Adam Smith
•He made the book A Wealth of Nations
•HE believed is Laissez-Faire(Free Enterprise)
Profit Competition
Karl Marx
•Communist
Manifesto
•Help the worker

Money Invested
 Stock market invented
 “investors” would receive a percentage of profits
 New York came stock market center
 Wall Street
 Insider Training

Supply and
Demand
 The SUPPLY is the number of shares offered for sale at anyone one moment.
 The DEMAND is the number of shares investors wish to buy at exactly that same time.
-These factors are very important in determining the price of stocks. If someone is willing to pay more for one stock, stocks will therefore cost more, and vice versa. (Refer to chart of supply, demand and price)

 A company may be doing well, but an industry likeliness to change can help or hurt many companies.
 Example: Video cassette companies.
- Ex.: Some video cassette player making companies may have been doing well, but the industry value declined with the advancement in technology (CD’s). Which led to their demise.
CHANGE
!!!

Economic Trends
 I NFLATION AND D EFLATION
 I NTEREST RATES
 R ATE OF ECONOMIC GROWTH MEASURED BY
GNP
 N ATIONAL BUDGET
 U NEMPLOYMENT RATES
A LL OF THESE INDICATORS SHOW CHANGES IN
HOW ORDINARY PEOPLE WILL SPEND THEIR
MONEY , AND HOW WILL THE ECONOMY IS LIKELY
TO PERFORM .

You need to know it

F.D.I.C (Federal depository)
 a public corporation, established in 1933, that insures, up to a specified amount, all demand deposits of member banks.

We want you to put your money in the bank. ( or there will be no money to lend)

S.E.C (Security and exchange)
 Securities and Exchange Commission: a board, consisting of five members, charged with regulating the public offer and sale of securities.

Police force of the stock market

Insider Trading
 the illegal buying and selling of securities by persons acting on privileged information.

White Collar Crime
 any of various crimes, as embezzlement, fraud, or stealing office equipment, committed by business or professional people while working at their occupations

Embezzlement

Federal Reserve Bank
 a U.S. federal banking system that is under the control of a central board of governors (Federal Reserve Board) with a central bank (Federal Reserve Bank) in each of 12 districts and that has wide powers in controlling credit and the flow of money as well as in performing other functions, as regulating and supervising its member banks.

We will change the interest rates to keep level.
Inflation
 unemployment

Mutual Funds
 an investment company that issues shares continuously and is obligated to repurchase them from shareholders on demand.

Inflation
 Economics . a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency ( opposed to deflation ).

Unemployment
 not employed; without a job; out of work: an unemployed secretary

Gross National Product (
Gross Domestic Product
 the total monetary value of all final goods and services produced in a country during one year.

Consumer Price Index
 an index of the changes in the cost of goods and services to a typical consumer, based on the costs of the same goods and services at a base period.

Corporation
A corporation is a formal business association with a publicly registered charter recognizing it as a separate legal entity having its own privileges, and liabilities distinct from those of its member. A publicly owned company through stocks.
SAY WHAT?

Stockholders
A shareholder is an individual person or institution that legally owns one or more shares of stock in a corporation.
IT’S SOMEONE WHO OWNS STOCKS
He could be part owner of Giant
Eagle

Shares
In financial markets a share is a unit of account for various financial instruments including stocks, and investments in limited partnerships, and real estate investment trusts.
ITS LIKE A CENTIMETER IN MATH
EXCEPT ITS FOR FINANCIAL UNITS

Business cycle
This may seem confusing.
Mr. Vanreeth will explain.

What is Economics?
 Economics is the study of how societies use scarce resources (land, labor and capital) to produce valuable goods and distribute them among different people

What questions must every economy answer?
 What should be produced?
 How many should be produced?
 What methods should be used?
 How should the goods be distributed?

What were the different economic philosophies?
 Mercantilism
 Capitalism
 Communism
 Socialism

What is Mercantilism?
 An economic policy used before the
Industrial Revolution, created to develop the wealth of a nation by strict government regulation of the entire national economy.

What were the characteristics of Mercantilism?
 accumulation of bullion (gold, silver)
 a favorable balance of trade – Exports >
Imports
 Development and protection of industry through use of protective tariffs
 Establishment of colonies to build wealth and markets

How did economic policies change during the Industrial
Revolution?
 Most nations began to follow the policy of Laissez-Faire
Capitalism introduced by
Adam Smith

Who was Adam Smith?
 Lived in Scotland over 200 years ago
 Chairman of Philosophy at
University of Glasgow
 Studied economics and political philosophy
 Wrote a book called “Wealth of Nations”
 Attacked the policy of mercantilism

What were Smith’s Ideas?
 Laissez-faire
 Free Markets
 Free Enterprise
 Individualism
(Self-Interest)

What is Laissez Faire?
 No government intervention in the economy – “Hands-Off”
 No taxes, No laws that would impact business,

What are free markets?
•Supply and demand determine what and how much to produce
•Competition regulates the price of goods

What is free enterprise?
 The freedom of private business to operate completely for profit with no intervention by the government

How will society benefit?
 Individualism
 When each person does what is best for him or her everyone benefits

What is Laissez-Faire
Capitalism?
 Economic system characterized by the following:
 Free Enterprise - Private ownership of property (businesses)
 Laissez Faire - No government intervention
 Individuals and businesses compete for their own economic gain (profits)
 Supply and demand determine the prices of goods and services

What were the results of
Laissez-faire economics?
 Economic Growth
 Large gap between the rich and poor
 Extreme Poverty
 Child labor
 City Slums
 Educational Neglect
 Unsafe and unsanitary working conditions

