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Unit 3Macroeconomics: Institutions
Ch 8 – Employment, Labor, and Wages
Ch 9 – Sources of Gov.’t Revenue
Ch 10 – Gov.’t Spending
Ch 11 – Money and Banking
Ch 12 – Financial Markets SKIP
• Macroeconomics • The area of economics that deals w/ the ________ as a whole, including inflation, _____________, economic growth, gross domestic product, + the distribution of _________.
• Macro = _______
Ch 8 – Employment, Labor, and Wages
• Labor • The civilian labor force – includes men + women _____ + older who are either working or ______________ for a job.
• It excludes members of the ____________, the prison population, other ______________ people or those who are not _______ employment.
• Unions • Associations of _______ formed to bargain for better working conditions + _____________.
• Approximately ____% of American labor is represented by unions.
• Unions tend to be concentrated in ____________ areas + increasingly in among gov.’t workers.
• Have ___________________________ (negotiations b/w workers + employers).
• If an agreement cannot be reached, workers may go on strike (refusing to ______). Striking workers may picket (protest ___________ the employer’s business). As a final result, striking workers may organize a boycott (a mass refusal to _____________ from their employers).
End Section 1
• Collective ___________
• Occurs when representatives from both _________ + ___________ meet. Labor is represented by a group of __________ union officials.
• Requires __________ from both sides. If a compromise cannot be reached b/w the 2 sides, other methods of negotiation are available:
• Mediation – involves bringing in a ____________ ____ whose job it is to find a solution acceptable to both sides. The mediator’s solution is ______ _________.
• Arbitration – involves bringing in a ___________ whose decision is ___________.
• Fact-finding – involves bringing in a neutral 3rd party to __________ about a dispute + present a solution which is ______________.
• Beneficial if both sides have presented _______ _______ or if one side doesn’t trust the other.
• Injunction (_____________ not to act) or seizure (temporary gov.’t ___________).
• ____________________ – may involve a simple public appeal or firing federal workers.
End Section 2
• Categories of _______
• Unskilled labor – people who work primarily w/ their hands b/c they _________ + skills required for other tasks.
• Basically anyone, regardless of ___________, could walk in off the street + easily take over their jobs.
• Usually earn the _________________.• Ex: Fruit pickers
• Semiskilled labor – workers w/ enough mechanical abilities/skills to _________________ that require a _____________ of training.
• Ex: Lawnmowers• Skilled labor – workers who are able to operate
_______________ + can perform their tasks w/ little _____________.
• Ex: Carpenters• Professional labor – workers w/ the ___________ of
knowledge-based education + managerial skills.• Usually earn the ________________.• Doctors
• ______ determination • The traditional theory of wage determination states that _______ + ________ for a worker’s skills/services determine their wages.
• High demand + low supply = ______ wages• Low demand + high supply = ______ wages
• The equilibrium wage rate is the wage rate that leaves neither a ______ nor _________ in the labor market.
• The theory of negotiated wages states that organized labor’s ____________________ is a factor that helps determine wages.
• Seniority is the ______________ a person has been on the job + in some jobs, the more seniority a person has the _________ his/her wages are.
• The signaling theory states that employers are willing to pay more for people w/ certificates, diplomas, ________, + other “signals” of ____________________.
• The ability of a _________ to attract labor also determines wages at the _______________.
End Section 3
P
QD1
S1
• _______ in labor
• For every _____ a man makes, a woman averages about ___ cents. This is known as the gender wage gap.
• Over _____ of the gap is due to the differences in skills + ___________.
• Ex: Many women leave the labor force to start a ______.
• Less than ____ of the gap is due to the uneven distribution of men + women in certain ___________ (meaning more men tend to be employed in _____ level positions).
• Over ____ of the gap is due to ______________.
• The ERA (Equal Rights Amendment) would have assured that women enjoyed the same rights + protections _______________. It passed in Congress in 1972, but Conservatives feared that it disrupt America’s _________________ + launched a Stop-ERA campaign. The amendment was ___________ by enough states.
