CIVICS IN PRACTICE
HOLT
Chapter 20
Economic Challenges
Section 1: The Business Cycle
Section 2: Coping with Economic Challenges
Section 3: Labor and Management
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 1: The Business Cycle
The Main Idea
The economy has periods of uneven growth called
business cycles. Sometimes the economy grows
quickly, but other times it may grow very slowly or
even shrink. The worst point in the business cycle in
the United States was the Great Depression.
Reading Focus
 What are the different parts of the business cycle?
 What was the Great Depression?
 What was the government’s response to the Great
Depression?
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 1: The Business Cycle
Different parts of the business cycle:
 Expansion
 Peak prosperity
 Contraction or recession
 Trough or depression
 Expansion
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 1: The Business Cycle
Old theories of the business cycle prior
to the Great Depression:
 Business cycle should be left alone: problems
cure themselves.
 Recessions could not last long: workers would
accept lower wages, thus lowering costs of
production.
 Expanding businesses would help other
businesses expand.
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 1: The Business Cycle
The Great Depression and the
government’s role:
 New Deal—designed to provide jobs and
create financial stability.
 Civilian Conservation Corps—young people
were to restore natural resources
 FDIC and SEC created to insure funds and
inhibit fraud
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 1: The Business Cycle
The Great Depression and the
government’s role: (continued)
 Social Security System set up to provide funds
for retirees
 Unemployment compensation established
Government intervention in the economy remains
a matter of dispute.
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
SECTION 1
HOLT
Question: What are the different parts of
the business cycle?
peak
contraction
The
Business
Cycle
expansion
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trough
HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 2: Coping with Economic Challenges
The Main Idea
Problems such as inflation, unemployment, and
recession pose serious challenges to the economy.
The government responds to these problems by
changing its monetary and fiscal policies.
Reading Focus
 What kinds of problems can occur in the economy,
and what causes them?
 How can the government address these economic
problems?
 How can citizens help to improve the economy?
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 2: Coping with Economic Challenges
Economic problems and their causes:
 Inflation—prices increase faster than wages;
 Unemployment—unemployed workers cannot
pay bills or purchase goods
 Recession—production, spending, and consumer
demand decline
 Money and loans—too much money in
circulation leads to inflation
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 2: Coping with Economic Challenges
Economic problems and their causes:
(continued)
 Government and consumer spending—over-
borrowing reduces savings, increases debt; helps
raise prices
 Productivity—foreign productivity hurts
American businesses; contributes to
unemployment
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 2: Coping with Economic Challenges
The government addresses economic
problems through
 Changes in fiscal policy—in a recession,
government may lower taxes and increase
government spending.
 Changes in monetary policy—in a recession, the
Federal Reserve may increase the money supply
or lower interest rates.
 Actions may be reversed in boom periods.
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 2: Coping with Economic Challenges
Citizens can aid the economy by
 Increasing savings—consumer savings give banks
more money to lend to business.
 Reducing credit debt—reduced debt can lead to more
savings.
 Buying American-made products, which preserves
and creates jobs in America.
 Increasing productivity—efficient management and
workers aid business and may increase wages.
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HOLT, RINEHART
AND
WINSTON
SECTION 2
CIVICS IN PRACTICE
HOLT
Question: How does the government address
economic challenges?
The Government’s Response to Economic Challenges
Changes to the fiscal
policy:
 reduce taxes
 buy more goods and hire more
people
 give larger payments to
unemployed, poor, and older
citizens
 decrease wasteful spending
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Changes to the monetary
policy:
 increase money supply during a
recession by reducing interest
rates or by buying government
bonds
 raise taxes and reduce spending
during a boom period
 raise interest rates during a boom
period
HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 3: Labor and Management
The Main Idea
Workers formed labor unions to force employers to improve
working conditions and wages. Businesses and unions have
had conflicts over the years, so the federal government passed
laws dealing with labor relations.
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Reading Focus
What led to the rise of factories in the 1800s?
What are labor unions?
What laws have been passed to ease relations between labor
and management?
What is the status of labor unions and labor relations today?
HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 3: Labor and Management
The rise of labor unions in the 1800s:
 Large factories used machines and employed
hundreds of workers.
 Factory managers and owners had little
contact with workers.
 Heavy immigration led to too many available
workers.
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 3: Labor and Management
The rise of labor unions in the 1800s:
(continued)
 Workers were forced to accept long working
days, low wages, and harsh conditions.
 Workers organized unions to improve
conditions.
 Collective bargaining was used to reach
agreements with employers.
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 3: Labor and Management
Methods of negotiation and major
labor laws:
 Workers’ methods: strikes, picketers, job actions
 Employers’ methods: blacklists and lockdowns
 Right-to-work laws—no one is forced to join a union
 1935—National Labor Relations Act or Wagner Act
 1947—Labor-Management Relations Act or Taft-
Hartley Act
 1959—Landrum-Griffin Act
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 3: Labor and Management
The state of labor relations today:
 Union leaders know companies must make
profits to ensure jobs.
 Companies know workers must have suitable
conditions and reasonable wages.
 Modern unions cooperate with companies to
run efficient businesses.
 Compromises help settle strikes when they
occur.
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Section 3: Labor and Management
The state of labor relations today: (continued)
 Mediators make nonbinding recommendations
to end a strike.
 Arbitrators make binding decisions to end a
strike.
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HOLT, RINEHART
AND
WINSTON
SECTION 3
CIVICS IN PRACTICE
HOLT
Question: What is the status of labor
relations today?
use arbitration
to settle
disputes
use collective
bargaining to
settle disputes
Labor
Relations
Today
use more
cooperation
between
employers and
unions
use mediation
to solve
disputes
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HOLT, RINEHART
AND
WINSTON
CIVICS IN PRACTICE
HOLT
Chapter 20 Wrap-Up
1. What was government’s response to the Great
Depression?
2. How did the government’s role in the economy change
during the Great Depression?
3. What measures does the Federal Reserve take to
control the amount of money in the economy, and why
does it do so?
4. How can the action of consumers affect the economy?
5. What first caused workers in the United States to form
labor unions?
6. What methods do unions and employers use to try to
achieve their goals?
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HOLT, RINEHART
AND
WINSTON