2. Economic Basics
• study of production & distribution of
goods & services
-micro=small consumer/ind. Markets
-macro=big picture/whole econ
• principle of scarcity
-how to satisfy unlimited wants
with limited means
• factors of production
-land; capital; labor; entrepreneurs
• opportunity cost
-cost of an economic decision
3. Trends
• recession
-part of business cycle
-occurs with drop in spending
-try to get people to spend
-increase money supply
-increase gov’t spending
-lower taxes
• depression
-not part of cycle
-long term downturn in activity
-high unemployment
-price deflation
• stagflation
-combo “stagnation” & “inflation”
-high inflation
-high unemployment
4. Deficit v. Debt
• deficit
-difference between $ gov’t takes in
and what gov’t spends each year
• debt
-accumulated deficits
-at interest
-currently $16.3 trillion
5. Approaches
• Supply-Side Economics
-tax cuts for the wealthy
-increased investments
stimulate economic growth
• Keynesian Economics
-government spending to
stimulate economy
-New Deal
6. World War II
• Fed. gov spends $350 billion
-twice total of all US history
-40% taxes/rest bonds
• work force –grows 20%
• GNP (total goods & services)
-doubles ‘39-’45
Post War Problems
• Inflation
-few consumer goods
-$140 billion in savings
• Strikes for higher wages
-no raises during war
-overtime less available
7. Righting the Ship
• GI Bill – loans
-business, home & college
• Taft-Hartley Act
-anti-union
-passed over veto
•‘45-’60 – US 6% of world pop.
-prod. 50% of manu. goods
• military-industrial complex
-permanent war economy