• Some anti-___________ laws have been passed however.
• In addition, women + minorities have greater difficulties in getting raises + __________. This invisible barrier that obstructs their ______________ up the corporate ladder is known as the glass ceiling.
Ratified --- RedRatified, then rescinded ---- Yellow Ratified in 1 house of legislature --- Green Not ratified --- Blue
• Minimum wage • The _____________ that can be paid ________ to most workers.
• Currently it is set at $___ per hr.• Intended to protect workers from
being _________. However, it is controversial. Some argue that employers cannot afford as many employees + so fewer people get _______.
Does this lead to a surplus or shortage of workers?
_________
End Section 4
Ch 9 – Sources of Gov.’t Revenue• Taxes • Taxes impact the _____________ in by affecting:
• ____________________ – the higher the taxes on resources, the fewer people can afford them + it can __________________.
• _________________ – can discourage consumers from ___________ certain products.
• Ex: The sin tax (a relatively ______ designed to raise revenue + __________) on items such as tobacco + alcohol.
• The nation’s productivity + _________• Also, the burden of taxes is sometimes transferred onto
__________________ besides the one being taxed.• If a company is charged a higher tax it may the cost
of its goods (passing cost onto __________), take it out of profits (passing cost onto ________), or lay off workers (passing cost onto ____________).
• Criteria for _______ taxes
1. ______ – fairness. But what is fair?
2. _________ – laws should be written so that the tax payer + tax collector can understand them.
• Good ex: Sales taxes• Bad ex: The income tax
3. ___________ – relatively easy to administer + reasonably successful at generating _________.
• Good ex: Income tax• Bad ex: Toll booths on
highways
• Principles of taxation
• The benefit principle of taxation says that those who ______ from gov.’t goods/services should pay in _____________ to the benefits they receive.
• Ex: toll booth taxes, gas taxes, etc…• 2 disadvantages:
1. Those who can ___________ to pay taxes are usually the ones who benefit most from gov.’t services.
2. Benefits are often hard to ________.• The ability to pay principle of taxation says that
people should be taxed according to their _______ _____ regardless of the _________ received.
• Ex: income tax• 2 bases for:
1. Benefits are often hard to measure.2. Assumes that people w/ higher
incomes suffer _______________ paying taxes than people w/ lower incomes.
• Types of taxes
• Proportional tax or “flat tax” – everyone pays the same ________________ (not the same amount) regardless of income.
• Ex: If flat tax was applied to income taxes everyone would have to pay 20%. So someone who made $20,000 would pay $_______ + someone who made $200,000 would pay $________.
• Progressive tax – people who make more pay a ________________________ of their income.
• Ex: Current income tax• Regressive tax – people who make less pay
a _____________________ of their income.• Ex: Sales tax
End Section 1
• ________ taxes• The most important taxes the national gov.’t collects are the __________ tax (over 35% of its revenue), _____________ taxes (about 33%), + ___________________ taxes (about 7.5%).
• P. 232• Excise tax – taxes on the ___________ or sale of
selected items like gas, alcohol, coal, etc…• Property tax – taxes levied on either real _______
(land, buildings, etc) or on ______________ (cars, stocks, bank accounts, etc).
• Estate tax – (or “_____ tax”) taxes the gov.’t levies on the transfer of property when a person dies.
• Gift tax – taxes on donations of $ or wealth PAID BY THE PERSON _______ THE GIFT. This is to prevent people from giving away their wealth shortly before __________.
• Customs duties or tariffs – taxes on __________.• User fees – charges on the use of _____/_______
such as gov.’t land.
End Section 2
• Sources of revenue for _____ gov.’ts
• Sources of revenue for _____ gov.’ts
• $ from the __________ gov.’t (over 22%).• __________ (20% - except for the states w/ no
sales tax).• State ________________ + insurance (18%).• State _______ tax (15% - except for the states
w/o an income tax).
