Return to flip book view

GUIDED NOTEBOOKTEACHER For the Virtual Virginia Economics Coursewww.VCE E.o rg

About Truist FoundationThe Truist Foundation is committed to Truist Financial Corporation’s (NYSE: TFC) purpose to inspire and build better lives and communities. Established in 2020, the foundation makes strategic investments in nonprofit organizations to help ensure the communities it serves have more opportunities for a better quality of life. The Truist Foundation’s grants and activities focus on leadership development, economic mobility, thriving communities and educational equity. Learn more at www.truist.com/truist-foundationThe Virginia Council on Economic Education (VCEE) received a grant from Truist Foundation to support the revised Economics and Personal Finance Online Course and to better lives and drive meaningful change in communities.About Virginia Council on Economic EducationOur mission is simple: to provide Virginia’s K-12 students with the economic knowledge and financial skills needed to thrive in our dynamic economy. VCEE provides quality pro-fessional development opportunities for K-12 teachers to assist them in teaching econom-ics and personal finance. With the support of donors and partners, VCEE institutes and workshops are provided at no cost to teachers or school divisions. Learn more at https://vcee.org

To the Teacher: What follows is a duplicate of the Student Version of the Guided Notes with solutions added in red. The Guided Notes are a resource for students in the Virtual Virginia Online Economics course. They are provide a tangible supplement to the virtual course materials to help students reinforce, recall, and review the work that they complete online. It serves as a learning tool for students and can also be used as an alternative assessment and resource for teachers. Student use the Guided Notes to; ❖Identify areas where they have questions or difficulties so they can ask for help ❖Make notes and identify areas to review before completing summative assessments ❖Summarize the main idea(s) of each Module after considering the Module introduction ❖Identify important concept highlighted in each lesson’s introductory visual (Bellringer) ❖Review the important vocabulary that is bolded in each lesson ❖Complete NEW (i.e. not in the online course) assessments to show mastery of important lesson vocabulary ❖Complete NEW (i.e. not in the online course) assessments related to videos that do not have formative assessments in the online course ❖Fill in answers to the Check Yourself questions that are provided in the online course ❖Provide responses to the Think About It questions from the “a” lessons in the online course, which require no online student response ❖Provide written answers (or revised answers) to the Homework questions required in the “b” lessons in the online course that are submitted for grading in the online course ❖Complete a practice exam while preparing for the end-of-course exam Teachers can use the Guided notes to; ❖Provide support for student learning, emphasize important vocabulary, and serve as an alternative assessment of student efforts and learning in the course. ❖Have students stop and think about the importance of the content they are about study by writing in the “boxes” at the start of the Guided Notebook Modules and Lessons ❖Complete the NEW assessments that focus on course vocabulary and videos that do not have formative assessments in the online course. These serve as both an incentive for students to spend time learning the new vocabulary and watching videos and an additional assessment of student learning. ❖Fill in blanks with in the responses to Check Yourself questions in the online course. This reinforces the content the assessments target and helps to make sure that students are completing the ungraded course activities (e.g. watching videos and completing interactives). ❖Respond in writing to the Think About It “boxes” so that teachers can review and respond to their thinking. ❖Use the Homework “boxes” to show either a draft of answers to homework questions submitted for a grade or provide an opportunity for a second attempt to complete the homework.

Virginia Council on Economic Education Table of Contents Suggestions for using this Guided Notebook……….………………………….…….2 Module 1 …………………………………………………………………………………………………………………3 Module 2 …………………………………………………………………………………………………….….…….26 Module 3 ………………………………………………………………………………………..….………….….….50 Module 4 ……………………………………………………………………………………………………………. 75 Module 5 ……………………………………………………………………………………………..…….……… 100 Module 6 …………………………………………………………………………………………………….…… 121 Module 7 …………………………………………………………………………………………………………… 146 End-of-course Practice Exam.……………………………………………………………….……167 Practice Exam Solutions ……..………………………………………………………………….……175 1

