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What is Economics?.

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Presentation on theme: "What is Economics?."— Presentation transcript:

1 What is Economics?

2 What is Economics? The study of choice under the conditions of scarcity. Microeconomics-study of the behavior and decision making by small units such as individuals and businesses. Macroeconomics-study of the behavior and decision making of large units such as governments.


4 Scarcity~ The concept that there are limited resources for
Scarcity and Shortage Scarcity~ The concept that there are limited resources for unlimited wants Shortage~ A condition that occurs when producers will not or cannot offer goods and services at the current price. What is the difference between scarcity and shortage?

5 FOP ACTIVITY In small groups you will complete the following: PART I
Terms and Concepts Definition of the term factors of production List and define the “four” factors of production PART II Scavenger Hunt Take four index cards. Label them with each of the FOP Walk around and find examples of each in the creation of “education”.

6 Chapter 1, Section 2: “Choosing is Refusing”
Trade-offs- All the alternatives that we give up whenever we choose one course of action over another. Individuals Businesses Governments Opportunity Cost- The most desirable alternative given up as the result of a decision. The next best thing!! Thinking at the Margin- Deciding whether to do or use one additional unit of some resource. Discussion Topic: “There is no such thing as a free lunch.”

7 The Government Trade-Off: GUNS OR BUTTER?

8 Our Role in Funding the Government
We authorize the government, through the Constitution and elected officials, to raise money through taxes. Must originate in the House (Ways and Means) House-Senate-President Taxation is the primary way that the government collects money. Without revenue, or income from taxes, government would not be able to provide goods and services.

9 Power and Limits of Taxation
The Power to Tax Article 1, Section 8, Clause 1 of the Constitution grants Congress the power to tax. The Sixteenth Amendment (introduced 1909, ratified 1913) gives Congress the power to levy an income tax. Great Depression Social Security Act (1935) and the Internal Revenue Service (IRS) Administrative agency of the Dept. of Treasury Headquarters in DC, 7 regional offices Main functions are to collect income taxes and enforce tax laws WWII Limits on the Power to Tax 1. The purpose of the tax must be for “the common defense and general welfare.” 2. Federal taxes must be the same in every state. 3. The government may not tax exports.

10 Tax Activity Person A (Low-Income)- $15,000
Person B (Middle-Income)- $75,000 Person C (High-Income)- $225,000

11 Types of Taxes Social Security Taxes Medicare Taxes Unemployment Taxes
This program is funded by the Federal Insurance Contributions Act (FICA). Most of the FICA taxes you pay go to Social Security, or Old-Age, Survivors, and Disability Insurance (OASDI) Medicare Taxes Medicare is a national health insurance program that helps pay for health care for people over 65 and for people with certain disabilities. Medicare is also funded by FICA taxes. Unemployment Taxes Unemployment taxes are collected by both federal and state governments. Workers can collect “unemployment compensation” if they are laid off through no fault of their own and if they are actively looking for work. Other Taxes Federal Income Taxes Excise Taxes Estate Taxes Gift Taxes Import Taxes

12 Tax Structures Proportional Taxes Progressive Taxes Regressive Taxes
A proportional tax is a tax for which the percentage of income paid in taxes remains the same for all income levels. Progressive Taxes A progressive tax is a tax for which the percent of income paid in taxes increases as income increases. Regressive Taxes A regressive tax is a tax for which the percentage of income paid in taxes decreases as income increases.

13 What is a “good” tax? Simplicity Economy Certainty Equity
Tax laws should be simple and easily understood. Economy Government administrators should be able to collect taxes without spending too much time or money. Certainty It should be clear to the taxpayer when the tax is due, how much is due, and how it should be paid. Equity The tax system should be fair, so that no one bears too much or too little of the tax burden.

14 How the Money Comes In: Revenue

15 The Politics of Tax and Spend
Hannity on the Budget Federal Spending: “Guns or Butter” Zinn on US Militarism FY 2010 Introduced Obama Defends Budget Ron Paul on Government Spending

16 Spending Categories Discretionary Spending Money that government
planners can choose how to spend. Defense Education Training Environmental cleanup National parks and monuments Scientific research Mandatory Spending Money that lawmakers are required by law to spend Interest payments on the national debt “Entitlement” programs (Social Security, Medicare and Medicaid) Makes up almost 2/3 of federal budget Problem because Congress and the President cannot control much of spending.


18 The Appropriations Process
House Senate Appropriation Subcommittee Reports a Bill Sent to President Appropriation Subcommittee Reports a Bill Full Committee Approves Full Committee Approves Sent to the Floor Conference Committee Meets to Resolve Differences Sent to the Floor

19 Where the Money Goes: Spending


21 Guns or Butter? Analyze the federal spending pie chart on page 371.
Consider the difference between mandatory and discretionary spending as described on pages Create your own federal spending pie chart based on your priorities. You may not “leave it the same”…think critically about what you think is the best way to spend our tax dollars! Explain the rationale for your spending choices. Present your poster and defend your choices.


23 What can we learn from looking at a Production Possibilities Graph/Frontier?
Trade-Offs/Cost- Alternative given up as a result of a decision. Every point on the PPF indicates a cost in on item or another. Efficiency- Making the best possible use of resources (any point on the PPF) Underutilization/Inefficiency- Misuse or waste of resources (any point inside the PPF) Growth- Expanding an economy’s ability to produce (shift of the entire curve to the right or any point to the right of the PPF) ~New Technology/ Innovation ~Increase in Resources

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