Essential Questions

1. Essential Standard 1.00:Understand economic activities of individuals and families.Objective 1.01 Understand responsible earning, spending, saving, and borrowing.

2. Essential Questions • What are four basic economic activities of consumers? • What does it mean to be responsible when earning, spending, saving, and borrowing?

3. Consumer Economic Activities What are the four basic economic activities of consumers? • EARNING • SPENDING • BORROWING • SAVING • When these activities are handled responsibly, individuals are more likely to achieve financial security and personal satisfaction. • How will you handle these four activities? • How financially successful will you be?

4. Consumer Economic Activities Market Economy- consumers respond to the economy as they wish in earning, spending, saving and borrowing behaviors • SPENDING • EARNING Other names for Market economy-capitalism, free enterprise system, private enterprise system • SAVING • BORROWING

5. EARNING • Earning --- gaining money by working, owning a business, or receiving investment returns. • Money gained from earning is called earnings. • A person’s career choices, ability to find employment, and ability to advance determine his or her expected earnings and standard of living. • Factors affecting career choices, ability to find employment, and ability to advance are shown in following slides • Standard of Living the style of living that a person can afford, according to income level is directly affected by the career choices made by consumers.

6. Being a Responsible Consumer • Responsible earninginvolves realizing that career choices greatly affect lifetime earnings and standard of living and considering these factors when making career choices. • Brainstorm other words or phrases describing Responsibility . • Write your list.

7. Being a Responsible Consumer • Other words describing Responsibility • Answerable • Accountable • Duty • Reliable • Dependable • Other phrases describing Responsibility • Capable of making moral or rational decisions • Legally or ethical accountable • Having to pay debts • Good judgment • Being trusted

8. CAREER CHOICE FACTORS AFFECTING EARNINGS What are you considering as a career? What type of work will you do? How much will you earn? What will the location of your work look like? How will your career choice affect your standard of living?

9. WHAT CAREER CHOICE FACTORS AFFECT ABILITY TO FIND EMPLOYMENT? • What employment skills do you have? • What economic conditions such as recession, recovery, or prosperity affect job search? • Is there a lot of competition for jobs in your field? • Does your experience affect ability to find employment? • How does your employment skills affect your chances of getting the job?

10. WHAT CAREER CHOICE FACTORS AFFECT ADVANCEMENT? • How do economic conditions affect ability to advance? • Is there room in this job for advancement? • How does my job performance affect advancement? • What trends or opportunities can be identified? • How does my education affect advancement?

11. Earnings Review What three things generate earnings/money? 1. 2. 3. Does Money Grow on Trees? video link "I want money"

12. What Generates Money? • Working at a job • Owning a business that makes profit • Income producing investments

13. SPENDING • Spending --- using money to purchase goods and services. • The way a person spends money determines the value received and influences the economy. Responsible spending includes • Researching and planning • Purchasing in advance • Making wise choices in light of opportunity costs and trade-offs that apply Opportunity costs- the highest valued alternative that is given up when a choice is made When you have a limited amount of money, how do you spend your money?

14. BENEFITS OF SPENDING • Each purchase contributes to the demand for the product or service purchased. • Spending keeps economy growing • Spending encourages prosperity (peak) in economic cycle • video link reuters recession Economic fluctuation -ups and downs in the business cycle

15. BENEFITS OF SPENDING • Consumer dollars vote! (DEMAND) • Affects prices of goods and services • Affects what producers make (SUPPLY) • Affects what retailers stock on shelves for consumers • Name 2 products that are no longer produced due to low demand. • Name 2 new products that are available due to increased demand. • Are goods marked as clearance usually high or low demand? • Do you eat green catsup? Can you find it on the grocery shelf ? • Responsible spending includes researching and planning purchases in advance and making wise choices in light of opportunity costs and trade offs that apply.