Suggestions for using this Guided Notebook

Virginia Council on Economic Education Suggestions for Using this Guided Notebook 1. Print the Guided notebook and insert it into a binder. 2. Be careful to note and follow any instructions from your teacher. 3. Fill in the Guided Notebook as you complete the online lessons. •Module introduction – review the materials and identify the general content of the module before you begin •Lesson introduction – start by identifying the topic of each lesson •Vocabulary – review the list of new vocabulary terms and complete the vocabulary activity (when one is provided) •Write in the correct answers to the “Check Yourself” features in the online course •Complete any additional “Check Yourself” features provided •Write your response to each end-of-lesson “Think About it” feature or Homework assignment 4. Makes a note identifying any area where you have a question or difficulty. 5. Mark areas review before completing exit slips, module exams, and the end-of-course exam. 6. Check with your teacher for answers to questions when they are not provided in the online course. 7. Review your Guided Notebook before completing exit slips and module exams. 8. Use the practice exam to review for your end-of-course exam. 9. Contact your teacher if you have any questions or need help with any lesson or module! 2

Module 1

Virginia Council on Economic Education MODULE 1 Basic Economic Concepts Module topic – Based on the Module introduction, what do you think is the major theme of this module? Write your response in the box below. Lesson 1a: Scarcity, Trade-offs, and Opportunity Costs Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Scarcity- there are not enough resources to have everything you want. B. Trade-off- you must give up something to get something else. C. Opportunity cost- the value of the next best alternative to what is chosen. D. Production Possibilities Curve- a graph that illustrates the alternative combinations of output you can produce. 3The main theme of the module is the definition of economics. Relate terms include; choices, decision-making, scarcity, trade-offs, allocating resources.Decision making or opportunity cost

Virginia Council on Economic Education __C__ 1. You lose the value of two hours of sleep in the morning if you go to breakfast with your mom. __B__ 2. A community college has lower tuition but does not participate in intercollegiate sports. __D__ 3. You can earn $100 per week and spend 5 hours socializing with your friends, earn $200 per week and spend 1 hour socializing with your friends, or earn $0 per week and spend 20 hours socializing with your friends. __A__ 4. There is not enough time on Saturday to complete your chores, finish your homework, watch a movie with your friends, and sleep until noon. Watch it (MJM Foodie: What is Economics?) Write the correct word or phrase, (unlimited, limited, equal to, greater than) in each blank. Scarcity exists because resources are _______limited________ and wants are ____unlimited____. When a good is scarce, its price will be ____greater than____ zero but if the good is not scarce, its price will be _______equal to _______ zero. Watch it (CEE: Scarcity) Write the correct answer from the formative assessment in each blank. 1. It is not desirable 2. It has many uses 3. All of these options 4

Virginia Council on Economic Education 4. Wants, resources Watch it (CEE: Opportunity Cost) Fill in the blank with a correct term. 1. When economists say “There is no such thing as a free lunch” they mean that every choice has a(n) _________opportunity cost____________. 2. People and governments compare _______benefits (costs)__ and _______costs (benefits)__ of each alternative to make decisions. Check Yourself (Production Possibilities Curve) Write the correct answer from the Check Yourself in each blank. 1. __ A__ 2. __D__ 3. __B__ and __C__ 4. __F__ 5. __E__ Think About it Great News! You have earned a full-ride scholarship for 4 years at your favorite college. Even though there are no monetary costs for going to college, you still have trade-offs and things that you will give up if you accept the scholarship. What are three opportunity costs associated with the decision to accept the scholarship? Write your response in the box. 5Example responses: 1. Income that could have been earned from working rather than going to college 2. Experience and skills that could have been earned form working rather than going to college 3. Enjoyment from working, if working is preferred to going to college Anything that was given up as a result of going to college1. 2. 3.

