Goals of the U.S. Economy

(assignment #5)

Warm-up

If you had to choose between the following for a graduation present, which would you rather get: your grandpa’s old car, A 3-week trip to South America with your

closest friends Explain your choice. What factors went into

your decision? What did you gain from your choice and what did you lose from your choice? Why couldn’t you do both?

Cost & Scarcity

All choices involve a ‘Cost’ – you gain something, you lose something

Because there are limited resources (i.e. $$), we cannot always do or get everything – this forces us to make choices – this is called ‘Scarcity’

3 Macro Goals of the U.S. Economy

1. Price Stability – Low Inflation (3-4%)2. Full Employment/Low Unemployment (<5%)3. Economic Growth (GDP > 3-4%)

1. Price Stability Inflation: is the gradual increase of prices

over time

Let’s take a look at an example of inflation: How much was/is 1 adult movie ticket in:

1997? __________ 2002? __________ 2007? __________

You Can’t Fight Inflation…

Prices will continue to ALWAYS INCREASE However, the U.S. wants prices to increase

slowly from one year to the next.

Target Inflation Rate is 3-4%!

Would you and your friends still decide to go watch a movie on a Friday night for $20 a ticket?

Would you and your friends still decide to go watch a movie on a Friday night if the price of a ticket increased to $10.25?

If prices increase too rapidly, consumers will not want to spend money!

But if prices increase really slowly, it’s almost unnoticed, and consumer spending remains stable from year to year!

2. Full Employment/Low Unemployment

The U.S. wants the unemployment rate to be low to maximize productivity

You are considered to be unemployed if:You are actively looking for a jobAnd you are 16 years or older

Target Unemployment Rate is 5% or less.

3. Economic Growth Gross National Product

This is one way to measure economic growth from year to year.

Essentially, the U.S. wants the economy to grow every year

Target GNP Growth is 3-4%

REVIEWREVIEWThe 3 U.S. Macro Goals Are:The 3 U.S. Macro Goals Are:

Low Inflation=Low Inflation=StableStable PricesPrices Low Unemployment Rate=Low Unemployment Rate=FullFull EmploymentEmployment GNP Growth=GNP Growth=EconomicEconomic GrowthGrowth

Review Q’s:(write out the question and then answer it in your notes)

1. If the price of a bicycle was $100 last year, what is the highest price it can be this year to hit the target inflation rate?

2. My name is Sam. I am 19 years old. I really want a job. Is Sam considered to be unemployed. Why or why not???

3. Every year, the U.S. economy wants the nation to grow at a rate of ___-___%.

H.W.-Designing A FlyerH.W.-Designing A Flyer Imagine that you are a candidate running Imagine that you are a candidate running

for office. You recognize the importance of for office. You recognize the importance of keeping the economy stable so you keeping the economy stable so you promise that it is one of your main goals to promise that it is one of your main goals to adhere to the macro goals of the U.S. adhere to the macro goals of the U.S. economy. economy.

Design a Flyer that Illustrates the three Design a Flyer that Illustrates the three macro goals and shows that you mean macro goals and shows that you mean business.business.

Your Flyer Should Have:Your Flyer Should Have: Title:Title: U.S. Macro Economic Goals U.S. Macro Economic Goals Slogan Promising Economic ProsperitySlogan Promising Economic Prosperity Three IllustrationsThree Illustrations that convey each that convey each

economic goal of the U.S.: economic goal of the U.S.: – Low InflationLow Inflation– Low UnemploymentLow Unemployment– GNP GrowthGNP Growth

The Target %’sThe Target %’s for each goal for each goal– InflationInflation– UnemploymentUnemployment– GNP GrowthGNP Growth

(Flyer needs to be colored!!!)(Flyer needs to be colored!!!)