of X / change in price of X
original quantity demanded of X original price of X
Midpoint Formula:
Ed = change in quantity demanded divided by change in price
sum of quantities/2 sum of prices/2
Because of the law of demand this number will always be negative. Ignore negatives.
This number tells us that a 1% change in price leads to a x percent change in Qd.
Less than one is inelastic. More than one is elastic. One is unitary.
(Notice that this will always yield a negative number. Ignore this.)
Demand is elastic if a given percentage change in price results in a larger percentage change in quantity demanded. ( a 4% increase in price results in a 8% decline in QD.)
Demand is inelastic if a given percentage change in price is accompanied by a relatively smaller change in quantity demanded. ( a 4% increase in price results in a 2% decline in Q.D.)
Market: an institution or mechanism, which brings together buyers ("demanders") and sellers ("suppliers") of particular goods and services.
Notice that the remainder of this unit assumes a perfectly competitive market. This means that there are a large number of independently acting buyers and sellers.
Three questions the market can answer. Any economic system should be able to answer these questions.
1) The market decides what will be produced.
2) The market decides how things will be produced?
3) The market decides for whom the products will be produced.
Demand-
The number of units of a good or service that a buyer
is willing (I am not willing to buy sweet potatoes)
and able (I am not able to buy a Porsche)
to buy at various prices. (a range of prices)
Quantity Demanded: the total amount of a commodity that all households wish to purchase. (These commodities must meet the definition of demand.)
Suppose you owned a C.D. player and c.d.'s cost $50 a piece. How many a year would you buy? Now suppose they cost $35 a piece. How many a year would you buy then? What if the cost was $20 dollars a year? Finally how many would you buy if they cost $5 a piece. Let’s look at this on a chart.
This is what we call a demand schedule. It is a table that shows how much consumers are willing and able to purchase at various prices.
You can have a demand schedule for an individual or a market. The market demand curve is just the summation of all the individual demand curves.
In looking at the table you will notice that as the price decreases quantity demanded (notice not your demand) increases. As price increases your quantity demanded for C.D.'S. This is called the law of demand.
The law of demand: as price increases your quantity demanded for a good or service will decrease and vice versa
This is what is called a DEMAND CURVE: A graph of a demand schedule: a demand curve is drawn on the assumption that everything except the commodity's own price is held constant (ceteris paribus); a change in any of the variables previously held constant will shift the demand curve to a new positions.
There are two main reasons for a downwardly sloping demand curve.
1) The income and substitution effect and
2) The Law of Diminishing Marginal Utility.
Income effect: The lower the price the more one can afford of a good without giving up other goods. If you make $20 per week you could buy 10 steaks at $2 per steak. If the price decreased to $1 per steak your income has in effect increased because your purchasing power has increased. You can now buy 20 steaks. At the same time, if the price of steaks went down you have more money to buy steaks and more money to buy other goods.
Substitution effect: at a lower price, you have the incentive to substitute the cheaper goods for similar goods, which are now relatively more expensive. If steaks now drop in price to $1 per pound you have an incentive to substitute steak for hamburger.
Utility: Satisfaction derived from consuming a commodity. Measured with “Utils”
TOTAL UTILITY: The total satisfaction from consuming some commodity
MARGINAL UTILITY: The change in satisfaction resulting from consuming a little more or a little less of a commodity
LAW OF DIMINISHING MARGINAL UTILITY: The utility any household derives from successive units of a particular commodity diminishes as total consumption of the commodity increases while the consumption of all other commodities remains constant
UTILITY THEORY OF DEMAND: Each household demands each good up to the point at which the marginal utility per dollar spent on it is the same as the marginal utility of the dollar spent on another good. When this condition is met, the household cannot shift a dollar of expenditures from one commodity to another and still increase its utility.
MUx = MUy
px py
This says that the household will allocate its expenditure so that the utility gained from the last dollar spent on a commodity is equal.
Change in Quantity Demanded
A decrease in price leads to an increase in Quantity Demanded
An increase in price leads to a decrease in Quantity Demanded
DETERMINANTS OF DEMAND:
When a determinant changes the demand curve shifts. The direction of the shift comes from the determinant that causes the change.
1) CONSUMERS’ INCOMES: a rise in average household income shifts the demand curve for most commodities to the right. This indicates that more will be demanded at each possible price. The direction of the shift depends on whether the good is inferior or normal (also called superior).
SUPERIOR GOODS (also called normal): those goods whose demand varies directly with income. (Examples: Steak, Luxury cars...)