Virginia Council on Economic Education Lesson 1b: Factors of Production, Marginal Cost and Marginal Benefit Write the economic concept addressed by the introductory cartoon/visual in the box below. Vocabulary Resource – something used to produce something else. Also known as factors of production. There are four categories; land, labor, capital, and entrepreneurship. Land – the land category of resources includes the ground and all natural things on and under the land, e.g. water, trees, minerals. Also known as natural resources. Labor – labor refers to the efforts that workers are paid to make at work. Labor is an example of a human resource. Capital – a capital resource is anything that is used to produce something else, for example machinery and tools. Entrepreneurship - the activity of coming up with a new idea and organizing factors of production to produce a new product. An entrepreneur has the idea and takes the risk to create a new product. An entrepreneur is also a human resource. Marginal – a marginal value is the value of an additional unit. For example, marginal cost is the additional cost of producing an additional unit and marginal benefit is the additional benefit of consuming an additional unit. List each of the following resources in the column (or columns!) where it fits in the table below. A teacher, a hammer, a farm field, a river, an entrepreneur, a truck driver, a factory. Land: farm field, river Labor: teacher, truck driver Capital: hammer, factory Human resource: teacher, entrepreneur, truck driver Natural resource: farm field, river 6Factors of production

Virginia Council on Economic Education Watch it (MJM Foodie: Resources) Joe and his partner were entrepreneurs who opened a business that later became what large, successful company? Write the name of the company in the space below. ________Starbucks_________________________________________ Check Yourself (Matching) Write the match for each resource type in the blanks below. Labor _____Sally working for 10 hours________ Capital _____a sewing machine________________ Entrepreneur _____a baker opening up her own bakery__ Land _____10 gallons of water______________ Check Yourself (Roll the Die) Write the answer to each roll of the dice in the blanks below. 1. __Land 4. __False__ 2. __Capital 5. __True__ 7

Virginia Council on Economic Education 3. __An entrepreneur 6. __True__ Homework List the four categories of resources. Assume you decide to earn some spending money by offering to clean out garages or sheds. List and describe the specific resources that you might need for this job. Are there any categories of resources that you might not need to produce this service? Explain which ones, if any. Write your response in the box below and submit it in Canvas. Lesson 2a: Choices Have Unintended Consequences Write the economic concept addressed by the introductory cartoon/visual in the box below. 8See homework rubric for answersUnintended consequences

Virginia Council on Economic Education Vocabulary Unintended consequence – an unexpected result or outcome of an action. Positive unintended consequence- when an action has an unexpected benefit. Negative unintended consequence – when an action has an unexpected cost. Label each of the following as a positive unintended consequence (P), a negative unintended consequence (N), or not an unintended consequence (X). __X__ 1. You don’t study for a quiz and your quiz grade is low. __P__ 2. Helping a friend study for an exam raises your exam grade. __P__ 3. You start exercising to increase your fitness and find you start sleeping better. __N__ 4. A rule mandating attendance causes sick students to come to class and spread illness. Check Yourself (Individual’s unintended consequences) Write whether each decision has positive or negative unintended consequences in the blanks. Individual Decision: _____Negative unintended consequence_____ Business Decision: _____Positive unintended consequence_____ Government Decision: _____Negative unintended consequence_____ 9

Virginia Council on Economic Education Check Yourself (Drag and Drop) Write the description of each activity in the appropriate box. Negative intended Positive intended Negative unintended Positive unintended Think About It In an effort to increase standardized test scores, your school district has mandated that each class taken during the day must have at least 20 minutes of homework per night. What are 3 possible unintended consequences (positive or negative) from this action? Write your answer in the box below. 10Your teacher gives quizzes when she knows you have not read the materialLaws enforcing a noise ordinance force the cancellation of the county’s annual July 4 fireworks displayRent control leads to lower prices for renting apartmentsHigh taxes on gasoline lead to weight loss from more people riding bikesExamples: Students take fewer classes Parents and children bond more over homework help Participation in after school activities decreases

Virginia Council on Economic Education Lesson 2b: Using Marginal Cost and Marginal Benefit for Decision Making Write the economic concept addressed by the introductory cartoon/visual in the box below. Vocabulary Marginal Analysis – an action should be undertaken if the marginal benefits are greater than the marginal costs. PACED Model- a tool used for making decisions. Problem- the decision to be made using the PACED model. Alternatives- different options that may be chosen when using the PACED model. Criteria- the bases on which the decision will be made when using the PACED model. Evaluate- the process of determining which alternatives meet which criteria when using the PACED model. Decide- the final step in the applying the PACED model. Label the step in the PACED decision-making model that goes with each of the following; __E__ 1. Two of the colleges I am considering are in the location I prefer but the other 3 are not. __A__ 2. There are 5 collages I am considering. __D__ 3. The best college for me to attend is the University of Mary Washington. __C__ 4. I want a nearby college with a strong academic reputation and equestrian team. __P__ 5. I need to decide what college I want to attend next year. 11Weighing marginal costs and marginal

