1. OGT Economics

2. Economic Systems

3. Economic Systems

4. Economic Systems

5. Economic Systems

6. Examples In a State of the Nation Address, the president of Country A announces new directions for Country A. He states that beginning in one month, he will instruct all of the nation’s factories to increase production levels by 7%. He will raise the base wage for all workers by 12%. Finally, he states that only families of military personnel will be able to buy new automobiles for 1 year Command

7. Examples In a State of the Nation Address, the King of country B makes some statements about the economy in B. First, he says that he has put together a new council to keep an eye on large corporations who might take advantage of consumers. The Council will have the power to prosecute offenders. Secondly, he asks farmers to increase their production of corn if their resources allow it. Thirdly, he encourages consumers to spend their money for the good of the country Mixed

8. United States Government’s Role in Economy What is Trade? Buying, selling, and exchanging of goods between and within countries Exports, Imports, Trade imbalance Which imbalance hurts economy more? More imports than exports.

9. United States Government’s Role in Economy What is a tariff? How can tariffs protect economy? Quota vs. Blockade/Embargo Protectionism – using tariffs, quotas, blockades to protect domestic markets Free Trade – remove all obstacles to trading. Each nation will learn to specialize in what it’s good at

10. What Happens to…… Sales of Toyota (Japan) cars in U.S. when a tariff is placed on foreign cars imported to U.S. Sales of Ford (Michigan) cars when the same tariff is placed. Cuban Cigar industry in Cuba when the U.S. lifts its embargo on all good from Cuba (free trade) Domestic Cigar industry in U.S. when the embargo is lifted (free trade)

11. United States Government’s Role in Economy Ultimate Goal – provide economic growth and Stability Maximum employment, maximum production Limit Inflation – Rising Prices Ways to Do This Provide Goods to Public – Military Defense Redistribute Income – Income tax is graduated, wealthier pay taxes and higher rates, which funds programs for less fortunate.

12. U.S. Fiscal Policy Federal government can influence the economy by its spending, taxes, and borrowing They want to stabilize the economy, bring it up when its down, and bring it down when its up (inflation). Times are good: worry about inflation Reduced Demand will do what to prices? Government will Consumers will have Less money and Tax more Spend less lower Spend less Avoids Inflation

13. U.S. Fiscal Policy In a Recession…. Obama Increasing Spending Times are bad: worry about depression Increased Demand will do what? Government will Consumers will have More money and Spend more Tax less Create Jobs Spend more Or Lose jobs

14. U.S. Monetary Policy Federal government can influence the economy by controlling the money supply Federal Reserve System Regulates through Interest Rates and Bank Reserve Requirements They want to stabilize the economy, bring it up when its down, and bring it down when its up (inflation). Times are good: worry about inflation – REDUCE MONEY SUPPLY Consumers are able to: The Fed will Businesses will Raise Rates Raise Requirements Borrow More Or Buy More or Buy Less Borrow Less

15. U.S. Monetary Policy In a depression or recession Times are tough: worry about growing economy – INCREASE MONEY SUPPLY Consumers are able to: The Fed will Businesses will Lower Rates Lower Requirements Borrow More Buy More Or Borrow Less Or Buy Less

16. What would the Government Do? THE ECONOMY INFLATION INFLATION C A RECESSION RECESSION B DEPRESSION Monetary Policy Who Controls Monetary Policy? What would they do at Point C? Point A?

17. What would the Government Do? THE ECONOMY INFLATION INFLATION C A RECESSION RECESSION B DEPRESSION Fiscal Policy What actions would we be talking about controlling? What would they do at Point A? Point C?