Who challenged the ideas of Adam Smith?
Karl Marx
•Born 1818 in Germany
•Studied philosophy and economics in Berlin
•Newspaper journalist until govt. expelled him
• Communist Manifesto, 1848

According to Marx, what caused society to change?
1. Economics is the major force of change in society
 Conflict between the “haves and havenots” – Social Classes
Examples:
French Revolution –
3 rd Estate vs. 1 st and 2 nd
Estate
Medieval
Serfs vs. Nobles

Who were the “Haves and
Have-nots during the IR?
 Haves:
 Capitalists – factory and business owners
(bourgeoisie)
 Power – control the govt.
 Money - keep the profits
 Have-nots
 Workers (Proletariat)
 Low wages, working conditions

What should the Working
Class do?
2. REVOLUTION - Workers should unite and overthrow the capitalist middle class (bourgeoisie)
 “Working men of all countries, unite!”

Who will own the factories and businesses?
3. NO PRIVATE OWNERSHIP -
All means of production
(factories and businesses) will be owned and controlled by society

Who will receive the profits?
4. EQUAL DISTRIBUTION OF WEALTH -
Profits will be equally distributed among the people according to need
“ From each according to his ability to each according to his need”

Who will have the power?
5. NO GOVERNMENT - Workers will temporarily control the government
(“Dictatorship of the Proletariat”) until all classes cease to exist and then the government will no longer be needed. It will cease to exist

How will Society Benefit?
 Collectivism
 Society benefits when everyone works together for the common good

What is Communism?
 An economic philosophy characterized by the following
 No Free of Enterprise/private ownership of business – society owns factories, businesses, natural resources
 Wealth is redistributed among the people in society equally
 Classless society
 Collectivism
 Government will cease to exist

What is Socialism?
 An economic system characterized by
 Government controlling the major means of production (land, raw materials, factories)
 Some centralized planning of the economy
 Some private ownership of business
 According to Marx, a stage on the way to communism
Uh Oh
A socialist!

Which of the following is not a characteristic of capitalism?
1.
Laissez-faire
2.
Private ownership
3.
Government controls the means of production
4.
Supply and demand determine price and quantity
5.
Large gaps between the rich and the poor

Which of the following is a characteristic of socialism?
1.
Government controls the major industries
(steel, transportation etc.)
2.
The elimination of government and social classes
3.
Governments do not interfere in economic activity
4.
Private individuals control all of the means of production
0% 0% 0% 0%
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Which of the following describes communism?
1.
Allows for some private ownership
2.
Elimination of government and social classes
3.
Ideas from Adam
Smith
4.
Follows the laws of supply and demand
0% 0% 0% 0%
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io n of
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Which of the following economic systems arose from poor living and working conditions during the
Industrial Revolution?
1.
Capitalism
2.
Socialism
3.
Communism
4.
Both 1 and 2
5.
Both 2 and 3
6.
None of the above
0% 0% 0% 0% 0% 0%
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B m ot h
1 an d
2
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th e ab ov e

Which of the following describes an idea of Karl Marx?
1.
Laissez-faire
2.
Bourgeoisie would revolt against the
Proletariat
3.
Entrepreneurs would control government
4.
Proletariat would revolt against the
Bourgeoisie
5.
All of the above
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What was Thomas Malthus theory?
 Poverty and famine unavoidable
 Population growing faster than food supply
 Agricultural
Revolution helped to disprove his theories

What was David Ricardo’s theory?
Iron Law of Wages
 Rapid population growth would lead to fierce competition for jobs
 Lower birthrates in western countries

What is utilitarianism?
 Laws should be judged by their usefulness
 Laws should advance human happiness and reduce human misery
 Jeremy Bentham

What were the ideas of
Robert Mill?
 Cooperation should replace competition
 Established a “model” town
 Improved working and living conditions

What were the ideas of
John Stuart Mill?
 Redistribution of wealth by taxing income
 Voting Rights for all citizens
 Equal Rights for Women
 His political ideology would be considered
________________

Who was William Wilberforce?
 Evangelical – joined ideas of
Christian faith with making a better society
 Member of
Parliament
 Helped to get a bill passed to end
Slavery
 Slave Act of 1807

Growth of Industrialization
1900s
 Populations began to grow – Europe almost doubled in 100 years
 Medical advances increased life expectancy and decreased infant mortality
 New methods for producing and preserving foods made better food available

Urbanization – growth of cities
 8 in 10 English lived in cities by 1914
 Came in search of new opportunities - larger farms needed fewer workers
 Movement from Rural to Urban

Lifestyle Improvements
 Life improved for many in Europe and
North America in the 1800s
 Sewers, garbage collection, police and fire protection
 More leisure time for cultural activities – newspapers, fine arts, sports
 The need for public schools was widely accepted by even the elite.

Improvements in working conditions
 Child Labor Laws Passed
 Safety Regulations
 Formation of Unions
 8 hour work day

Moving Around
 Rural to Urban
 Emigration – leaving one’s home country to settle someplace else
 Push Factors – reasons to leave
 Population growth – no jobs, crowded
 Government Persecution
 Famine
 Discrimination
 Immigration – entering a new country or region to settle permanently
 Pull Factors – reasons to come
 Better life
 Higher Pay
 Better Working Conditions

Reliability of Data:
 Facts
 Unbiased
 Expert source
 Consistency results
Thesis Statement:
 States what you want the reader to believe, know or understand
 Is backed by data that supports it