BASIC ECONOMICS

                                                                                                            Grade Level: 10-12

                                                                                                  Length of Course: Year

                                                                                                                           Credit: 1

                                                                                                            Prerequisite: None

COURSE DESCRIPTION

This is a survey course covering economics from Micro to Macro. The course begins with a basic vocabulary and continues to build on each successive unit. A free market economy demands the understanding of supply and demand, the invisible hand, inflation, leading economic indicators and consumer confidence. We also study the role of the government, labor unions and the impact of the Federal Reserve. The stock market will be covered in depth using Internet technology, each student building a mock portfolio and tracking their assets.

In addition to the big picture we will get even bigger as we study international trade, trade agreements, tariffs, spheres of influence and immigration. We also narrow our focus on small business, entrepreneurship, hiring and firing, business/labor relations, unions and strikes and their resolutions.

 

Alaska Content Standards

 

GOVERNMENT AND CITIZENSHIP

 

Standard A.  A student should know and understand how societies

                        define authority, rights, and responsibilities through a

                        governmental process.

Standard B.  A student should understand the constitutional

                        foundations of the American political system and the

                        democratic ideals of this nation.

Standard C.  A student should understand the character of government

                        of the state.

Standard D.  A student should understand the role of the United States                                    in international affairs.

Standard E.  A student should have the knowledge and skills necessary

                        to participate effectively as an informed and responsible

                        citizen.

Standard F.  A student should understand the economies of the United

                        States and the state and their relationships to the global

                        economy.

Standard G.  A student should understand the impact of economic

                        choices and participate effectively in the local, state,

                        national, and global economies.

 

Understands that scarcity of productive resources require choices which generate opportunity costs.

·        Understands the quality of labor resources (i.e., human capital) can be improved through investments in education, training, and health care

·        Understands that technological change depends heavily on incentives to reward innovation and on investments in capital, research, and development

·        Understands that productive resources used to produce capital cannot be used to make consumer goods and services, ant that this is the trade-off for higher expected productivity in the future

·        Understands that technological change and investments in capital goods and human capital may increase labor productivity but have significant opportunity costs and economic risks

·        Understands that increasing labor productivity is the major way in which a nation can improve the standard of living of its people

Understands characteristics of different economic systems, economic institutions, and economic incentives.

·        Knows that in a command economy wages and prices are determined by a central planning agency, not by the operation of markets as in a market economy or by custom as in a traditional economy

·        Understands why traditional economies usually do not experience rapid productivity increases or economic growth

·        Understands how economic systems can be evaluated by their ability to achieve broad social goals such as freedom, efficiency, equity, security and growth

·        Understands how economic institutions (e.g., corporations, labor unions, banks, the stock market, cooperatives) have evolved in response to changing economic conditions and incentives

·        Knows that the right of individuals and firms to own property and not to be deprived of its use except through legal procedures is necessary for a market economy to function properly

·        Understands that in every economic system consumers, producers, workers, savers, and investors seek to allocate their scarce resources to obtain the highest possible return, subject to the institutional constraints of their society

Understand the concept of prices ant interaction of supply and demand in a market economy.

·        Understands that in a market system prices provide information to consumers and producers, which encourages the efficient production and allocation of the goods and services consumers demand

·        Understands that the demand curve show an inverse, or negative, relationship between price and quantity demanded because of the income and substitution effects (i.e., when the prices of goods and services go up and income does not, in real terms the consumer are poorer and buy less; consumers also buy less when prices rise because they are able to use other goods and services that have become relatively cheaper to satisfy the same general wants)

·        Understands that the demand for a product will normally change (i.e., the demand curve will shift) if there is a change in consumers’ incomes, tastes, and preferences, or a change in the prices of related (i.e., complementary or substitute) products

·        Understands that the law of diminishing returns states that when more variable factors of production are added to a fixed factor of production, at some point the number of additional products resulting from each added variable factor will begin to decrease, thus increasing the average cost of all units of the product

·        Understands that the supply curve shows a direct, or positive, relationship between price and quantity supplied in the short run (i.e., a period of time in which at least one factor of production, usually capital or land, cannot be changed, although the amount of other, variable factors of production can be changed), but that is relationship is limited by the law of diminishing returns

·        Understands that the supply of a product will normally change (i.e., the supply curve will shift) if there is a change in technology, in prices of inputs, or in the prices of other products that could be made and sold by producers

·        Understands that shortages or surpluses usually result in price changes for products in a market economy

·        Understand that when price controls are enforced, shortage and surpluses occur and create long-run allocation problems in the economy

·        Understands that in the long run all inputs (i.e., factors of production), including those that are fixed in the short run, can be changed

Understands basic features of market structures and exchanges.