Virginia Council on Economic Education Check Yourself (Matching) Write answers to the Check Yourself questions in the blanks below. __Problem____ Sam’s mother asked him to make dinner for the family tonight using the pound of ground beef in the refrigerator. __Alternatives__ With one pound of beef, Sam can make hamburgers, tacos, or meatloaf. __Criteria______ Easy to prepare, healthy, and something everyone in the family likes to eat. __Evaluate_____ Hamburgers are easy to cook so Sam puts a “+” in the easy to cook criterion. __Decision_____ The number of “+” signs for tacos is higher than that of hamburgers or meatloaf so Sam makes tacos Homework In order to make good decisions, carefully evaluate the alternatives. Using the PACED grid below, create an example of how you could use the grid to make a decision. State the problem clearly, list 3 alternatives, list 3 criteria by which your decision is evaluated, evaluate the possibilities, and state your decision based on the criteria and alternatives provided.Write your answer in the table below and submit it on Canvas. Problem: Evaluate: Decision: PACED Decision GridCriterion 1:Criterion 2:Criterion 3:Alternative 1:Alternative 2:Alternative 3: 12See homework rubric for answers

Virginia Council on Economic Education Lesson 3a: Incentives and How They Influence Behavior What economic concept does the introductory cartoon/visual introduce? Vocabulary Positive incentive- a reward that encourages someone to behave in a certain way. Negative incentive- a penalty that discourages someone to behave in a certain way. Label each of the following incentives as positive (P) or negative (N). __P__ 1. Buy one pair of shoes and get the second pair free. __N__ 2. Library books are checked out free for a week but there is a fee if not returned on time. __N__ 3. Assignments turned in late lose one letter grade per day after the deadline. __P__ 4. Receive a t-shirt if you donate to a worthy cause. Watch it (CEE: Incentives) Write the answers to the video questions in the spaces below. 1. _____both buyers and sellers___________________ 2. _____non monetary _________________________ 3. __people respond to incentives_________________ 4. _____profit________________________________ 13Incentives

Virginia Council on Economic Education Check Yourself (Incentives) Write the answers to the Check Yourself questions in the blanks below. 1. ____positive, negative_____ 2. _____negative, positive_____ 3. _____positive, negative_____ 4. _____positive, negative_____ Think About It In this lesson you learned that incentives can be used to influence our behavior. Say that your teacher wants you to work on a group book report for class, but wants to make sure that everyone is participating. What are one positive incentive and one negative incentive that your teacher could use to get all members of the group to read the book and put together a final project? Write your answer in the box below. Lesson 3b: Consumers, Producers, Workers, Savers, Investors, and Incentives Write the economic concept addressed by the introductory cartoon/visual in the box below. 14Answers will vary. For example; (positive) add bonus points to the report grade if all group members participate (negative) take off 10 points if all members do not participate(people respond to) incentives

Virginia Council on Economic Education Vocabulary Competition- when multiple businesses work to be the most successful in a market. Profit- the money that a business earns in excess of its costs. Wages- money paid by firms to workers for their labor. Benefits- non-monetary incentives paid to workers for their labor, for example insurance or vacation time. Interest- payment for the use of money, for example a bank paying for deposits in a savings account. Fill in the blank with the appropriate vocabulary word. A business will pay its workers ____wages______ for their labor and may also provide them with sick leave, daycare, or other __benefits____. Borrowers pay __interest_______ when they receive a loan from a bank. Banks engage in __competition________ with other banks by raising the ___interest______ rate they pay on savings accounts. Check Yourself (Incentives) Write the answer to the Check Yourself questions in the blanks below. 1. __increase work ____________________________________ 2. __buy less _________________________________________ 3. __decrease production ________________________________ 4. __increase amount invested____________________________ 5. __vote for the politician_______________________________ 15