Increase in income will lead to increase in demand for the normal good
Decrease in income will lead to decrease in demand for the normal good
INFERIOR GOODS: those goods whose demand varies inversely with income. (Ex: Hamburgers, used cars...)
2) CONSUMERS’ TASTES AND PREFERENCES: A change in tastes and preferences in favor of a commodity shifts the demand curve to the right more will be bought at each price. (C.d.'s change demand for records)
If people prefer more of a product you will get an increase in demand. If they prefer less of a product you will get a decrease in demand.
3) THE PRICE OF COMPLEMENTARY GOODS:
A fall in the price of a complementary commodity will shift a commodity’s demand curve to the right.
Example: A decrease in the price of baked potatoes means the demand curve for sour cream will increase. Notice this means more sour cream will be bought at each price.
Decrease in price of baked potatoes
Increase in demand for sour cream
An increase in the price of baked potatoes will cause demand curve for sour cream to decrease.
(Can you graph this?)
4) THE PRICE OF SUBSTITUTES:
A rise in the price of a substitute for a commodity shifts the demand curve for the commodity to the right.
Example: An increase in the price of margarine leads to an increase in the demand for butter.
Increase in price of margarine
Increase in demand for butter
A decrease in the price of beef leads to a decrease in demand for pork.
5) CHANGE IN POPULATION:
A rise in population will shift the demand curves for commodities to the right, indicating that more will be bought at each price. (THIS ALSO INCLUDES NEW MARKETS.) (Baby boom, Germany)
A decrease in population will shift the demand curve for the commodity to the left.
6) CONSUMER EXPECTATIONS ABOUT PRICE:
If consumers expect prices to rise in the near future the demand for goods will increase. (Increase in Demand)
If consumers expect prices to fall in the near future the demand for goods will decrease. (Decrease in Demand)
7) CONSUMER EXPECTATIONS ABOUT INCOME: If consumers expect overall incomes to fall the demand will decrease now.
(Ex: an announced increase in future sin taxes will increase demand for those goods before the tax goes in effect.)
When students are in their last year of college they often get job offers a few months before they graduate. They then run out and buy new clothes, a new car… because they expect higher wages.
SPEND TIME MAKING SURE YOU UNDERSTAND THE DIFFERENCE BETWEEN A CHANGE IN DEMAND AND A CHANGE IN QUANTITY DEMANDED.
Micro Unit 2 Lesson 2 & 3
SUPPLY: The number of units of a good or service that a seller is willing and able to sell at various prices.
SUPPLY SCHEDULE: A table that shows how much sellers are willing and able to supply at various prices.
LAW OF SUPPLY: As price of goods and services increase, sellers usually will want to supply more of those goods or services, and vice versa
A decrease in price leads to a decrease in Quantity Supplied.
A increase in price leads to a increase in Quantity Supplied.
DETERMINANTS OF SUPPLY
1) RESOURCE PRICES:
A rise in the price of inputs shifts the supply curve to the left indicating that less will be supplied at any given price.
A fall in the price of inputs shifts the supply curve to the right.
2) TECHNOLOGICAL CHANGE:
A decrease in production costs will increase the profits that can be earned at any given price of the commodity. This change shifts the supply curve to the right.
An increase in production costs will decrease the profits that can be earned at any given price of the commodity. This change shifts the supply curve to the left.
3) TAXES
An increase in the taxes will shift the supply curve to the left.
4) SUBSIDIES:
A subsidy is a payment to a company to produce (or not produce) something. This makes it cheaper for the company to produce so the supply curve shifts to the right.
5) EXPECTATIONS:
If the supplier expects future profits of their good to rise they will decrease the supply of the good now. This will shift the curve to the left.
If the supplier expects future profits of their good to fall they will increase the supply of the good now. This will shift the curve to the right.
6) NUMBER OF SELLERS:
An increase in the number of sellers will shift the supply curve for the product to the right.
The price at which the quantity demanded equals the quantity supplied is called the equilibrium price.
Notice that equilibrium is defined as a state of balance between opposing forces
Shortage:
In this case the producer has set the price too low. This means quantity demanded is much higher than quantity supplied.
This market is not in equilibrium. As sellers realize they can not keep the product on the shelves, they will raise the price. The market will work its way to equilibrium.
Surplus
In this case the producer has set the price too high. This means quantity demanded is much lower than quantity supplied.
This market is not in equilibrium. As sellers realize they are not selling as much of their product as they want at this price, they will lower the price. The market will work its way to equilibrium.
What happens to equilibrium when one of the determinants of demand change?
In this case a determinant of demand causes an increase in demand. This caused the price to increase and the quantity to increase.
