At The End of This Lesson You Will:

1
At The End of This Lesson You Will

• Be better able to illustrate how the macro
  economy impacts our individual lives (ESO 7
  Syllabus)
• We will begin to Identify, Compare, and Contrast
  current macroeconomic issues for significance on
  the functioning of the overall U.S. Economy (ESO
  4 Syllabus)

2
Economic History From the Depression to the
Present

• America Emerging from the 1930s
• World War II
• Growth of Federal Government
• Automobile, Housing, and Suburbia
• The Eisenhower Years
• The Kennedy/Johnson Years
• Stagnation of the 1970s OPEC
• The Reagan Years
• The Roaring Nineties
• Most Pressing Economic Issues of the 21st Century

3
America Emerging from the 1930s

• America, the worlds leading industrial economy
• Underemployment Unemployment at 17 and
  underutilization of industrial capacity
• The New Deal Programs Relief, Recovery, Reform
• Public Works Jobs Work for your Welfare
• Increase in income would translate into spending
  which would bring recovery
• Social Security System, FDIC, SEC, Unemployment
  Insurance Programs of Reform
• Politically, both Germany and Japan expanding by
  imperialist expansion

4
World War II

• Massive Federal Spending brings U.S. Economy to
  Full Employment Ends the Depression of the 30s
• Destruction of European and Asian (Especially
  Japanese) Economic Infrastructure
• U.S. Soviet Union emerge as world Superpowers
• Beginning of the Cold War -- Ensured continued
  Defense Spending
• U.S. Birthrate sky rockets The Baby Boomer
• U.S. accounted for ½ worlds production with 7
  of worlds population

5
The Growth of the Federal Government

• Reconstruction of European and Japanese economies
• Defense of those economies Again, the Cold War
• G.I. Bill of Rights Education/Home
  Ownership/Small Business
• Housing FHA, VA,
• New Deal Reform Programs not Dismantled
• The Great Society Programs L. B. Johnson
• Korea, Vietnam, Middle East
• Environmental Protection
• Business Regulation
• Fiscal Policy/Monetary Policy Muscle

6
The Automobile, Housing Suburbia

• Tremendous Housing Shortage Following WWII
• Government Housing Support
• Automobile enabled construction of the suburbs
• Highway construction/Suburban housing
  developments
• Flight of people and business from the cities
• Decay of the cities All across America, from
  small towns to major metropolitan areas

7
The Eisenhower Years

• The Consumer is King
• Korean War Ends
• Construction Boom Interstate Highway System
• Inflation brought under control, despite three
  mild recessions
• New Deal Programs kept intact by a Republican
  President

8
The Johnson/Kennedy Years

• Tax Cuts to stimulate the economy A democratic
  president
• The Vietnam War (1963-1975)
• The Great Society Welfare Programs
• Medicare/Medicaid
• Food Stamps
• Other Welfare Programs
• Federal Deficits and Inflation

9
Stagnation of the 1970s World Oil Crisis

• OPEC Organization of Petroleum Exporting
  Countries
• Recession (November 1973-March, 1975)
• Fourfold increase in Price of Oil
• Double digit inflation
• Double digit unemployment
• Stagflation
• The Federal Reserve use of Monetary Policy
• Vietnam War Ends

10
The Reagan Years

• Government is not the solution to our problem.
  Government is the problem.
• Supply Side Economics A Born Again Classical
  Approach
• Incent Business to Produce and Workers to work
• Tax Cuts
• Deregulation
• Recession of 1981-82 -- Worst Recession Since
  1930s Federal Reserve Restricts Money Supply
• Problems of the Reagan Years
• Relatively high unemployment 6
• Federal Deficit Spending
• Foreign Trade Deficits

11
The Roaring Nineties

• Longest Period of Sustained Economic Growth in
  the history of the country (April, 1991-February,
  2001)
• Tremendous Period of Technological Change The
  Computerization of America
• Tremendous Growth of Productivity
• Low levels of Inflation
• Low levels of Unemployment
• High levels of economic growth
• Control of Federal Spending (Clinton Defense)
• Budget Surpluses

12
The Age of the New Economy

• Never Again would U.S. Economy face recessions,
  unemployment and inflation worries
• Fundamental Changes had ushered in a New
  Economy Changes led by
• Higher Levels of Technological Innovation and
  accompanying improvement of Productivity
• More efficient organization of Business
  (Information Driven, Elimination of Middle Mgmt,
  Empowerment)
• Enlightened Government Policy
• Interaction of these Changes
• Aftermath Recession of 2001 Collapse of the
  Technology Sector

13
Pressing Issues of Our Time

• Globalization of the American Economy
• Imports verses Exports Trade Deficits
  500-600B/year
• Overvalued American Labor in a World Labor Market
  (Outsourcing)
• High Cost American Production Processes in a
  World Production Market
• Movement toward more Free Trade
• Fiscal Policy Run Amok? Budget Deficits _at_
  450-550B/Year
• Massive Consumer Debt
• Baby Boomer Dilemma (77 Million BBs will begin
  partaking of Federal Benefits rather than
  contribute to them
• Future Sources of Energy (Oil)
• Democratization of all Nations of the World to
  Ensure Peace (Cost of the Bush Political Agenda)

14
Waiting for the Bubble to Burst

• Economy seems to have recovered from the
  recession of 2001, albeit very slowly
• Economy seems okay in the short run. . .
• But When Will the Pressing Issues Cause the
  Bubble to Burst? That is the Question!
• How long can the consumer continue to spend with
  his debt load?
• How can the U.S. Economy withstand Job
  Outsourcing and Relocation of Production to
  Foreign Countries?
• How long can the Federal Government Continue to
  Expand the National Debt at Current Rates?
• How long can the Current Trade Deficit Continue
  without causing a downturn in world confidence in
  the U.S. Economy?
• How will the country finance 77 million BBs
  drawing Medicare and Social Security Benefits?

15
Review Expected Student Outcomes

• Illustrate how the macro economy has impacted our
  lives in the 20th Century
• Our economy today has been marked by a number of
  major events, including
• Growth of innovation and technology
• The Great Depression of the 1930s
• Two World Wars and several smaller conflicts
• The Super Power and the Cold War
• Globalization of U.S. economy
• The Growth of the Government Sector
• The Future of the U.S. economy is uncertain

16
Review Expected Student Outcomes

• Current macroeconomic issues and their
  significance
• Demographics The Baby Boomer (78 million)
• Future Energy Supply
• Chronic Consumer Debt/Lack of Savings
• Democratization of the world (Bush Agenda)
• Federal Deficit Spending
• Future demands on Social Security and Medicare
• International Trade Deficit
• The House of Cards Economy!

17
For Next Time

• Read Chapter 2, Pages 23-29
• Multiple Choice Questons, 1-9, 16-23, (pages
  41-43)
• Fill the Blank Questions, 1-3 6-9

18
For Next Time

• If you had to state the central issue(s) of the
  social science of economics in a short paragraph,
  what would you say?
• List and briefly describe the four factors of
  production.