• $ from the ________ + _______ gov.’ts (35%).• _______ taxes such as real estate, cars, bank
accounts, buildings, etc… (24%).• ________ + state-owned liquor stores (8%).• ______ tax (6%).
End Section 3
• The flat tax • A ______________ tax on individual income.
• Gained widespread attention during the election of 1996 as a way to “___” the current tax system.
• Advantages:
1. ___________
2. Eliminates many ____________
3. Reduces the need for many __________, tax preparers, + a good portion of the ___
• Disadvantages:
1. Removes many ________________ in the current tax code (ex: you can get deductions for certain donations)
2. Would benefit the ________ more + hurt ________ classes
3. No one knows _______ would be needed to raise the current revenue.
End Section 4
Ch 10 – Gov.’t Spending• Spending • In 2003, federal, state, + local gov.’ts
collected nearly $__________. That averaged out to about $10,300 per capita (per _________).
• The public sector refers to the part of the _________ made up of federal, state, + local _________.
• The private sector refers to the part of the _________ made up of private ___________ + privately-owned ____________.
Are they part of the public or private sector?Are they part of the public or private sector?
______________ 1. Employees at TL Hanna High School
______________ 2. Employees at Microsoft
______________ 3. The President of the United States
______________ 4. Police
______________ 5. The veterinarian at Pet-Smart
______________ 6. Bankers
______________ 7. A soldier
______________ 8. Your family physician
• Types of gov.’t __________
• __________ of goods/services:• Tanks, ships, weapons, space
shuttles, land, roads, offices, ________, prisons, employees, etc…
• Transfer payments (a payment for which the gov.’t ________________ goods nor services):
• ______________, welfare, unemployment, Medicare, grants-in-aid (transfer payment from one ________ of gov.’t to another), etc…
• _______ of gov.’t spending
• Due to its __________, the public sector has a huge impact on people’s lives:
1. _______________________ – military spending encourages private
industries that make weapons, agricultural price supports encourage
more people to stay on farms, etc…
2. ___________________ – the amount of $ received by lower
income families through programs such as Medicare, the closing of a military base causes the surrounding community to lose $, etc…
3. _________________________ – public education vs. private education, military vs. private hospitals, etc… End Section 1
• Federal gov.’t spending
• The federal budget is an __________ outlining proposed $ that will be _______ + _______.
• About 2/3 of the federal budget is mandatory spending (spending authorized ________ that doesn’t have to be approved by Congress every year – ex: Social Security, Medicare, etc…).
• About 1/3 of the federal budget is discretionary spending (programs that must receive Congressional ____________ every year – ex: the military, welfare, stimulus $, etc…).
• The fiscal year is a 12 month financial planning period.
• The federal gov.’t’s fiscal year is from ____________________.
• A budget deficit is when the gov.’t spends _______ $ than it takes in.
• A budget surplus is when the gov.’t takes in _______ $ than it spends.
• Major spending by the federal gov.’t
• _______________ (over 20%)• _______________ (18%)• _______________ (15%) – includes
retirement benefits for federal + military employees, food programs for low income families, subsidized housing, Medicare, etc…
• Interest on the ___________ (varies)
End Section 2
• State spending
• Unlike the ______ gov.’t, some states have enacted a balanced budget amendment in their state constitutions which requires that annual spending not _______________.
• So in other words, by law, some states cannot ___________ than they take in.
• If one of these states experience an unanticipated in revenue, they must immediately ______________.
• Major spending by state gov.’ts
• Major spending by local gov.’ts
• $ to ______ gov.’ts (30%)• Public ________ (18%)• Higher _________ (10%)• Highways (6%)
• _______ Education (36%)• Utilities (10%)• __________ (5%)• Gov.’t administration (5%)
End Section 3
• Deficit spending
• Occurs when the gov.’t spends more than it collects.• The federal gov.’t _________ runs a deficit. Why?