·        Knows that collusion among buyers or sellers reduces the level of competition in a market and is more difficult in markets with large numbers of buyers and sellers

·        Know that cartels are explicit forms of collusion concerned with product price, output, service, or sales

·        Understands that the United States government uses laws and regulations to maintain competition, but sometimes the government reduces competition unintentionally or in response to special interest groups

·        Understands that in the long run the level of competition in an industry is determined largely by how difficult and expensive it is for new firms to enter the market

·        Understands that externalities are unintended positive or negative side effects that result when the production or consumption of a good or service affects the welfare of people who are not the parties directly involved in the market exchange (e.g., a negative externality in consumption occurs when cigarette smoking by one individual has harmful or undesirable effects on nonsmokers, a positive externality in production occurs when a neighbor’s home improvements increase the value of nearby properties)

·        Understands that a natural monopoly exists when it is cheaper for one supplier to produce all of the output in a market than for two or more producers to share the output (e.g., electric companies)

·        Understands that public service commissions typically regulate natural monopolies because people cannot rely on competition to control price and service levels in these cases

·        Understands that when transaction costs (e.g., tariffs, costs of gathering or disseminating information on products, transportation costs paid by the consumer) decrease, more specialization and trading will occur

Understands unemployment and income distribution in a market economy.

·        Understands that for the functional distribution of income economists analyze what percentage of national income is paid out as wages and salaries, proprietors’ income, rental income, and interest payments and trace that pattern of income distribution over time

·        Understands that the personal distribution of income classifies the population according to the amount of income they receive, including transfer payments

·        Understands that the functional distribution of income has, over time, reflected changes in the occupational structure of the economy and changing economic conditions related to the business cycle, while the personal distribution of income has remained relatively stable in the United States over long periods of time

·        Understands that individuals and firms making exchanges in resource markets and governments implementing policies (e.g., taxation, assistance programs targeted at particular income groups, programs designed to provide training to workers) affect the distribution of income

·        Understands that the standard measure of the unemployment rate is flawed (e.g., if id does not include discouraged workers, it does not weigh part-time and full-time employment differently, it does not account for differences in the intensity with which people look for jobs)

·        Understands that many factors contribute to differing unemployment rates for various regions and groups (e.g., regional economic differences; differences in labor force immobility; differences in ages, races, sexes, work experiences, training and skills; discrimination)

·        Knows that economists do not define full employment as 100 percent of the labor force because there is always some unavoidable unemployment due to people changing jobs (i.e., frictional employment) or entering the labor force for the first time

·        Understands frictional, seasonal, structural, and cyclical unemployment and that different policies may be required to reduce each

·        Understands the various policies designed to deal with structural unemployment (e.g., education and training) and cyclical unemployment (e.g., tax cuts, government spending for public works program)

Understands the roles government plays in the United States economy.

·        Knows that progressive taxes take a larger proportion of income or wealth from higher income families, regressive taxes take relatively more from lower income families, and proportional taxes take the same percent from all income groups

·        Understands that because government policies affect the distribution of scarce economic resources the government has a major influence on the well-being of people, businesses, and regions

·        Understands how those who are legally required to pay a tax are sometimes able to pass some or all of the tax onto others who buy goods and services from them or who sell goods and services them

·        Understands that certain government spending programs often result in gains for groups other than those intended to be helped (e.g., private companies and contractors that benefit from spending for health, welfare, and national defense programs)

Understands aggregate supply and aggregate demand.

·        Knows that aggregate supply is the total amount of goods and services that an economy produces

·        Knows that aggregate demand is the combined demand of consumers, business firms, government, and foreign buyers for goods and services produced by an economy

·        Understands how relationships between aggregate demand and potential aggregate supply affect unemployment or inflation

·        Knows that when aggregate demand is equal to aggregate supply at a level that just employs all available productive resources with no change in the overall price level, the economy is at full-employment, noninflationary equilibrium

·        Understands that when aggregate demand is not enough to buy all good and services that are produced (i.e., when aggregate demand falls below the full-employment level of aggregate supply), business firms will reduce production, aggregate supply will decline, and workers will become unemployed level of aggregate supply), costs rise as business firms compete for productive resources, and prices rise in the short run (i.e., demand-pull inflation)

·        Understands how changes in taxing and government spending affect aggregate demand and income

Understands basic concepts of United States fiscal policy and monetary policy.

