Chapter 20 Economic Challenges

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Chapter 20Economic Challenges

• Section 1 The Business Cycle
• Section 2 Coping with Economic Challenges
• Section 3 Labor and Management

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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 governments response to the Great
  Depression?

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Different parts of the business cycle
Section 1 The Business Cycle

• Expansion
• Peak prosperity
• Contraction or recession
• Trough or depression
• Expansion

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Old theories of the business cycle prior to the
Great Depression
Section 1 The Business Cycle

• 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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The Great Depression and the governments role
Section 1 The Business Cycle

• New Dealdesigned to provide jobs and create
  financial stability.
• Civilian Conservation Corpsyoung people were to
  restore natural resources
• FDIC and SEC created to insure funds and inhibit
  fraud

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The Great Depression and the governments role
(continued)
Section 1 The Business Cycle

• 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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SECTION 1
Question What are the different parts of the
business cycle?
contraction
peak
trough
expansion
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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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Economic problems and their causes
Section 2 Coping with Economic Challenges

• Inflationprices increase faster than wages
• Unemploymentunemployed workers cannot pay bills
  or purchase goods
• Recessionproduction, spending, and consumer
  demand decline
• Money and loanstoo much money in circulation
  leads to inflation

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Economic problems and their causes (continued)
Section 2 Coping with Economic Challenges

• Government and consumer spendingover-borrowing
  reduces savings, increases debt helps raise
  prices
• Productivityforeign productivity hurts American
  businesses contributes to unemployment

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The government addresses economic problems through
Section 2 Coping with Economic Challenges

• Changes in fiscal policyin a recession,
  government may lower taxes and increase
  government spending.
• Changes in monetary policyin 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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Citizens can aid the economy by
Section 2 Coping with Economic Challenges

• Increasing savingsconsumer savings give banks
  more money to lend to business.
• Reducing credit debtreduced debt can lead to
  more savings.
• Buying American-made products, which preserves
  and creates jobs in America.
• Increasing productivityefficient management and
  workers aid business and may increase wages.

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SECTION 2
Question How does the government address
economic challenges?

• reduce taxes
• buy more goods and hire more people
• give larger payments to unemployed, poor, and
  older citizens
• decrease wasteful spending

• 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

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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.
• 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?

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The rise of labor unions in the 1800s
Section 3 Labor and Management

• 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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The rise of labor unions in the 1800s (continued)
Section 3 Labor and Management

• 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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Methods of negotiation and major labor laws
Section 3 Labor and Management

• Workers methods strikes, picketers, job actions
• Employers methods blacklists and lockdowns
• Right-to-work lawsno one is forced to join a
  union
• 1935National Labor Relations Act or Wagner Act
• 1947Labor-Management Relations Act or
  Taft-Hartley Act
• 1959Landrum-Griffin Act

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The state of labor relations today
Section 3 Labor and Management

• 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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The state of labor relations today (continued)
Section 3 Labor and Management

• Mediators make nonbinding recommendations to end
  a strike.
• Arbitrators make binding decisions to end a
  strike.

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SECTION 3
Question What is the status of labor relations
today?
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Chapter 20 Wrap-Up
1. What was governments response to the Great
Depression? 2. How did the governments 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?