Unit 3 Macroeconomics: Institutions Ch 8 – Employment, Labor, and Wages Ch 9 – Sources of Gov.’t Revenue Ch 10 – Gov.’t Spending Ch 11 – Money and Banking Ch 12 – Financial Markets SKIP • Macroeconomics • The area of economics that deals w/ the ________ as a whole, including inflation, _____________, economic growth, gross domestic product, + the distribution of _________. • Macro = _______ Ch 8 – Employment, Labor, and Wages • Labor • The civilian labor force – includes men + women _____ + older who are either working or ______________ for a job. • It excludes members of the ____________, the prison population, other ______________ people or those who are not _______ employment. • Unions • Associations of _______ formed to bargain for better working conditions + _____________. • Approximately ____% of American labor is represented by unions. • Unions tend to be concentrated in ____________ areas + increasingly in among gov.’t workers. • Have ___________________________ (negotiations b/w workers + employers). • If an agreement cannot be reached, workers may go on strike (refusing to ______). Striking workers may picket (protest ___________ the employer’s business). As a final result, striking workers may organize a boycott (a mass refusal to _____________ from their employers). End Section 1 • Collective • Occurs when representatives from both _________ + ___________ ___________ meet. Labor is represented by a group of __________ union officials. • Requires __________ from both sides. If a compromise cannot be reached b/w the 2 sides, other methods of negotiation are available: • Mediation – involves bringing in a ____________ ____ whose job it is to find a solution acceptable to both sides. The mediator’s solution is ______ _________. • Arbitration – involves bringing in a ___________ whose decision is ___________. • Fact-finding – involves bringing in a neutral 3rd party to __________ about a dispute + present a solution which is ______________. • Beneficial if both sides have presented _______ _______ or if one side doesn’t trust the other. • Injunction (_____________ not to act) or seizure (temporary gov.’t ___________). • ____________________ – may involve a simple public appeal or firing federal workers. End Section 2 • Categories of _______ • Unskilled labor – people who work primarily w/ their hands b/c they _________ + skills required for other tasks. • Basically anyone, regardless of ___________, could walk in off the street + easily take over their jobs. • Usually earn the _________________. • Ex: Fruit pickers • Semiskilled labor – workers w/ enough mechanical abilities/skills to _________________ that require a _____________ of training. • Ex: Lawnmowers • Skilled labor – workers who are able to operate _______________ + can perform their tasks w/ little _____________. • Ex: Carpenters • Professional labor – workers w/ the ___________ of knowledge-based education + managerial skills. • Usually earn the ________________. • Doctors • ______ determination • The traditional theory of wage determination states that _______ + ________ for a worker’s P skills/services determine their wages. S1 • High demand + low supply = ______ wages • Low demand + high supply = ______ wages • The equilibrium wage rate is the wage rate that leaves neither a ______ nor _________ in the labor market. • The theory of negotiated wages states that organized labor’s ____________________ is a D1 factor that helps determine wages. Q • Seniority is the ______________ a person has been on the job + in some jobs, the more seniority a person has the _________ his/her wages are. • The signaling theory states that employers are willing to pay more for people w/ certificates, diplomas, ________, + other “signals” of ____________________. • The ability of a _________ to attract labor also determines wages at the _______________. End Section 3 • _______ in labor • For every _____ a man makes, a woman averages about ___ cents. This is known as the gender wage gap. • Over _____ of the gap is due to the differences in skills + ___________. • Ex: Many women leave the labor force to start a ______. • Less than ____ of the gap is due to the uneven distribution of men + women in certain ___________ (meaning more men tend to be employed in _____ level positions). • Over ____ of the gap is due to ______________. Ratified --- Red Ratified, then rescinded ---- Yellow Ratified in 1 house of legislature --- Green Not ratified --- Blue • The ERA (Equal Rights Amendment) would have assured that women enjoyed the same rights + protections _______________. It passed in Congress in 1972, but Conservatives feared that it disrupt America’s _________________ + launched a Stop-ERA campaign. The amendment was ___________ by enough states. • Some anti-___________ laws have been passed however. • In addition, women + minorities have greater difficulties in getting raises + __________. This invisible barrier that obstructs their ______________ up the corporate ladder is known as the glass ceiling. • Minimum wage • The _____________ that can be paid ________ to most workers. • Currently it is set at $___ per hr. • Intended to protect workers from being _________. However, it is controversial. Some argue that employers cannot afford as many employees + so fewer people get _______. Does this lead to a surplus or shortage of workers? _________ End Section 4 Ch 9 – Sources of Gov.’t Revenue • Taxes • Taxes impact the _____________ in by affecting: • ____________________ – the higher the taxes on resources, the fewer people can afford them + it can __________________. • _________________ – can discourage consumers from ___________ certain products. • Ex: The sin tax (a relatively ______ designed to raise revenue + __________) on items such as tobacco + alcohol. • The nation’s productivity + _________ • Also, the burden of taxes is sometimes transferred onto __________________ besides the one being taxed. • If a company is charged a higher tax it may the cost of its goods (passing cost onto __________), take it out of profits (passing cost onto ________), or lay off workers (passing cost onto ____________). • Criteria for _______ taxes 1. ______ – fairness. But what is fair? 2. _________ – laws should be written so that the tax payer + tax collector can understand them. • Good ex: Sales taxes • Bad ex: The income tax 3. ___________ – relatively easy to administer + reasonably successful at generating _________. • Good ex: Income tax • Bad ex: Toll booths on highways • Principles of taxation • The benefit principle of taxation says that those who ______ from gov.’t goods/services should pay in _____________ to the benefits they receive. • Ex: toll booth taxes, gas taxes, etc… • 2 disadvantages: 1. Those who can ___________ to pay taxes are usually the ones who benefit most from gov.’t services. 2. Benefits are often hard to ________. • The ability to pay principle of taxation says that people should be taxed according to their _______ _____ regardless of the _________ received. • Ex: income tax • 2 bases for: 1. Benefits are often hard to measure. 2. Assumes that people w/ higher incomes suffer _______________ paying taxes than people w/ lower incomes. • Types of taxes • Proportional tax or “flat tax” – everyone pays the same ________________ (not the same amount) regardless of income. • Ex: If flat tax was applied to income taxes everyone would have to pay 20%. So someone who made $20,000 would pay $_______ + someone who made $200,000 would pay $________. • Progressive tax – people who make more pay a ________________________ of their income. • Ex: Current income tax • Regressive tax – people who make less pay a _____________________ of their income. • Ex: Sales tax End Section 1 • ________ taxes • The most important taxes the national gov.’t collects are the __________ tax (over 35% of its revenue), _____________ taxes (about 33%), + ___________________ taxes (about 7.5%). • P. 232 • Excise tax – taxes on the ___________ or sale of selected items like gas, alcohol, coal, etc… • Property tax – taxes levied on either real _______ (land, buildings, etc) or on ______________ (cars, stocks, bank accounts, etc). • Estate tax – (or “_____ tax”) taxes the gov.’t levies on the transfer of property when a person dies. • Gift tax – taxes on donations of $ or wealth PAID BY THE PERSON _______ THE GIFT. This is to prevent people from giving away their wealth shortly before __________. • Customs duties or tariffs – taxes on __________. • User fees – charges on the use of _____/_______ such as gov.’t land. End Section 2 • Sources of • $ from the __________ gov.’t (over 22%). revenue for • __________ (20% - except for the states w/ no _____ gov.’ts sales tax). • State ________________ + insurance (18%). • State _______ tax (15% - except for the states w/o an income tax). • $ from the ________ + _______ gov.’ts (35%). • Sources of revenue for • _______ taxes such as real estate, cars, bank _____ gov.’ts accounts, buildings, etc… (24%). • ________ + state-owned liquor stores (8%). • ______ tax (6%). End Section 3 • The flat tax • A ______________ tax on individual income. • Gained widespread attention during the election of 1996 as a way to “___” the current tax system. • Advantages: 1. ___________ 2. Eliminates many ____________ 3. Reduces the need for many __________, tax preparers, + a good portion of the ___ • Disadvantages: 1. Removes many ________________ in the current tax code (ex: you can get deductions for certain donations) 2. Would benefit the ________ more + hurt ________ classes 3. No one knows _______ would be needed to raise the current revenue. End Section 4 Ch 10 – Gov.’t Spending • Spending • In 2003, federal, state, + local gov.’ts collected nearly $__________. That averaged out to about $10,300 per capita (per _________). • The public sector refers to the part of the _________ made up of federal, state, + local _________. • The private sector refers to the part of the _________ made up of private ___________ + privately-owned ____________. Are they part of the public or private sector? ______________ 1. Employees at TL Hanna High School ______________ 2. Employees at Microsoft ______________ 3. The President of the United States ______________ 4. Police ______________ 5. The veterinarian at Pet-Smart ______________ 6. Bankers ______________ 7. A soldier ______________ 8. Your family physician • Types of • __________ of goods/services: gov.’t • Tanks, ships, weapons, space __________ shuttles, land, roads, offices, ________, prisons, employees, etc… • Transfer payments (a payment for which the gov.’t ________________ goods nor services): • ______________, welfare, unemployment, Medicare, grants-in-aid (transfer payment from one ________ of gov.’t to another), etc… • _______ of • Due to its __________, the public sector gov.’t spending has a huge impact on people’s lives: 1. _______________________ – military spending encourages private industries that make weapons, agricultural price supports encourage more people to stay on farms, etc… 2. ___________________ – the amount of $ received by lower income families through programs such as Medicare, the closing of a military base causes the surrounding community to lose $, etc… 3. _________________________ – public education vs. private education, military vs. private hospitals, etc… End Section 1 • Federal gov.’t • The federal budget is an __________ outlining spending proposed $ that will be _______ + _______. • About 2/3 of the federal budget is mandatory spending (spending authorized ________ that doesn’t have to be approved by Congress every year – ex: Social Security, Medicare, etc…). • About 