1. Extended Bellringer

2. Create a visual in which you outline the four types of unemployment Define unemployment What are the three phases of the business cycle? Between what percentage points is unemployment “normal”? Why is high unemployment dangerous to our economy?

3. SeasonalStructuralCyclicalFrictional Laid off for season, employment will resume at a future time Not counted in unemployment Unable to find employment because skills don’t match job market Laid off because company is having economic issues Choosing to be unemployed while searching for a new job

4. Define unemployment Employable yet unemployed; actively seeking employment What are the three phases of the business cycle? Recession, depression, recovery Between what percentage points is unemployment “normal”? 4-6% Why is high unemployment dangerous to our economy? Reduces demand across country which diminishes economic production which causes more job loss

5. Read the article that was published Friday Answer the following questions in your notebook (not being turned in)

6. How many jobs have been added in November? What is the unemployment rate right now? How do interest rates affect the economy? What sectors added the most employees? Why? “Many people without jobs have stopped looking for one and are no longer counted as unemployed” What kind of workers are these? “higher-priced services such as body waxing and facials” are normal goods or inferior goods?

7. Essential Learning: Economic Indicators

8. After the Great Depression, economists set out to find a way to predict if our economy would significantly downturn ever again There are three that you must know: Inflation Unemployment GDP (Gross Domestic Product)

9. Inflation: General increase in prices OR general decrease in purchase power Deflation: general decrease in prices or increase in purchase power Not a bad thing if kept within reason. Adam Smith claimed it was naturally occurring. Economists agree that if the rate of inflation stays between 1-3% (2-4) our economy is doing fine

10. Cost of a brand new car 1958: $3,000 Cost of a brand new car 2013: $20,000 Average cost of a home 1950: 15,000 Average cost of a home 2013: $215,000

11. Something you own will increase in value over time because of inflation (ex: homes). This increase in value evolves with the rate of inflation so you don’t lose money by owning a home Purchasing power: As inflation rises, a dollar is not worth as much. In other words, If you could buy 5 lollipops for $1 today, then next year you might only be able to buy 3. Your purchasing power (because of the value of a dollar) has decreased

12. The Bureau of Labor Statistics (BLS) is responsible for calculating inflation They use the Consumer Price Index (CPI) Price Index: measurement that shows how the average price of a group of goods has changed over time

13. There are 8 categories of goods that the BLS monitors: Food and Drink Housing Apparel and upkeep Transportation Medical Care Entertainment Education and communication Other Goods and services (haircuts, cosmetics, bank fees, etc…)

14. The costs of all the goods within these categories is monitored by BLS They compare the costs of these goods month- to-month and year-to-year to determine the rate of inflation Inflation Rate: percentage rate of change in price level over time

15. CPI for year A minus CPI for year B divided by the CPI for year B and multiplied by 100 CPI Year A – CPI Year B X 100 CPI Year B CPI Year A: 180 CPI Year B: 178

16. If inflation rate stays between 1-3% (2-4) we are in good shape If inflation rate exceeds 5% we may be in trouble and the economy is deemed “unpredictable” People will stop investing May stop using banks as often Employment may be jeopardized (lack of expansion) Hyperinflation: inflation that is out of control. 100-500% in a month.

17. Hyperinflation occurred in Germany after WWII

20. There are three theories you need to know: Quantity Theory Demand-Pull Theory Cost-Push Theory

21. This theory states that inflation occurs when there is too much money in the economy This is why we have the Federal Reserve – to regulate how much money is printed This is why we can’t just “print more money” because we are in debt If US dollars were everywhere and easy to come by they wouldn’t have value (hyperinflation or excessive inflation)

22. This theory states that inflation occurs when demand for goods and services exceeds existing supplies Example: During a war, the government has a huge demand for certain goods (ie: steel). This heavy demand makes the items more valuable and thus more expensive Remember supply and demand?! Determinants! When demand is high, prices go higher! As prices go higher, supply will increase!

23. This theory states that inflation occurs when producers raise prices to meet increased costs The home prices have gone up because all the building materials have gone up (wood, metals, plastics) Cost of fast food increases because cost of food itself increases and wages of workers increase

24. Purchasing power is reduced Income Most salaried careers offer a 2% annual increase to keep up with inflation Most hourly paying jobs do not. If you do not get a raise, inflation will outpace your earnings Interest rates The interest you earn from investments decreases by the inflation rate because now the money you earn is worth less

25. What is cost-push inflation? What is quantity inflation? What is demand-pull inflation? Within what percentage points is inflation normal? What is super crazy high inflation called? Define inflation

26. What is cost-push inflation? Resource costs go up, cost pushed onto consumer – costs rise What is quantity inflation? There is too much money in economy which devalues currency What is demand-pull inflation? There is a shortage of something, so prices are raised Within what percentage points is inflation normal? 1-3% What is super crazy high inflation called? Hyperinflation Define inflation General increase in prices