• _______, to stimulate the economy (Ex: Stimulus $ of 2008).
• _________, b/c of an unexpected event (Ex: WWII).• Unplanned, b/c the gov.’t doesn’t ______ as much
$ as it anticipated (Budgets are based on estimates).
• The deficit is the loss of $ ___________. The federal debt (or national debt) is the TOTAL amount of $ the federal gov.’t has borrowed to pay off the debt.
So how does the gov.’t _________ $?By selling bonds to the public (a formal
contract to repay borrowed $ + _______ on the borrowed $ in the future).
• One of the reasons the gov.’t has ________ balancing the budget is b/c much of the budget is spent on entitlements (or entitlement programs) which are programs or benefits using established __________________ to provide health, nutritional, or income supplements to individuals.
• Ex: Social security, Medicare, welfare, unemployment, etc… End Section 4
Ch 11 – Money and Banking• __________ of $ • Money is _______________ that serves as a
medium of exchange, a measure of value, + a store of value.
1. Medium of exchange – something ________ by all parties as ________ for goods/services (Ex: gold, silver, salt, seashells, etc…).
2. Measure of value – a common denominator that can be used to express ______ in terms that most ___________ __________ (Ex: price tags, to base the value of something by the weight of something else, etc…).
3. Store of value – the property that allows _________________ to be saved until needed (putting $ in the bank, stockpiling gold etc…).
• Characteristics of $
• _______ – easy to _____ from one place to another.
• __________ – won’t disintegrate or fall apart after a ______ period of time.
• _______ – can be divided into ______ units.• Limited ___________ – if too much exists or
can be made, it loses its _______.
End Section 1
• The gold standard
• A monetary standard under which the basic __________ unit is equal to, + can be ____________ for, a specific amount of gold.
• In 1900, the US went on the gold standard w/ an ounce of gold being worth $20.67. Although people continued to use paper $, they could at any time exchange the $ for a set amount of gold at the ___________.
• Many _______________ were also on the gold standard.• Advantages:
• People feel more _______ if they can convert their $ into gold.
• It is supposed to prevent the gov.’t from _____________ ______ $ (thus, preventing inflation). In reality, countries that go on the gold standard never have enough ______.
• Disadvantages:• The gold stock may not grow fast enough to keep pace
w/ a growing economy + thereby __________ economic growth.
• If too many people demand gold all at once, there can be a gold ___________.
• The price of gold can ___________________ over time.• A gov.’t looks inept if it isn’t able to accurately manage
the gold/$ supply.• The US went off the gold standard in 1934 during the ________
___________, when people didn’t trust in the value of paper $ + began stockpiling gold. Fearing there would be a ________ ________ of gold, the gov.’t ended the gold standard.
End Section 2
• The Fed (Federal Reserve System)
Ben Bernanke
Chairman of the Fed
• The _____________ of the US.• A central bank is a bank that can _____ $
to other banks.• It issues our _______________.• B/c its member banks __________ in the
Fed, the gov.’t does not own it. However the gov.’t does _______ it. The president appoints (w/ Congress’s approval) the Chairman of the Fed.
• The FDIC • When the _________________ in 1929, many people lost their fortunes + immediately ran to the banks to withdraw their $. Many banks ___ _________ + closed permanently. Countless people lost __________.
• To re-establish people’s _____________ in the banking system, Congress passes The Banking Act of 1933 which created the Federal Deposit Insurance Corporation (FDIC) which protects _________________ in the event of a bank closure (up to $______ per individual per account type at each bank – temporary increase – will go back down to $_________ in 2014).
• _____________ still happen occasionally. If a bank appears to be in danger of collapsing, the FDIC can ______ the bank + either ____ it to a bigger bank or ____________ it + pay off the depositors. This is all done in secrecy to prevent _________________. The primary reason for bank closures is poor ___________.
End Section 3