• Warm-up: Write down 3 words that describe unemployment, and 3 words that describe poverty

• Now list 2 people that you know, their job and 3 of their job functions. Tell me what could happen to get rid of their position and one thing that could happen to increase the need for that position.

Ch 13: Economic Challenges

13.1 Unemployment

• In the late 1990’s, early 2000’s unemployment in the US hit record_____. It is not just a personal issue – it is an issue for the _______ economy.

• Economists look at ____________ to determine the health of the economy.

lows

national

unemployment

• Frictional Unemployment– When people take ____ to find a job

• Seasonal Unemployment– When industries slow or shut down for a _______

• Structural Unemployment– When workers’ skills ____________ the jobs that are

available (farming, industrial, technological)

time

season

do not match

• Cyclical Unemployment

– Rises during economic downturns and falls when economy improves (Great Depression)

– During _________ of the business cycle the demand for goods and services drops.

– This then causes the _______ for labor to drop.

– The worst was during the Great Depression – when __ of workers were laid off.

recessions

demand

¼

• FULL Employment– Level reached when there is __________

employment

• Underemployment– Working at a job for which they are

___________, or working part-time when they desire full-time work

no cyclical

over-qualified

• Some people give up hope of finding work. These _________ workers have stopped searching for employment.

discouraged

Activity:Create a Character

• Create a fictional worker. Write a paragraph explaining each person’s employment situation. Include why these workers are discouraged or underemployed, their current financial situation, and their view of the future.– Discouraged, underemployed, frictional,

seasonal, structural or cyclical (groups)

Ch 13.3 Inflation

• As inflation rises, every dollar will buy a _______ percentage of a good. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year.

Most countries' central banks will try to sustain an inflation rate of _____

smaller

2-3%.

• During World War II, you could buy a loaf of bread for $0.15, a new car for less than $1,000 and an average house for around $5,000. In the twenty-first century, bread, cars, houses and just about everything else cost more. A lot more. Clearly, we've experienced a significant amount of inflation over the last 60 years.

When inflation surged to _________ levels in the mid- to late-1970s, Americans declared it public enemy No.1. Since then, public anxiety has abated along with inflation, but people remain ________ of inflation, even at the minimal levels we've seen over the past few years. Although it's common knowledge that prices go up over time, the general population doesn't understand the forces behind inflation.

double-digit

fearful

INFLATION

• Inflation is a general ________ in prices.

• CPI: ____________________ measures the price of a standard group of goods meant to represent the “market basket”

increase

Consumer Price Index

Market Basket• The CPI market basket is developed from detailed expenditure

information provided by families and individuals on what they actually ________. For the current CPI, this information was collected from the Consumer Expenditure Surveys for 2005 and 2006. In each of those years, about 7,000 families from around the country provided information each quarter on their spending habits in the interview survey. To collect information on frequently purchased items, such as food and personal care products, another 7,000 families in each of these years kept diaries listing everything they bought during a 2-week period.

• Over the 2 year period, then, expenditure information came from approximately 28,000 weekly diaries and 60,000 quarterly interviews used to determine the importance, or weight, of the more than ________________ in the CPI index structure.

bought

200 item categories

• The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:

• Food and beverages (milk, coffee, chicken, wine, snacks)

• Housing (rent, fuel oil, furniture)

• Apparel (shirts, sweaters, jewelry)

• Transportation (cars, airline fares, gas, car insurance)

• Medical care (prescriptions, medical supplies, eye care)

• Recreation (tv, toys, pets, sports equipment)

• Education and communication (tuition, postate, telephone, computers)

• Other goods and services (tobacco, haircuts, funeral expenses)

Market Basket Cont.

• The CPI _________ include investment items, such as stocks, bonds, real estate, and life insurance. (These items relate to savings and not to day-to-day consumption expenses.)

• About every _______ the items in the market basket are ________ to account for shifting consumer buying habits.

does not

10 yearsupdated

Types of Inflation

• Core inflation rate

• Hyperinflation – out of control – worst type

Causes of Inflation

• Quantity Theory: ______________• Demand-pull: demand exceeds _______

thus forcing prices up.• Cost-push: when producers raise price to

meet increased cost (primarily led by wage increase)– Wage-price spiral (p. 342) A feedback loop in

which wage hikes due to inflation cause companies to raise prices, and those rising prices lead to demand for further wage increases, perpetuating the cycle.

too much money

supplies

The opposite = today

Effects of Inflation

• Purchasing Power __________

• People on fixed income have less. – ___________: does not increase when prices

go up

• Savers may __________ if the inflation rate is higher than their banks interest rate

decreases

Fixed income

lose money

Ch 13.3 Poverty

POVERTY

• ______________: income level below which income is insufficient to support a family

• Cause of Poverty: Education, location, race, gender, change in family structure, economic shift.

Poverty threshold

Income Inequality

• The highest ___ of the population have ___ times more than the lower 1/5

• The ___________ illustrates the distribution of income in the economy.

• The lowest 20% of households received 3.6% of the nations income

• The lowest 40% (2/5) received 12.5%• The wealthiest 1/5 of US households have

____

1/513

Lorenz curve

50%

Lorenz Curve

Income Gap Cont.

• Differences in skills and education

• Inheritances

Anti-Poverty Policies

• Enterprise Zones: create jobs/opportunity in rundown areas – ________ inner cities or rural areas

• Employment Assistance: _____________ and grants for education

• Welfare

revitalize

minimum wage

• Suppose you are in charge of creating an antipoverty program for your state. Create a list of at least 5 proposals for your program.

• Make a flyer for one of your programs & present