Help broaden your students’ understanding of the underlying economic principals behind current events, as well as other more basic economic concepts.
FOR THE WEEK OF May 9, 2010
Article Link: "Bernanke to grads: Money’s not all that" Sunday, May 9, 2010, The Denver Post, 2A
- Federal Reserve Chairman: The Chairman of the Federal Reserve Bank System is appointed by the President of the U.S. for a 4-year term and approved by Congress. Ben Bernanke is serving his second term as Chairman. The Chairman is responsible for directing the monetary policy of the U.S. with the help and advice of six other members of the Board of Governors and the Open Market Committee. He is term limited to 14 years of service.
- Happiness: the goal of economics is to make people better off. Part of being better off is human happiness. Economists study happiness by conducting surveys—they ask people how happy they are and report the results. Happiness increases as income rises from zero to about $10,000 per year per person. After that happiness rises slower and slower and eventually increases in income do not increase happiness at all.
- Lottery: a method of allocating money. Many states operate lotteries where people buy tickets and then at the end of a week a winning ticket is selected by chance. The person holding the winning ticket gets a certain large amount of money. Lotteries are considered inefficient by economists because there is so much waste through administration, fees and the winner may not need the money at all.
- Human capital: skills and abilities gained by a person through education and experience. It includes attitudes such as persistence that make a person a good worker—productive. Education (finishing high school and going to college) is the surest way to increase one’s human capital. A college education is worth over $1 million over a worker’s lifetime over what a high school graduate earns. Therefore, a college education is like winning the “lottery.
Discussion: The article is a report of a speech given by Federal Reserve Chairman, Ben Bernanke, at the University of South Caroline commencement (graduation). He advised the graduates that it is more important to be happy in your work than to seek high income without satisfaction. His advice sounded like advice from a parent. He also commented that people who win the lottery experience only a short period of happiness before returning to a “normal” level of happiness. Therefore, money cannot produce lasting happiness.
Questions for discussion: What job would you like to have that would make you happy? Why? Do you think this job would make you enough money? Why? How much money would you have to make to be a policeman? A bull rider? Why do you think more money does not make people happier (after a certain low level)?
Article Link: "Jobs growth aids recovery," Saturday, May 8, 2010, The Denver Post, 8B
- Recovery: the end of a recession. This time is measured by in increase in GDP after a period of decline. This is part of the business cycle when the graph starts to tilt up out of a “trough.”
- Jobless rate (Unemployment): this is a measure of how many people are employed. Only people who are looking for jobs are counted as unemployed. Discouraged workers, retired people, military, housewives and prisoners are not counted in the workforce.
- Economy: the total of all goods and services produced by a country in one year. The U.S. economy produces just over $14 trillion per year in goods and services.
- Net jobs: The number of new jobs subtracted by the number of lost jobs. When this number is positive (reported by the U.S. Bureau of Labor Statistics) it is a strong indication that the economy is recovering. Net new jobs are a lagging indicator of a recovery—it is one of the last statistics to show improvement.
- Sector: a major division of economic activity: e.g. agriculture, manufacturing, government, export, etc. Some sectors may be adding jobs while another sector is losing jobs.
- Employment trend: a series of monthly data that are consistently increasing or decreasing. In this article the new (net) jobs has increased for February, March and April. This encouraging trend indicates that the U.S. economy will continue to improve. Economists analyze trends and try to predict where the economy will head in the future.
- Unintended consequences: outcomes that are not the results originally intended by a particular event. The unintended results may be positive or negative but they are unforeseen. The concept has long existed but was named by American sociologist, Robert Merton. The Law of Unintended Consequences warns that an intervention in a complex system invariably creates unanticipated and often undesirable outcomes. In this article the unforeseen consequence of more jobs is an increase in the number of job seekers and therefore a higher unemployment rate.
Discussion: This article describes an encouraging increase in the number of net new jobs in the U.S. This increase indicates that the economic recovery is real and sustainable. The reason for the increased hiring is improved confidence among businesses that demand for their products and services will increase in the future. However, the unemployment rate also increased because the improved job situation has attracted discouraged job seekers back into the job markets.
Questions for discussion: The article’s author interviewed a woman who went to school to become a chef. Why do you think she went to school? What was her previous job and what do you think the prospects were for that previous profession? Why do people go back to college and trade school during recessions?
Handy Dandy Guide
6 core economic Principals
Colorado Model Content Standards for Economics
Economics is written by Dennis Grogran, Program
Director, Colorado Council for Economic Education. For information about
CCEE's other programs, call 303-752-2323 or e-mail firstname.lastname@example.org.