Virginia Council on Economic Education Check Yourself (Matching) Write the answers to the Check Yourself questions in the blanks below. Consumers _____low prices___________________________ Producers _____profit________________________________ Workers _____pay and benefits_________________________ Savers _____interest earned____________________________ Investors _____capital gains______________________________ Politicians _____votes_________________________________ Homework Explain how savers would respond if the interest rate on savings accounts increased. Would they increase or decrease their amount of savings? What about borrowers? Would they increase or decrease their amount of borrowing if the interest rate on loans increased? Explain why. Write your answer in the box below and submit it on Canvas. 16See homework rubric for answers

Virginia Council on Economic Education Lesson 4a: The 3 Economic Questions and the Role of Entrepreneurship Write the economic concept addressed by the introductory cartoon/visual in the box below. Vocabulary What, How, and For Whom- the three economic questions that any economy must answer regarding the production and distribution of resources. Economic system- the method of allocating resources and distributing goods and services within a society. Traditional economy- answers the 3 questions with “what has always been done.” Command economy- the government answers the 3 questions for society. Market economy- the three questions are answered by the interaction of consumers and producers in markets. Mixed economy- answers the 3 questions using some elements of a market economy and some elements of a command economy. List the way that command and market systems answer What, How, and For Whom. 17The 3 economic questions COMMAND MARKET MIXEDWhat: consumers How: producers For Whom: pricesWhat: government How: government For Whom: government

Virginia Council on Economic Education Check Yourself (Three questions) Write the answers to the Check Yourself questions in the blanks below. 1. __How______________________________ 2. __For whom__________________________ 3. __What_______________________________ Watch it (MJM Foodie: Economic Systems) Label each of the following methods of allocating a scarce good with the corresponding economic system (market, command, mixed, traditional). ___command__________1. The government distributes the good equally. ___mixed____________ 2. Key goods are allocated by the government, others by the market. ___market____________ 3. The good goes to whoever pays its price. ___traditional_________ 4. The good is given to the people who have had it in the past. Check Yourself (Matching) Write the match for each resource type in the blanks below. Traditional Economy: Answers the 3 economic questions by relying on cultural and long-established practices. Market Economy: Answers the 3 economic questions by consumers “voting” with their dollars. 18

Virginia Council on Economic Education Command Economy: Answers the 3 economic questions by government control. Mixed Economy: Answers the 3 economic questions through both consumer and government decisions. Think About It Say your favorite flavor of ice cream is chocolate. For each of the economic systems, explain if it would be possible to buy your favorite ice cream whenever you want it. Write your answer in the box below. Lesson 4b: Entrepreneurship Write the economic concept addressed by the introductory cartoon/visual in the box below. 19Market: yes, if you have the income to afford it Traditional: only if you have gotten it in the past Mixed: yes, if ice cream is allocated int eh market Command: no, only when the government allocates itEntrepreneurship

Virginia Council on Economic Education Vocabulary Private enterprise- any business not owned by the government. Risk- the possibility that something unexpected will happen. Watch it (Kauffman Foundation: Entrepreneurs) Check Yourself Note: Watch the Kauffman video first! List the benefits and role of entrepreneurs in the appropriate columns. Benefits of becoming an entrepreneur Role of entrepreneurs 1. Additional services offered to attract 1. Create jobs customers 2. Flexibility of your schedule 2. Birth new ideas through innovation 3. Lower prices due to competition 3. Create new net wealth Check Yourself (Roll the Die) Write the answer to each roll of the dice in the blanks below. 1. _____All of these____________________________________ 2. _____A dress shop___________________________________ 3. _____Resources_____________________________________ 4. _____Profits________________________________________ 20

Virginia Council on Economic Education 5. _____They will always make a profit____________________ 6. _____Mixed or market economies_______________________ Homework Researchoneof the entrepreneurs below to answer the questions that follow: ▪Richard Branson ▪Coco Chanel ▪Anita Roddick ▪Martha Stewart Questions 1. Name the entrepreneur chosen and indicate which country they are from. 2.What product or service did this entrepreneur create? 3.Are they alive or deceased? 4.Is the product or service created by this entrepreneur something you have used before? Have you heard of it? 5.Write 1–2 sentences about something you learned about this entrepreneur that is not included in the other questions. Write your answer in the box below and submit on Canvas. 21See homework rubric for answers