·        Knows that the United States government may borrow from foreigners and foreign governments to finance its deficits, and that when the United States repays such loans, income is transferred from Untied States citizens to foreign economies

·        Understands that fiscal policies and monetary policies are often a result of political factors as well as economic factors

·        Understands that fiscal policies take time to affect the economy and that they may be reinforced or offset by monetary policies

·        Understands that when banks make loans, the money supply increases, and when loans are paid back, the country’s money supply shrinks

·        Knows that banks may lend a certain percentage of the money that is deposited with them, but they may not lend over the amount reserves they are required to keep by the Federal Reserve System

·        Understands that changes in the money supply lead to changes in interest rates and in individual and corporate spending which may influence the levels of spending, employment, prices, and economic growth in the economy

·        Understands that monetary policy can cause serious economic problems if it follows an inconsistent pattern in terms of changes in the rate of growth of the money supply

Understands how Gross Domestic Product and inflation and deflation provide indications of the state of economy.

·        Knows that Gross Domestic Product (GDP) is the total market value, expressed in dollars, of al final goods and services produced in the economy in a given year and is used as an indicator of the state of the economy

·        Knows the difference between “nominal” GDP (i.e., GDP stated in current dollars where an increase GDP may reflect not only increases in the production of goods and services, but also increases in general prices) and “real” GDP (i.e., GDP which has been adjusted for price level changes)

·        Knows the factors upon which a country’s GDP depends (e.g., quantity and quality of natural resources, size and skills of labor force, size and quality of capital stock)

·        Understands that real GDP in the United States and other industrialized nations has grown fairly steadily in modern times, but short-run fluctuations in business activity (i.e., business cycles) are not smooth or completely predictable

·        Understands that a recession occurs when real GDP declines for at least six months

·        Understands that governments sometimes attempt to smooth out business cycles by using policies to moderate fluctuations in the growth of real GDP, thus reducing unemployment or inflation

·        Understands that Consumer Price Index (CPI) does not perfectly measure the effects of inflation on individual households

·        Understands that inflation creates uncertainty because it affects different groups differently

·        Knows that demand-pull inflation occurs when total spending rises faster than total production, and may result from expansive monetary or fiscal policies, or from expectations of businesses and consumers that prices will rise in the future

·        Knows that cost-push inflation occurs when increases in the overall costs of making and selling goods and services rise the price level, and may result from the effects of monopolization in product or factor markets, or from a sudden reduction in the supply of an important product or factor of production

·        Know there are various policy options available to combat inflation (e.g., monetary and fiscal policies, wage and price controls, antitrust actions, tax incentives, automatic adjustment mechanisms)

·        Knows that a country experiencing “stagflation” has both a high unemployment rate and a high inflation rate at the same time

·        Understands that government policies designed to reduce unemployment may increase inflation, and vise versa

Understands basic concepts about international economics.

·        Understands that trade between nations would not occur if nations had the same kinds of productive resources and could produce all goods and services at the same real costs

·        Knows that a nation has an absolute advantage if it can produce more of a product with the same amount of resources than another nation, and it has a comparative advantage when it can produce a product at a lower opportunity cost than another nation

·        Knows that despite the advantages of international trade, many nations restrict the free flow of goods and services through a variety of devices known as “barriers to trade” (e.g., tariffs, quotas)

·        Understands that a change in exchange rates change the relative price of goods and services traded by the two countries and can have a significant effect on the flow of trade between nations and on a nation’s domestic economy

·        Understands that extensive international trade requires an organized system for exchanging money between nations (i.e., a foreign exchange market)

·        Understands that countries that engage in foreign trade maintain a “balance sheet” to measure the value of goods and services exchanged and the flow of financial reserves used to keep total payments between the countries in balance

·        Knows how the level of real GDP per capita is used to compare the level of economic development in different nations

·        Knows the factors that have led increased interdependence among nations (e.g., transfer of technology, exchange of productive resources, trade of finished goods and services)

·        Understands that increasing international interdependence causes economic conditions and policies in one nation to affect economic conditions in many other nations

·        Understands that public policies affecting foreign trade impose costs and benefits on different groups of people and that decisions on these policies reflect economic and political interests and forces