1. Unit 6: Macroeconomic Systems & the U. S
Unit 6: Macroeconomic Systems & the U.S. Economy Lesson 5: The Role of Government in a Mixed Economy
WARM UP
What does it mean to have a “mixed” economy? Brainstorm examples showing the role of the U.S. government plays in the economy.
ESSENTIAL QUESTIONS (WRITE DOWN!):
What role should governments play in the economy?
Lesson Vocabulary:
Federal Reserve Bank
Economic Stimulus
Discount rate
Monetary Policy
Reserve requirement
Loose
Fiscal Policy
tight
Federal Budget
Revenue
Money supply
Deficit
Surplus
Inflation
Lesson Skills:
I can evaluate the effect of monetary policy on the U.S. economy

2. Class Website: DEADLINES & HOMEWORK: Lesson One: PT 6.1 – Due May 8
Unit 6: Macroeconomic Systems & the U.S. Economy Lesson 5: The Role of Government in a Mixed Economy
Class Website:
DEADLINES & HOMEWORK:
Lesson One: PT 6.1 – Due May 8
Lesson Two: PT 6.2 Due May 11
Lesson Three: PT 6.3 Due May 13
Lesson Four: PT 6.4 Due May 15
Lesson Five: PT 6.5 due May 18
Review Packet: Due May 22nd
UNIT TEST: Friday, May 22nd
ALL Review Packets: May 28
FINAL EXAM: June 5
Lesson 6.5 Performance Task
Students make recommendations to the Federal Reserve

3. Quick quiz – Match the definitions on the left to the terms on the right.
Total value of all things produced and sold in an economy
When the economy contracts 6 months in a row
Series of economic expansions and contractions
Measures inflation
The reason the government can’t just print unlimited amounts of money
Consumer Price Index
Inflation
Gross Domestic Product
Business Cycle
Recession

4. Monetary Policy & Fiscal Policy
Monetary Policy – set by Federal Reserve Bank
Money supply
Interest rates
Fiscal Policy – set by congress
The Federal Budget
What we are spending money on
How we are raising money (TAXES!!!!)

5. Fiscal Policy Raise or lower taxes? Raise or lower spending?
What type of tax?
On whom?
Raise or lower spending?
On what?
FISCAL POLICY – in 15 MINUTES:
Read the “Money Matters” handout and use it to complete the note guide and activity provided.
Done early / extra time?
play the game “People’s Pie” on or
NOT DONE? Make it Homework & bring it done tomorrow

6. Government and the Economy
Read & Respond using Kahoot.it
Section 1: THE FEDERAL RESERVE (#1-3)
Section 2: THE FED & THE ECONOMY (#4-7)

7. Roles of the Government in the Economy
Control Inflation
Provide Public Goods and Services
Deal with Externalities
Regulate Market Activity (Ensure Product Safety, Proper Labels)
Maintain Competition

8. Inflation
Erodes the value of $$$$

9. Controlling Inflation

10. The Money Supply
Money supply = the total amount of $$$$ in the economy
The greater the money supply, the lower the value of each dollar

11. Read & Respond using Kahoot.it #8-9

12. Federal Reserve System (Fed)
Controls the U.S. money supply (the total amount of cash $$$$ in circulation)
The Fed acts as the Government’s bank
Textbook p. 529

13. Monetary Policy
Defined ~ government action to control the supply of money and the cost of borrowing money
Fed tries to control inflation by increasing or decreasing the supply of money
Textbook pp

14. Monetary Policy Tight Money Policy Fed reduces money supply
GOALS of Tight Money Policy:
Control inflation
Slow growth
Loose money policy
Fed INCREASES the money supply
GOALS of loose money policy:
Increase consumer spending
Reduce unemployment
End a recession
Textbook pp

15. How the Fed Controls the Money Supply
Sets the Discount Rate
interest rate that the FED charges banks for loans
Sets the reserve requirement
amount of money banks are required to keep in CASH; banks cannot invest, spend, or use this money to make loans
Buys & sells government bonds
Sort of like buying stock in the government

16. Monetary Policy Tools TIGHT MONEY POLICY LOOSE MONEY POLICY
Raise the discount rate
Higher interest = less borrowing
Raise the reserve requirement
More money held in cash = less available for banks to lend
SELL government bonds
Money removed from economy as consumers give it to the Fed in exchange for bonds
LOOSE MONEY POLICY
LOWER the discount rate
Lower interest = more borrowing & spending
LOWER the reserve requirement
Less money held in cash = more available for banks to lend out
BUY BACK government bonds
Fed gives consumers cash they can spend in exchange for bonds
Textbook pp

17. STIMULATING THE ECONOMY
The Federal Reserve can help STIMULATE the economy
(puts more money in circulation
gets consumers to spend more money
helps businesses)
HOW?
Lower the discount rate
Interest rates go down; this lowers the cost of borrowing and makes people more willing to spend money
Lower the reserve requirement
This lets banks put more money into the hands of consumers through loans
RISK: INFLATION

18. CONTROLING INFLATION HOW?:
The Federal Reserve limits and controls inflation
helps maintain stable prices
Maintains purchasing power & value of the dollar
maintains consumer confidence
HOW?:
raise the discount rate
Interest rates go UP; this raises the cost of borrowing and makes people less willing to borrow and spend money
Raise the reserve requirement
This requires banks to keep more money in cash, which means less is available for investments and consumer spending
RISK: slows economic growth; can lead to recession

19. Monetary Policy Questions
KAHOOT.it -- #10-15;

20. Monetary Policy Questions: PT 6.5
Why can rapid economic growth cause inflation?
You are Federal Reserve Chairman Ben Bernanke and have to decide how to help keep the U.S. economy on track. What monetary policy should the federal reserve bank adopt in the following scenarios:
Consumer spending is slow, unemployment has increased in six of the last seven months, and GDP has gone down in four of the last seven months.
The stock market is at an all-time high. Unemployment is down to 3%, and many new businesses are opening. The consumer price index shows significant increases in prices over the last nine months.
When done, continue by working on your Unit 6 review packets.

21. Work Time Review Packet (Due Jan. 5th; Bonus if done by 12/19):
Complete unit 5
Complete unit 6 through what we have covered so far
January 5th I will assign a grade for completion of EVERY review packet from the course:
Units 1, 2, 3, and 4 have already been completed & will be shared electronically but NOT reprinted/copied
If you never did them or lost them, you must do /redo them by Jan. 5
FIRST 17 PEOPLE TO show me a COMPLETE PACKET GET +10 BONUS POINTS ON IT

24. Division of Labor
Every worker does one small part of the big job

25. Specialization
Workers develop one specific skill, and do only that

26. What are the advantages of this for a company?

27. Advantages
More efficient
Pace of work can increase

28. How can companies make labor faster and cheaper?

29. Automation Replacing human beings with machines Less jobs
Lower production costs

30. Outsourcing American factories shut down & jobs go overseas
Other countries have cheaper labor and fewer regulations

31. How does this create a problem for the company?

32. purchasing power is reduced – People have less money to buy products