Virginia Council on Economic Education Lesson 5a: Adam Smith’s Theories Write the economic concept addressed by the introductory cartoon/visual in the box below. Vocabulary Adam Smith- the “father” of modern economics. Specialization- focus on production of one good for efficiency and lower costs. Wealth of Nations- Adam Smith’s renowned book, published in 1776. Self-interest- seeking one’s own personal gain. Podcast (St. Louis Fed: Self-interest and Competition) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. _____Adam Smith___________________________________________ 2. _____Competition___________________________________________ 3. _____Self-interest is held in check by competition__________________ 4. _____They are self-interested___________________________________ 5. _____Self-interest____________________________________________ Watch it (CEE: Specialization) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. _____specialization______________________________________________ 22Adam Smith and /or Invisible hand

Virginia Council on Economic Education 2. _____specialization______________________________________________ 3. _____assembly line______________________________________________ 4. _____lowers skill level___________________________________________ 5. _____increases__________________________________________________ Watch it: (MRU: Voluntary Trade) Fill in the blanks with the appropriate term. Voluntary exchange makes the people involved better off. It also increases an economy’s output through division of____labor_____ and ____specialization__________ of capital (for example, shipping containers). Think About It Competition causes businesses to keep their prices lower than they might without others trying to gain their customers. Think of your town. What is an example of competition leading to a decreased price of a product? Write your response in the box below. Lesson 5b: Consumer Sovereignty, Profit Motive, and Limited Government Write the economic concept addressed by the introductory cartoon/visual in the box below. 23Examples will vary. E.g. The price of produce decreases when it is harvested and there are lots of sellers. E.g. The price of laptop computers has decreased over timeMarket economy

Virginia Council on Economic Education Vocabulary Private ownership- individuals are allowed to own property and use it in any legal way they see fit. Consumer sovereignty- the desires of the consumers control the goods that will be produced. Voluntary transactions- individuals buy or sell willingly and without coercion. Check Yourself (Roll the Dice) Write the answer to the Check Yourself questions in the blanks below. 1. __True__ 2. __True__ 3. __False__ 4. __True__ 5.__True__ 6. __True__ Check Yourself (Voluntary Transactions) Write your answers to the Check Yourself questions in the blanks below. 1. ___yes_________________________________ 2.___because I act of my own free will_________ 3.__true__________________________________ 24

Virginia Council on Economic Education Watch it (Vulcan Productions, We the Economy: Cave-o-nomics) Fill in the blanks below based on descriptions in the video. 1. ___Competition_______________ drives innovation. 2. ____Innovation________________ drives productivity. 3. ____Productivity_______________ drives profit. Homework One of the characteristics of a market economy is private ownership of resources. Not all countries protect private ownership of resources equally.Go to the Heritage Foundation website(Links to an external site.)for data on the Economic Freedom Index for the United States. What is the current ranking of the United States in the Economic Freedom Index (#1-5, #6-10, 11 or above)? Does this surprise you? Did you expect the ranking to be higher or lower than it was? Write your answer in the box below and submit it on Canvas. 25See homework rubric for answers

Module 2

Virginia Council on Economic Education MODULE 2 Consumers and Producers Module topic – Based on the Module introduction, what do you think is the major theme of this module? Write your response in the box below. Lesson 1a: Consumers Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Consumer- a person who purchases goods and services for personal use. B. Buyer- another term that is sometimes used to refer to a consumer. C. Households- all of the people within a dwelling. D. Good- tangible item that can be touched. E. Service- an action that a person does for someone else. F. Utility- the satisfaction provided by goods and services. G. Marginal Utility-the added utility from consuming an additional unit of a good or service. H. Law of Diminishing Marginal Utility- as you consume more and more of a good or service, the additional satisfaction (utility) from consuming additional units goes down. I. Factors of Production- Resources such as land, labor, capital, and entrepreneurship. J. Product Market- a market where consumers purchase goods and services. K. Factor Market- a market where factors of production are sold. __J__ 1. A town’s weekend farmer’s market. 26The main theme of the module is Consumers and ProducersConsumer satisfaction (satisfying needs and wants)

