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Name: __________________________Period: ___________EconomicsDate: ____________Aim: How do we measure economic performance?Do Now: Read the article and answer the discussion questions below.Although there are other branches of economic study, micro and macroeconomics are the most well-known. Despite their popularity, however, the principles of these disciplines are frequently misunderstood or confused. While they share some of the same concepts and are interrelated in important ways, there is a fundamental difference between micro and macroeconomics. The simplest way to distinguish microeconomics from macroeconomics is to think about the names of these two fields. As its name indicates, microeconomics is the study of economics on a smaller, more detailed scale. Similarly, the basic definition of macroeconomics is that it is the study of economics on a larger, broader scale.Define the difference between the two fields in economics.MicroeconomicsMacroeconomicsMicroeconomicsMicroeconomics looks at the behavior of individual people and companies within the economy. It is based on the idea of a market economy, in which consumer demand is the driving force behind the prices and production levels of goods and services. Microeconomics is interested in how specific parties choose to use the limited resources that are available to them. It focuses on what drives them to make their decisions, as well as the ways in which their decisions affect the supply and demand of particular goods and services. In turn, these choices influence the price levels of various commodities. Microeconomics also examines how the decisions of individuals impact specific industries. For example, economists studying at the micro level might be interested in discovering how current consumer demand is affecting the well-being of the oil industry. Another basic principle of microeconomics is the "theory of the firm." This studies the actions of businesses as they strive to increase their profits. It looks at which resources they choose to utilize as inputs, how much they produce, and what they charge for their goods or services. In summary, microeconomics concerns itself with the human beings whose purchasing and production-related decisions come together to form the backbone of a given economy. Even when it involves companies, the focus of microeconomics is always at the personal level.What or who do Micro Economists study? Give an example from the text!!MacroeconomicsThe most concrete definition of macroeconomics is that it is a study of "the big picture" in the economy. Instead of focusing on individual households and firms, it examines conditions within the economy as a whole. This is the most vital difference of micro and macroeconomics. In more technical terms, macroeconomics looks at the factors that influence aggregate supply and demand. Since it is associated with the conditions of national economies, it deals with such statistics as unemployment rates, gross domestic product (GDP), overall price levels, and inflation. Its general nature makes it closely associated with public policy. Most nations around the world have their own central banks; in the United States, this is the Federal Reserve. In any class about macroeconomics, the actions of a given country's central bank (known collectively as monetary policy) will be a major topic of discussion. Those studying economics at the macro level will learn about the factors that drive a central bank to manipulate the interest rates and money supply of its respective nation at any given time. They will also learn about the ways in which the decisions of the national government can affect the overall economy. These governmental actions are known collectively as fiscal policy. Although macroeconomics has a much broader focus than microeconomics does, many macroeconomic factors are essential to making predictions and conclusions at the microeconomic level. For instance, knowing what the unemployment rate is at the national level can help a micro economist predict future layoffs in a specific industry.What or who do Macroeconomists study? Give an example from the text!!Gross Domestic Product:Gross Domestic Product (GDP) is the _____________________________ of all officially recognized goods and services produced within a country in a given period of time. GDP per capita is often considered an indicator of a country's _____________________.What happened to the unemployment rate in the United States during the 2008 recession?What happened to the United States GDP during the 2008 recession?Based on the information in the charts, do you believe the United States Economy has recovered from the 2008 recession?Sectors of the Economyleft157480Public00Public3712845157479Private00Private-VS-Apply your knowledge:Which field of study, macroeconomics or microeconomics, do you believe is a better way to measure economic performance? Why? Name: __________________________Period: ___________EconomicsDate: ____________Task: Read and highlight the article below and answer the discussion questions.The New Yorker: Two Economies: Private Sector, Good; Public Sector, BadThe news that house prices have risen by almost ten per cent during the past twelve months, the fastest rate of increase in almost seven years, confirms a trend seen in other recent reports on the economy: the private sector—excluding the unemployed—is doing pretty well. But retrenchments in the public sector, which accounts for roughly a fifth of G.D.P., are holding back the recovery, and, indeed, jeopardizing its future. Let’s start with the positive developments. One of the reasons that this recovery, which technically began in July, 2009, has been so weak is that the bombed-out housing sector has acted as a big drag on spending. In most recoveries, residential construction, and other spending associated with housing, is a key engine of growth. But for at least the first couple of years of this recovery, the housing sector was actually detracting from G.D.P. growth. Last year, things picked up a bit, and the trend is continuing. Since last summer, residential investment has been rising at an annual rate of about fifteen per cent, albeit from a low base. Rising house prices mean this trend is likely to continue. According to the closely-watched S. & P. Case-Shilller house-price index, which tracks prices in twenty big cities, prices rose by 9.3 per cent in the year to March—the highest rate of increase since March 2006, when the housing bubble was at its peak. Over the past twelve months, prices rose in all of the cities that S. & P. tracks, and some places, such as Atlanta, Phoenix, and Las Vegas, have seen prices jump by more than fifteen per cent. When prices are rising, developers build more new homes and homeowners spend more on renovations. If you’ve been to Home Depot lately, you’ve most likely seen evidence of this happening. In its most recent quarter, the retailer saw its sales and profits surge. Construction companies are also doing very well. On a conference call with Wall Street analysts last week, Donald Tomnitz, the chief executive of D. R. Horton, the country’s biggest homebuilder, said, “The first half of fiscal year 2013 was nothing short of phenomenal. We expect the second half to be even better.” Housing isn’t the only sector in which the recovery is picking up. Sales of cars and trucks are pretty strong. So are sales of things like