Goals of the U.S. Economy (assignment #5)

Warm-up If you had to choose between the following for a graduation present, which would you rather get: your grandpa’s old car, A 3-week trip to South America with your closest friends Explain your choice. What factors went into your decision? What did you gain from your choice and what did you lose from your choice? Why couldn’t you do both?

Cost & Scarcity All choices involve a ‘Cost’ – you gain something, you lose something Because there are limited resources (i.e. $$), we cannot always do or get everything – this forces us to make choices – this is called ‘Scarcity’

3 Macro Goals of the U.S. Economy 1. Price Stability – Low Inflation (3-4%) 2. Full Employment/Low Unemployment (<5%) 3. Economic Growth (GDP > 3-4%)

1. Price Stability Inflation: is the gradual increase of prices over time Let’s take a look at an example of inflation:  How much was/is 1 adult movie ticket in: 1997? __________ 2002? __________ 2007? __________

You Can’t Fight Inflation… Prices will continue to ALWAYS INCREASE However, the U.S. wants prices to increase slowly from one year to the next. Target Inflation Rate is 3-4%!

Would you and your friends still decide to go watch a movie on a Friday night for $20 a ticket? Would you and your friends still decide to go watch a movie on a Friday night if the price of a ticket increased to $10.25?

If prices increase too rapidly, consumers will not want to spend money! But if prices increase really slowly, it’s almost unnoticed, and consumer spending remains stable from year to year!

2.Full Employment/ Low Unemployment The U.S. wants the unemployment rate to be low to maximize productivity You are considered to be unemployed if: You are actively looking for a job And you are 16 years or older Target Unemployment Rate is 5% or less.

3. Economic Growth  Gross National Product This is one way to measure economic growth from year to year. Essentially, the U.S. wants the economy to grow every year Target GNP Growth is 3-4%

REVIEW The 3 U.S. Macro Goals Are:  Low Inflation=Stable Prices  Low Unemployment Rate=Full Employment  GNP Growth=Economic Growth

Review Q’s: (write out the question and then answer it in your notes) 1.If the price of a bicycle was $100 last year, what is the highest price it can be this year to hit the target inflation rate? 2.My name is Sam. I am 19 years old. I really want a job. Is Sam considered to be unemployed. Why or why not??? 3.Every year, the U.S. economy wants the nation to grow at a rate of ___-___%.

H.W.-Designing A Flyer Imagine that you are a candidate running for office. You recognize the importance of keeping the economy stable so you promise that it is one of your main goals to adhere to the macro goals of the U.S. economy. Imagine that you are a candidate running for office. You recognize the importance of keeping the economy stable so you promise that it is one of your main goals to adhere to the macro goals of the U.S. economy. Design a Flyer that Illustrates the three macro goals and shows that you mean business. Design a Flyer that Illustrates the three macro goals and shows that you mean business.

Your Flyer Should Have:  Title: U.S. Macro Economic Goals  Slogan Promising Economic Prosperity  Three Illustrations that convey each economic goal of the U.S.: –Low Inflation –Low Unemployment –GNP Growth  The Target %’s for each goal –Inflation –Unemployment –GNP Growth (Flyer needs to be colored!!!)