Unwrap the objectives Factual: Define Inflation and Deflation Conceptual: Explain how Fiscal Polices impact the economy Communicative: Illustrate the consequences of inflation and deflation on the middle class

Agenda Unwrap objectives Lecture Fill in notes Political cartoon analysis 3,2,1 Reflection on video

Essential Question Explain how Fiscal Policies of the united states affect American citizens

The Federal Reserve System Unit 4 B

Fiscal Policy Part 1

Fiscal Policy Changes in taxes or government spending with the hope to impact the national economy Fiscal policy is used by the government when it feels that a correction needs to be made in the economy Proactively, it is a change made to keep something from happening Reactively, is a change that is made because something has already happened

Political Cartoon Analysis According to the political cartoon, who are the tax cuts helping? Is the illustrator of the cartoon in favor of tax cuts? What evidence do you have to support this? What symbolism do you see in the cartoon?

Cutting taxes One Fiscal Policy is to cut taxes The idea is that cutting taxes will put more money in the hands of people and business. They will then spend the money by purchasing more goods causing the companies to hire more workers. When more people are working, pay goes up and more purchases are made and more taxes are paid The risk is that if the people that get to keep more money are afraid to spend it, then the government will lose revenue and the tax will return higher than ever

Increasing government spending Another Fiscal Policy is increasing government spending The idea is that if the government spends more money, it will create new jobs. The new jobs will increase tax revenues (income tax collected) Workers with these new government jobs will then go and spend their money on goods and services which will improve the economy. The Risk – the increase in government spending will lead to higher debt which will lead to a raise in taxes which will lead to less spending.

Inflation/Deflation Inflation - a general increase in prices and fall in the purchasing value of money because to much money is in circulation. Deflation - reduction of the general level of prices in an economy by limiting the amount of money available. In general, Inflation is more dangerous to the economy because it reduces the buying power of workers. This can lead to layoffs if companies stop making profits, which only makes things worse. Inflation is particularly hard on people that live on fixed incomes. Incomes that are not expected to increase. Most retired people live on fixed incomes.

3,2,1 Reflection Please list on your activity sheet 3 things that you learned from the video 2 things from the video that you found interesting 1 question that you have on the topic of the video The video can be found @ https://www.youtube.com/watch?v=TKBFpWGo qvA

Managing the Money supply The Federal Reserve has government authority to manage the amount of money in circulation to prevent deflation or inflation as part of the governments over all fiscal policy Money supply refers to the amount of money in circulation at any given point. When the Fed meets, they can set policy to manage the amount of money in circulation When purchasing power is too low, they collect money from their branches and have it destroyed When too little money is flowing through the economy, they order more money to be printed

Unwrap the objectives Factual: Describe the Federal Reserve System Conceptual: Illustrate the Functions of the Federal Reserve System Communicative: Justify the creation of the Federal Reserve system

Agenda Unwrap the objectives You Decide (Answer a few short questions based on your own opinion) Lecture Fill in Notes Vocabulary check (Cross word with vocabulary for end of year vocabulary test)

Essential Question Describe the Federal Reserve System, it’s functions, and Its Role in the United States economy

Functions and Role of the Federal Reserve System Part 2

MONEY Anything that people can agree to give value to can be money Currency includes both paper and coin money Currency usually only has value because people agree that it does A ten dollar bill only costs a few cents to produce Through history, different things have been used as money Shells, Coins, and furs have all be used as money

You Decide What problems can come from the types of money listed below? Why would they not be safe? Shells Coins Furs

The function of money Money has three functions: Medium of exchange – this means we can trade money for goods or services A store of value – this means that we can hold our wealth in the form of money until we are ready to use it A Measure of value – the price of goods and services tells us what value they have

You Decide What items can you think of that could be or should be used as money in an apocalypse? Why? When is it important for currency to be backed up by something?

Financial Institutions Commercial Banks – are institutions that offer full banking services Savings and loans associations (S&Ls) – Institutions that traditionally loan money for people to buy house. S&Ls also provide savings accounts Credit Unions – They work on a not-for-profit basis, where the goal is to offer great rates for members of a select group. These three Financial institutions all serve similar roles They connect people that want to save money with people that want to borrow money

Keeping the financial system safe Banks make up a key role in the financial system and need to be protected so that the people that use them are protected When you deposited money into your checking account, the bank puts that money to work by loaning it out to someone until you come to get it. If too many people come to get their money back from a bank (bank run), then the bank will not have the money to give it all back to the people that get to the bank last. The federal reserve was created to protect the nations financial systems.

The Federal Reserve System Created to prevent runs on the bank by managing the financial system They do this through regulations and by having the ability to set a rate of interest for banks that borrow from the fed. The fed also serves as the bank for the federal government in three ways: It holds the governments money used to make payments and to buy goods The fed sells government bonds so that the government can borrow money The fed issues the nations currency The fed does not print money or create coins this is done by other departments but they do so on the command of the fed

Changing the supply of money The fed determines the amount of money that is in circulation. When more is needed, they order more to be printed When too much is available, they order old money to be collected and destroyed