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 Jan. 30, 2011
Article Link: "In focus: Economic upheaval," Monday, Jan. 24, 2011, The Denver Post, 2A
- Foreign currency reserves: foreign money and bonds that are held in a country’s central bank as a result of international trade.
- Inflation: a rise in prices for the entire economy. As prices rise, the purchasing power of the currency declines.
- Economy: describes the total production, trade and consumption of a country’s goods and services.
- Working class: those employed in lower level jobs (for example, unskilled laborers with little education and lower incomes).
- Sovereign debt: public debt or national debt—money owed by a government.
- Currency: the coins and banknotes of a nation. Currency may have underlying value (gold or silver) or it may be fiat, meaning that only trust in the government is backing the currency.
- Black market: is trade or sale of goods and services that are not part of the official economy of a country; this may be legal activities where taxes are not paid, or illegal activities such as exchanging currency without government approval or selling drugs.
- State-run companies: a legal entity created by a government to undertake commercial or business activities on behalf of the government.
- Private enterprise: a commercial enterprise that is owned by private investors, shareholders or owners. An economic system where privately run businesses are the backbone of the economy is referred to as a market economy. This contrasts with a command economy, where industry is owned by the state.
Discussion: This article describes the situation of the economy in Vietnam. Refer to the map to see where Vietnam is located. The region of Southeast Asia is generally prosperous and has low inflation. Vietnam is the exception. It has state-run businesses that are holding back the economic development of the nation. There is a picture of a railroad track going down the middle of a poor, working class neighborhood. Inflation is over 10% and is making life difficult for working class citizens.
- Economic systems: people are free to create the economic system that best meets their needs and desires. Some countries have chosen a mostly market system while other countries have chosen a mostly command economy. Vietnam has chosen a command economy.
- Economic freedom: the freedom to produce, trade and consume any goods and services acquired without the use of force, fraud or theft. This is possible because of the rule of law, property rights and freedom of contract. A free economic system is open and relatively free of government controls and restrictions. A free economy also guarantees the protection of property rights and freedom of economic choice—for example, freedom to choose any job or to open a business. Vietnam is a relatively un-free economic system. (In 2008 Vietnam was ranked 108th out of 141 nations studied for economic freedom.)
Questions for discussion: Why do you think Vietnam has chosen to adopt a command economy? What kind of economy does the United States have? Why is it bad if prices are rising? What kind of life does a person have if they do not have a good education?
Article Link: "Consumer activity lifts economy," Saturday, Jan. 29, 2011, The Denver Post, 9B
- Consumers: individuals and households who purchase goods and services. Consumer spending accounts for about 70% of the U.S. economy.
- Unemployment: a measure of how many people are looking for jobs but cannot find work. The unemployment rate is calculated by dividing the number of people looking for work by all the people in the workforce. Many people are not counted as being in the workforce: discouraged workers, housewives, retirees, military and prisoners.
- Commerce Department: a department of the U.S. government concerned with promoting economic growth. Its mission is job creation and improving living conditions for Americans.
- Great Recession: The recession of 2007-2009. A recession is a prolonged period (6 months or longer) of declining output in a nation’s economy as measured by Gross Domestic Product (GDP).
- Social Security: is a social insurance program that pays older (over 62) American workers every month and which is funded through a payroll tax on working Americans and employers. It was started in 1935 and currently keeps about 40% of Americans over age 65 out of poverty.
- Economic recovery: refers to the period of the business (or economic) cycle when production has ceased declining and is beginning to increase. The next stage of the business cycle is the expansion (or boom) when economic conditions are very active and healthy. The U.S. is just beginning to show increases in recovery as shown in the graph attached to this article.
Discussion: The article describes how consumer spending has been increasing. This increase is helping the economy grow 3.2% in the last 3 months of 2010, according to the U.S. Commerce Department. If the economy continues to grow the unemployment rate is expected to decline. However, the current growth rate is not enough to reduce the unemployment rate. Growth would have to occur at a 5% rate to catch up with population growth and help currently unemployed workers.
Questions for discussion: Look at the graph showing GDP for the last 9 quarters. What do you notice? What happened in the 2nd Quarter of 2010? Some economists were worried about a “double dip” recession. The GDP graph shows why this was a worry. What is the current national unemployment rate? (Ans: 9.4%) Why do you think this recent recession was called the “Great Recession”? Why is consumer spending important to the U.S. economy?
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.