1/3 of the federal budget is discretionary spending (programs that must receive Congressional ____________ every year – ex: the military, welfare, stimulus $, etc…). • The fiscal year is a 12 month financial planning period. • The federal gov.’t’s fiscal year is from ____________________. • A budget deficit is when the gov.’t spends _______ $ than it takes in. • A budget surplus is when the gov.’t takes in _______ $ than it spends. • Major • _______________ (over 20%) spending by • _______________ (18%) the federal • _______________ (15%) – includes gov.’t retirement benefits for federal + military employees, food programs for low income families, subsidized housing, Medicare, etc… • Interest on the ___________ (varies) End Section 2 • State spending • Unlike the ______ gov.’t, some states have enacted a balanced budget amendment in their state constitutions which requires that annual spending not _______________. • So in other words, by law, some states cannot ___________ than they take in. • If one of these states experience an unanticipated in revenue, they must immediately ______________. • Major spending by state gov.’ts • Major spending by local gov.’ts • • • • $ to ______ gov.’ts (30%) Public ________ (18%) Higher _________ (10%) Highways (6%) • • • • _______ Education (36%) Utilities (10%) __________ (5%) Gov.’t administration (5%) End Section 3 • Deficit • Occurs when the gov.’t spends more than it collects. spending • The federal gov.’t _________ runs a deficit. Why? • _______, to stimulate the economy (Ex: Stimulus $ of 2008). • _________, b/c of an unexpected event (Ex: WWII). • Unplanned, b/c the gov.’t doesn’t ______ as much $ as it anticipated (Budgets are based on estimates). • The deficit is the loss of $ ___________. The federal debt (or national debt) is the TOTAL amount of $ the federal gov.’t has borrowed to pay off the debt. So how does the gov.’t _________ $? By selling bonds to the public (a formal contract to repay borrowed $ + _______ on the borrowed $ in the future). • One of the reasons the gov.’t has ________ balancing the budget is b/c much of the budget is spent on entitlements (or entitlement programs) which are programs or benefits using established __________________ to provide health, nutritional, or income supplements to individuals. • Ex: Social security, Medicare, welfare, unemployment, etc… End Section 4 Ch 11 – Money and Banking • __________ of $ • Money is _______________ that serves as a medium of exchange, a measure of value, + a store of value. 1. Medium of exchange – something ________ by all parties as ________ for goods/services (Ex: gold, silver, salt, seashells, etc…). 2. Measure of value – a common denominator that can be used to express ______ in terms that most ___________ __________ (Ex: price tags, to base the value of something by the weight of something else, etc…). 3. Store of value – the property that allows _________________ to be saved until needed (putting $ in the bank, stockpiling gold etc…). • Characteristics • _______ – easy to _____ from one place to of $ another. • __________ – won’t disintegrate or fall apart after a ______ period of time. • _______ – can be divided into ______ units. • Limited ___________ – if too much exists or can be made, it loses its _______. End Section 1 • The gold standard • • • • • • A monetary standard under which the basic __________ unit is equal to, + can be ____________ for, a specific amount of gold. In 1900, the US went on the gold standard w/ an ounce of gold being worth $20.67. Although people continued to use paper $, they could at any time exchange the $ for a set amount of gold at the ___________. Many _______________ were also on the gold standard. Advantages: • People feel more _______ if they can convert their $ into gold. • It is supposed to prevent the gov.’t from _____________ ______ $ (thus, preventing inflation). In reality, countries that go on the gold standard never have enough ______. Disadvantages: • The gold stock may not grow fast enough to keep pace w/ a growing economy + thereby __________ economic growth. • If too many people demand gold all at once, there can be a gold ___________. • The price of gold can ___________________ over time. • A gov.’t looks inept if it isn’t able to accurately manage the gold/$ supply. The US went off the gold standard in 1934 during the ________ ___________, when people didn’t trust in the value of paper $ + began stockpiling gold. Fearing there would be a ________ ________ of gold, the gov.’t ended the gold standard. End Section 2 • The Fed (Federal • The _____________ of the US. Reserve System) • A central bank is a bank that can _____ $ to other banks. • It issues our _______________. • B/c its member banks __________ in the Fed, the gov.’t does not own it. However the gov.’t does _______ it. The president appoints (w/ Congress’s approval) the Chairman of the Fed. Ben Bernanke Chairman of the Fed • The FDIC • When the _________________ in 1929, many people lost their fortunes + immediately ran to the banks to withdraw their $. Many banks ___ _________ + closed permanently. Countless people lost __________. • To re-establish people’s _____________ in the banking system, Congress passes The Banking Act of 1933 which created the Federal Deposit Insurance Corporation (FDIC) which protects _________________ in the event of a bank closure (up to $______ per individual per account type at each bank – temporary increase – will go back down to $_________ in 2014). • _____________ still happen occasionally. If a bank appears to be in danger of collapsing, the FDIC can ______ the bank + either ____ it to a bigger bank or ____________ it + pay off the depositors. This is all done in secrecy to prevent _________________. The primary reason for bank closures is poor ___________. End Section 3