Virginia Council on Economic Education __I__ 2. Workers, machinery, and natural resources. __F__3. The enjoyment you get from going to see a movie. __A__4. Someone who buys themselves a new video game (NOT a buyer). __C__ 5. A group of roommates who chip in to buy groceries every week. __B__ 6. Another term for a consumer. __D__ 7. A pair of pants. __H__ 8. I rate the first scoop of ice cream a “7” and the second scoop of ice cream a “5”. __G__ 9. The extra benefit I get from having a second pair of sneakers. __E__ 10. A haircut. __K__ 11. The market for labor. Watch it (CEE: Consumers) Write the correct answer from the video quiz in each blank. 1. What does every decision have in common? __Opportunity costs________________ 2. Which of the following is a tangible item? __Food___________________________ 27

Virginia Council on Economic Education 3. Consumers compare what before making a choice? __Costs and benefits___________ 4. Which of the following is the service? __Movie ticket_________________________ 5. What is the term to describe people who use __ Consumer______________________ goods/services to satisfy their personal needs? Check Yourself (Goods and Services) Place each item in its appropriate category. Goods: Apple, bottle of water, car, and pair of shoes Services: Concert, doctor visit, car repairs, movie theater ticket Watch it (MJM Foodie: Diminishing Marginal Utility) Check Yourself Fill in the blanks with the correct term. ___Consumers______________ are people who use goods and services to satisfy their needs and wants. The satisfaction from consuming goods and services is called _____utility____________. Consumers want to __maximize___________ their total utility. The additional utility from consuming a good or service is __marginal utility__________. As a consumer consumes more of a good or service, the additional satisfaction of consuming the additional units goes down. This is called the law of __ diminishing marginal utility_________________________________. Check Yourself (Diminishing Marginal Utility) Write your response in the blank below. 28

Virginia Council on Economic Education 1. What is Sandra's marginal utility from consuming the second pancake? ___15____ 2. How much additional utility did Sandra get from consuming the fourth pancake?__ 0__ 3. What happens to Sandra's utility if she consumes a fifth pancake? ___It decreases___ 4. Does Sandra's consumption of pancakes exhibit diminishing marginal utility? __Yes__ Think About it When producers offer BOGO pricing (buy one, get one free), they are lowering the price on the second unit of the good purchased. What happens to the additional utility a consumer receives from purchasing a second pizza or pair of shoes compared to the first? How can the law of diminishing marginal utility explain the use of BOGO pricing? Write your response in the box below. Lesson 1b: Consumer Sovereignty What economic concept does the cartoon/visual introduce? Write your response in the box below. Vocabulary A. Consumer Sovereignty- choices of consumers influence what is produced. 29The law of diminishing returns says that the marginal utility of additional units of a good decrease. Because the marginal utility of a second unit is lower, consumers will not pay as much for it. BOGO lowers the price of a second unit so that people will buy more. Consumer sovereignty/Consumer confidence/Consumer choices

Virginia Council on Economic Education Watch it (MRU: Consumer Choice and Budget Constraints) Check Yourself Write the answer to the Check Yourself questions in the blanks below. 1. Consumer choices influence producer output. This is called __Consumer Sovereignty___. 2. All factors that affect a decision __are not_____ within the control of the decision-maker. 3. Consumer choices are made __at the margin_______________________. 4. In making decisions, consumers compare costs and __benefits_____________________. 5. __Budget constraints_________ are all possible products bought given a limited income. 6. ___Preferences_______________ and prices both affect decisions that consumers make. Check Yourself (Drag and Drop) Indicate Sandra’s choices in the spaces below. Sandra’s first choice: __1st order of bacon________________________ Sandra’s second choice: __2nd order of bacon_____________________ Sandra’s third choice: __1st pancake____________________________ Sandra’s fourth choice: __2nd pancake___________________________ Sandra’s fifth choice: __3rd pancake_____________________________ Sandra’s sixth choice: __4th pancake_____________________________ 30

Virginia Council on Economic Education Homework Write your answer in the space below and submit it on Canvas. The table below shows themarginalutility from consuming mini pizzas and sodas. If pizzas and soda are the only goods and the price of a mini pizza is $1 and the price of a soda is $.50, how many of each will maximize utility if you have $4 for lunch? 1. Calculate the marginal utility per dollar for sodas. Show your work. 2. List each sequential decision made to maximize utility. 3. How many pizzas and sodas maximize utility? Number of PizzasMarginal U4lityNumber of SodasMarginal U4lity0000110162925343142415050 31See homework rubric for solution

