Government H.S.A. Workshop #9

1. Government H.S.A. Workshop #9 Fiscal Policy and Economics Missy LaCroix Annie Caldwell

2. Outcomes • TWBAT review the correlation between the Core Learning Goals and the H.S.A. for the Fiscal Policy topics in the Public Policy Unit. • TWBAT determine best practices for teaching fiscal policy topic from the Public Policy Unit.

3. Agenda Welcome and Introductions Inflation Motivation Activity Review of Fiscal Policy Topics Covered on the H.S.A. Indicator Overview Business Cycle Indicator Overview Business Cycle and Mocha Activity Fiscal Policy and Indicator Overview Fiscal Policy and Indicator Scenario Activity Helpful Resources for Teaching Economics Session Debrief Questions/Reflections and Evaluation

4. Inflation Motivational Game The Scenario: We live in the “Land of the Hungry”. This year our GDP was a box of candy. In our mixed market economy, we auction off our products. Each of you for the last year has earned $1.

5. Year 2 Since everyone did not have enough to buy soda we are raising your income from $1 to $5!!!

6. Year 2 • In year 2 income increased to 5 times what it was in year 1, however GDP (candy) stayed the same. • What happened to price? • Were people better off?

7. Year 3 Since people are still unable to buy products, income is increasing again from $5 to $10.

8. Year 3 What happened to price? Was the population better off? Did more inflation occur? Why?

9. Money and Inflation Money gets its real value from its purchasing power or what it can buy. The health of the economy is measured not by how much people earn, but by how much their money buys. The different kinds and amount of goods and services your money lets you buy is called your standard of living. You as a person want to earn as much money as you can. The national economy can actually have too much money. When the amount of money grows faster than the speed goods and services are produced the result is inflation. In the activity we just did the candy or soda represented the goods and services you were able to buy. By the third round it took more money to buy the same amount as you bought in the first round. So how can inflation affect you? Say you want a new pair of jeans, for examples. Last year, they cost $20, but this year the same pair costs $23. If the prices of most other goods have also risen, then you are probably dealing with inflation. There is too much money in circulation. Prices have inflated and your $20 buys less than it did. People have to earn more money just to stay even.

10. VSC and Assessment Limits for Fiscal Policy

11. VSC and Assessment Limits for Fiscal Policy, Economic Indicators, and the Business Cycle 4.0 Content Standard:ECONOMICS – Students will develop economic reasoning to understand the historical development and current status of economic principles, institutions, and processes needed to be effective citizens, consumers, and workers participating in local communities, the nation, and the world. CLG Expectation 4.1 - The student will demonstrate an understanding of economic principles, institutions, and processes required to formulate government policy.

12. VSC and Assessment Limits for Fiscal Policy, Economic Indicators, and the Business Cycle

13. VSC and Assessment Limits for Fiscal Policy, Economic Indicators, and the Business Cycle • Describe the role of the United States Congress and the Maryland General Assembly in developing fiscal policy and the approval of budgets • Describe how national, state, and local legislative bodies use taxing and spending to influence the economy • Evaluate the effectiveness of fiscal policy in achieving economic growth and employment, such as tax incentives and changes in spending (Unit 3) • Analyze the role of the executive on the national, state and local level in the budgetary process • Determine how the executive branch influences economic performance by using the tools of fiscal policy including increasing and decreasing taxes and tariffs and/or spending (Unit 4) • Describe how the Federal ReserveSystem uses the three tools of monetary policy, including open market operations, changes in the discount (interest) rate and changes in the reserve requirements to influence the economy • Describe the effectiveness of monetary policy in achieving economic growth, full employment and price stability • Explain how the Consumer Price Index (CPI), the unemployment rate and the Gross Domestic Product (GDP) measure economic performance • Explain how economic instability, including periods of growth and recession, is a part of the free enterprise system • Explain how inflation reduces buying power and may contribute to a slow down in the economy (Unit 6)

14. Economic Indicator Overview • 4.1.4h - Explain how the Consumer Price Index (CPI), the unemployment rate and the Gross Domestic Product (GDP) measure economic performance

15. Economic Indicators

16. Economic Indicators

17. Business Cycle & Indicator Activity

18. Business Cycle Overview • 4.1.4i - Explain how economic instability, including periods of growth and recession, is a part of the free enterprise system

19. The Business Cycle Peak Expansion Contraction Trough

20. The Business Cycle A period of economic growth as measured by a rise in GDP. More jobs are created and business prospers. There are larger incomes, increased spending and investment, and higher profits. Consumers go into debt to acquire big-ticket items, like new cars, appliances, and other durable goods. Expansion

21. The Business Cycle Peak When the GDP stops rising, the economy has reached its peak - the height of an economic expansion. Labor is in short supply because factories are at full production. The banking system has become fully loaned up and interest rates on loans increase, making it harder to get credit. Consumers reach their limit and their demand for goods decrease. Factory output slows as consumer demand cools off.

22. The Business Cycle After reaching its peak, the economy enters a period of contraction, an economic decline marked by falling GDP. Unemployment usually increases. Consumer confidence in the economy weakens. Unemployment begins to rise as factories begin to lay off workers. If the contraction continues for six months, the economy is said to be in a recession (when GDP declines for six months in a row). Contraction

23. The Business Cycle When the economy has bottomed out, it has reached the lowest point. When the economy is in the trough, it is not growing. Factory production is down; therefore unemployment is at its highest. Consumers are not buying and prices for many goods and services have fallen. Trough

24. The Business Cycle and Economic Indicator Application

25. Business Cycle and Mocha Extension One extension activity for the business cycle is to have students watch Kingdom of Mocha and mark events in the cartoon that relate to the different parts of the Business Cycle.

26. Fiscal Policy Overview 4.1.4 a-e • Describe the role of the United States Congress and the Maryland General Assembly in developing fiscal policy and the approval of budgets • Describe how national, state, and local legislative bodies use taxing and spending to influence the economy • Evaluate the effectiveness of fiscal policy in achieving economic growth and employment, such as tax incentives and changes in spending (Unit 3) • Analyze the role of the executive on the national, state and local level in the budgetary process • Determine how the executive branch influences economic performance by using the tools of fiscal policy including increasing and decreasing taxes and tariffs and/or spending (Unit 4)

27. Fiscal Policy 2013 Interactive Budget

28. The Budget

29. Fiscal Policy in Action • As a group analyze the scenario you have been provided. • Indentify: 1. The economic indicator(s) related to the scenario (GDP, CPI, Unemployment) and what they tell you about the economy. 2. The current state of our economy on the business cycle based on the economic indicators. 3. A recommendation for using fiscal policy to “fix” the economy. 4. A prediction of the impact of your recommendation.

30. Show What You Know • Prepare a presentation for the class offering your recommendation to “fix” the economy. • Include: • An illustration of the location on the business cycle • The related indicators • Recommendation • Predicted Effect on the economy

31. Helpful Resources for Teaching Economics Helpful Websites for Teaching Economics Handout What Students Need to Know About Economics on the H.S.A. Handout

32. Reflection Questions • What major concepts do students need to know about fiscal policy for the H.S.A.? • What are some engaging ways that you can teach students about fiscal policy?

33. Questions? • Feel free to email us with any questions. • Annie Caldwell – acaldwell@bcps.org • Missy LaCroix – mlacroix@bcps.org

34. Evaluation