16. Gross Domestic Product (GDP) • Dollar value of all the final goods and servicesproduced by a nation in one year • Frequently used as measurement to determine how well an economy is performing

17. Gross Domestic Product GOODS + SERVICES link to gdp per capita by country

18. SCARCITY • Have you heard news about scarcity in these areas? What other items that are scarce affect your life? • Time • Only 24 Hours in Day • Money • Food • Water • Jobs • Positions on ball team • Attractive girls/guys in your class • # of acceptances for the college of your choice • Law of Scarcity: An economic system cannot produce all goods and services that consumers want, and Most consumers do not have the resources to purchase everything they want Choices must be made about how limited resources are used Did you make any choices today due to scarcity?

19. Trade-offs and Opportunity Costs • When making a choice, other alternatives must be sacrificed • The highest-valued alternative that must be given up when a choice is made is the opportunity costof the choice. • The choice of one item while giving up another is called a trade-off. • Lisa only has $1 after buying a ticket to the basketball game. Which item would you choose if you were Lisa? • Box of popcorn • Candy bar • Soda • 50/50 raffle ticket • Give $ to friend needing just one more $ to buy game ticket • Save for later purchase opportunity cost video link

20. SAVING • Saving --- putting aside money for later use • Money may be “saved” in a bank account or in a wallet • The form of savings used determines the financial return • Saving in your wallet does not earn interest on your money! • “Later Uses” for Savings • Emergencies • Recurring expenses • Future purchases • Financial goals • Retirement • Name three items you would be willing to save up $ to purchase

21. BENEFITS OF SAVING • Benefits of Saving • Provide money for future purchases • Can be used to earn income • Produce a healthy economy • Increase personal financial security • Provide growth opportunities for business ventures • Purchasing durable goods is considered a form of savings • Responsible savingmeans forming the habit of saving regularly and finding forms of saving that yield high returns Examples of Durable goods- Bricks, jewelry, refrigerators, cars, mobile phones, household goods, consumer electronics, sports equipment Consumables- opposite of durable goods, Also called soft or non-durable goods Used up in a short period of time

22. SAVING Link: barney's car • Will the three items you would save for change based on your life stage? • LIFE STAGES • 13-19 TEENAGE • 20-30 SINGLE YOUNG ADULT • 20-30 YOUNG ADULT WITH FAMILY • 30-50 MIDDLE AGE • 50-65 PRE-RETIREMENT • 65+ RETIREMENT

23. Why Save? • Financial Security • Having enough savings to be able to withstand crises and emergencies • Provide for needs • Provide for wants • What is difference between needs & wants? • How much do you think you will need in savings to be “financially secure”? • Savings Rate • Amount of money people save in an economy • Americans are saving less and less money while spending more on credit link to savings rate by country comparison

24. BORROWING • Borrowing --- obtaining money, goods, or services at present in exchange for the promise of future payment . • “Buy now, pay later” aka CREDIT • Borrowing means spending future income and includes buying on credit. • Having “good credit” depends on one’s willingness and ability to pay back what is owed when it is due. • Credit purchases are more costly than cash purchases if not paid back quickly. • Responsible borrowing means borrowing only what can be paid back when due. • Wise use of credit can help some individuals raise their standard of living by extending their buying power.

25. BORROWING • Reasons for Borrowing • Major purchases • Emergencies • Convenience • Prepare for future goals • Take advantage of good sales/offers • Examples of Borrowing • Buying with a credit card • Buying car on an installment loan • Payday loans • Cash advances • Layaway purchases • Home mortgage loans

26. Interest • Interest Rate -Percentage of amount borrowed to be ADDED to the amount owed and paid back • Interest rates are stated as an Annual Percentage Rate (APR) • Formula to calculate interest is I=PRT • I= Interest • P=Principal amount borrowed • R=Interest Rate • T=Time of loan in years Example: • Beth bought her first car by borrowing $10,000 at 6% APR from SunTrust Bank. Interest for one year is $600. ($600 =$10,000 x 1 year x 6%) (using formula I=PRT) • If she pays off the loan in one year she will pay back $10,000 PLUS $600 interest.

27. Interest and Inflation • Inflation • A general increase in the cost of goods and services (rising prices) • Inflationary period • time when demand for goods/services is high and prices continue to rise Example of an Online Interest Rate Calculator