clothing, electronics, and furniture. Taking overall household consumption into account, spending rose by 3.2 per cent in the first quarter of the year, according to last week’s G.D.P. report, compared to an increase of 1.8 per cent in the previous quarter. The buoyancy of consumer spending, which accounts for about two-thirds of the G.D.P., is encouraging and somewhat surprising. At the start of the year, the Obama Administration and Congress agreed to end a payroll-tax cut, which will cost a typical family about a thousand dollars over the course of the year. But rather than cutting back on purchasing new gadgets and outfits, many Americans appear to be saving less. In the period from January to March, the personal-savings rate fell to 2.7 per cent, compared to 4.7 per cent in the previous three months. With spending strong and wages stagnant, American businesses are enjoying record earnings. Corporate profits topped two trillion dollars last year, according to the Commerce Department, and they appear to have grown again in the first quarter. Unfortunately, most businesses aren’t investing very much in new buildings or equipment such as machinery and computers, nor are they going on hiring sprees. Spending on new offices and factories actually fell slightly between January and March, and spending on equipment and software rose at an annual rate of just three per cent. Rather than investing in their businesses, many corporations are holding onto their cash or using it to purchase back their own stock. For the recovery really to get going, and unemployment to come down further, we need businesses to display some confidence in the future and expand at a more rapid rate. But for all its weakness, business investment is still contributing modestly to G.D.P.—which is more than can be said for the public sector. In the first quarter of the year, overall government expenditures—spending at the federal, state, and local level—declined by more than four per cent, according to the Commerce Department. And this fall in outlays deducted almost a full percentage point from overall G.D.P. growth. Even now, it isn’t fully appreciated how much trimming the public sector has been through in the past couple of years. If you listened to the House Republicans or Fox News, you would believe that overall government spending is still racing ahead. Last week’s G.D.P. report showed that this simply isn’t true—at the national or local level. In the first three months of the year, inflation-adjusted federal non-defense spending declined at an annual rate of two per cent, and federal spending on defense fell at an annual rate of 11.5 per cent. State and local spending declined at an annual rate of 1.2 per cent. If this was just an isolated quarter, it might not mean very much. But it isn’t: in 2011, overall federal spending (inflation-adjusted) fell by 2.8 per cent, and in 2012 it fell by 2.2 per cent. At the state and local level, spending fell by 3.4 per cent in 2011 and by 1.4 per cent in 2012. These figures are worth restating in another way. Since the start of 2011, when the Tea Party contingent arrived in Congress and started banging on about the government being out of control, overall federal spending has fallen by more than five per cent, as has spending at the state and local level. The cuts the Republicans are calling for are already a reality. Some of this drop in spending reflects lower outlays on things like unemployment benefits and food stamps, as the jobless rate has come down from ten per cent in October, 2009, to 7.6 per cent last month. But some of it reflects policy decisions. The Obama stimulus package was allowed to expire. The Budget Control Act of 2011, which the President signed as part of a deal to avoid breaching the debt ceiling, established caps on discretionary spending through 2021. And the decision to pull U.S. troops out of Iraq and Afghanistan led to a sharp decline in military spending. When you look at the government spending figures and think about them for a moment, is it any surprise that the recovery, post-2010, has been so weak? It’s simple arithmetic that if spending in a third of economy declines for more than two years running, there has to be a sustained uptick somewhere else to prevent an overall decline. So far, the private sector, and particularly consumer spending, has managed to make up the gap, and a modest rate of G.D.P. growth has been sustained. But with the rise in payroll taxes still being felt, and the impact of the sequester just starting to become clear, what will happen going forward? Given the rebound in the private sector, and the Fed’s determination to keep interest rates at rock bottom, I’m still reasonably confident it won’t be anything too terrible. But it’s a situation worth watching, and it’s one we didn’t have to get ourselves into. If the public sector—and here, I am including state and local governments, which are a significant part of the story—hadn’t been forced to retrench prematurely, the economy would now be in better shape. Discussion Questions:1. Which sector of the economy is holding back the recovery of the economy? Why? 2. What positive developments are helping with the recovery? 3. What negative developments are slowing the recovery? 4. Is the author examining the economy through the eyes of macroeconomics or microeconomics? Explain with text-based evidence!5. If you were an elected official, what sector of the economy would you focus on to help rebound from the recession in 2008? Why? Name: ______________________________Period: _____________EconomicsDate: ______________Innovation: Private vs. Public Viewing Guide: As you watch the video, fill in the blanks with the correct words.1. Over the years politicians have promised us energy independence, world peace, an end to poverty. If we just give them more ____________, they will solve those problems.2. Government science is clumsy. By contrast, for a ____________ of the cost, a private group called the X-Prize does better.3. You know, all innovation comes out of the ____________ ____________ ; it comes out of entrepreneurs.4. We’re programmed to believe that if it’s for real high-tech, futuristic ____________, it’s got to come from the government.5. I like the idea of government taking my dollars, my tax dollars, and investing in the technologies of ____________.6. While government spent billions, X-Prize offered a $10 million prize for a car that gets a ____________ miles per gallon.7. We don’t _____________ the winner in advance like the government does in research. The research funding agency says, “You’re a good researcher. Here’s money.”8. The top 10 teams went head-to-head at the world’s largest oil spill cleanup facility in New Jersey. And seven of the 10 teams ____________ the pre-existing standards that had been used to clean up oil for the last—the last 20 years.9. Just because government can’t, that doesn’t mean we can’t. We can! Individuals’ ____________ while government fails.Now, take a few moments to reflect on the video and answer the questions below:Why does John Stossel say that politicians can’t do what private individuals can?What are the differences between government and private entrepreneurs investing in problem solving ventures? Whose money is being spent?Why might the political process be less effective in solving problems and innovating than private enterprise? ................
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