What happens to equilibrium when the one of the determinants of supply change?
In this case a determinant of supply causes an increase in supply. This caused the price to decrease and the quantity to increase.
PRICE CEILING: The maximum legal price a seller may charge for a product or service.
This allows people to purchase G&S at a lower price than they would have otherwise been able to get it for. This allows many a chance to afford these things.
A price ceiling is below equilibrium point.
Notice that a ceiling keeps the price low and does not allow the market to drive the price up. This keeps buyers in the market that would have otherwise gotten out. At that price the quantity supplied and the quantity demanded cannot reach equilibrium. Hence a shortage.
PRICE FLOORS: Minimum prices fixed by government which are above equilibrium prices.
Ex: minimum wage, price floors of agriculture products.
Notice that the floor keeps the price above the equilibrium. Suppliers are willing to increase Qs at this artificial price while some demanders are driven out of the market. The net result is a surplus.
Consumer Surplus: the difference between the market price and the maximum price the consumer would pay to obtain that unit
Producer Surplus: the difference between the market price and the minimum price the producer would be willing to take for the product.
What happens when both supply and demand change?
In economics we do not deal with absolute terms. That means we do not really know how far the curves shift. This means that any time you shift both curves, either Quantity or Price will not be able to be determined. (Indeterminant)
With and increase in S and an increase in D Quantity increases and price is indeterminant.
With and decrease in S and an decrease in D Quantity decreases and price is indeterminant.
Decrease D and Increase supply means that Price decrease and Q is indeterminant.
Increase D and Decrease supply means that Price increase and Q is indeterminant.
Unit 2: Lesson 5 (Activities 20-23)
Discuss the subject of the slope of a line. How is it found? (rise over run) or the vertical axis divided by the horizontal axis. Notice that this is elasticity.
The responsiveness, or sensitivity, of consumers to a change in the price of a product is measured by the concept of Price elasticity of demand. Simply put, if consumers respond (relatively) to a change in price it is said to be elastic. If they do not respond (relatively) to a change in price the product is said to be inelastic.
There are four things that go into determining the elasticity of a demand curve.
1) Luxuries versus necessities. This is what we have been discussing. Your quantity demanded for heart surgery will not change much with the change in price.
Ex of elastic demands: Sports cars, riding lawn mowers, V.C.R's.
Ex of inelastic demands: food, electricity, health care.
2) Availability of substitutes. The greater the number of substitute the more elastic the product. If the price of beef went way up you would just switch to chicken. Therefore we can say that the demand curve for beef is very elastic. Its quantity demanded changes with a change in price.
elastic: c.d.'s, sugar,
inelastic: U.S. mail, local telephone company, gasoline
3) Proportion of income. The greater the price of a good relative to one's budget, the greater the elasticity of demand. If the price for candy bars increased 10% (or 4 cents) your quantity demanded would not change much. However if the price of a 100,000-dollar house increase 10% (or $10,000) your quantity demanded would most likely change a lot. A house would have an inelastic demand curve.
elastic: automobiles, houses, boats
inelastic: soft drinks, computer disks
4) Time: The longer the time period the more elastic a demand curve becomes. A person will not run out and buy a smaller car if the price of gas goes up. Instead they will wait until their older car wears out.
Have students do Activity 21. Answer any questions they have about elasticity.
Examples of Elastic curves: steak, ice cream, riding lawn mowers...
Examples of Inelastic curves: water, electricity, medicine...
Ask what happens when price decreases? Qd increases. The measurement of the responsiveness to this price change is elasticity.
What would you expect elasticity to be if the price decreased by 1% and Qd increased by 4%. (ELASTIC)
A one percent change in price leads to a smaller change in Qd is inelastic.
Percent Change: Old-New
Old
Ed= % change in quantity demanded of product X
% change in price of product X
This is the same as saying
Ed= change in quantity demanded of X / change in price of X
original quantity demanded of X original price of X
Midpoint Formula:
Ed = change in quantity demanded divided by change in price
sum of quantities/2 sum of prices/2
Because of the law of demand this number will always be negative. Ignore negatives.
This number tells us that a 1% change in price leads to a x percent change in Qd.
Less than one is inelastic. More than one is elastic. One is unitary.
(Notice that this will always yield a negative number. Ignore this.)
Demand is elastic if a given percentage change in price results in a larger percentage change in quantity demanded. ( a 4% increase in price results in a 8% decline in QD.)
Demand is inelastic if a given percentage change in price is accompanied by a relatively smaller change in quantity demanded. ( a 4% increase in price results in a 2% decline in Q.D.)
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