Virginia Council on Economic Education Lesson 2a: Human Capital What economic concept does the cartoon/visual introduce? Write your answer in the box below. Vocabulary A. Human Capital- a worker's experience, knowledge and skills. B. Hard Skills- specialized knowledge, such as writing ability, fluency in a 2nd language, software proficiency, or machine operation ability. C. Soft Skills- traits of a good employee, such as arriving to work on time, teamwork, problem solving, and getting along with others. Label each of the following as a hard skill (H) or a soft skill (S). __S__ 1. Surupta is good at providing constructive feedback to her coworkers. __H__ 2. Jimin is great at computer coding. __S__ 3. Kyle has exceptional time management skills. __H__4. Maggie creates impressive PowerPoint presentations. Watch it (CEE: Human Capital) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. Human capital is the ___ skills, knowledge, and experience______________ of a worker. 2. A worker can improve their human capital by __ attending a professional conference___. 32Human Capital

Virginia Council on Economic Education 3. Gaining more education is a good economic decision when the financial benefit of the education __is more than______________________ the cost of the education. 4. Businesses __gain____________ when their workers improve their human capital. 5. When attending college, an opportunity cost is the sacrifice of __income that could have been earned_______________________________. 6. Which of the following are forms of investing in your own human capital? Select all that apply. Attending workshops related to your occupation, Gaining experience in a job, Attending conferences related to your occupation, and Earning a college degree. Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. What is the difference in weekly earnings between a high school graduate and a high school dropout? ___$185_______ 2. By how much does a college degree (e.g., bachelor's degree) increase weekly income above a high school graduate? __$459_______ 3. What happens to a person's chance of being unemployed as their education level increases? _It decreases_________________________ Check Yourself (Occupations & Skills/Knowledge) For each occupation, list the examples of human capital that are required. Occupation: Carpenter - Mathematics skills, Communication skills, Trade school, Apprenticeship, and ability to work with special tools. Occupation: Automotive Technician/Mechanic - Mathematics skills, Communication skills, Trade school, Apprenticeship, and Ability to work with special tools. Occupation: Mechanical Engineer - Mathematics skills, Communication skills, Ability to work with special tools, and College degree. 33

Virginia Council on Economic Education Occupation: Retail Sales Clerk - Mathematics skills and Communication skills. Occupation: Doctor - Mathematics skills, Communication skills, Ability to work with special tools, Medical school, Internship, and Residency. Think about it Think of examples of how your teachers plan their classes to help you develop soft skills. What about hard skills? Think of examples of hard and soft skills you have learned in each of your classes. Write your answer in the box below. Lesson 2b: The Role of Human Capital in the Economy What economic concept does the introductory cartoon introduce? Write your answer in the box. Vocabulary A. Signaling- when employers use a college degree as a signal that a worker has valuable skills. B. Sheepskin Effect- finishing almost everything required for a degree without getting a diploma can prevent a person from getting a job. 34Examples: Soft - requiring attendance, recording “tardies”, requiring presentation and writing assignments, group work Hard skills – teaching content and skillsproductivity

Virginia Council on Economic Education Watch it (MRUniversity: Human Capital) Check Yourself Write in the answer to the Check Yourself true or false questions in the blanks below. ___True __ Engineers earn the highest median lifetime earnings of college graduates. ___False __ It doesn’t matter if you graduate or not; getting some college is all you need. This is called the sheep-skin effect. ___True __ If you don’t finish your college degree, you might end up with a lot of debt and very little to show for it. Watch it (CEE: Productivity) Fill in the blanks. 1. __Productivity___________ is how efficiently we turn resources into goods and services. 2. Productivity is typically measured by how many goods and services a worker produces in ___an hour___________________. 3. A primary benefit to society of improving productivity is an improvement in __standard of living_______________________________. 4. When worker productivity increases, costs of producing goods and services _decreases_______. 5. Which of the following are ways that productivity can be improved? Select all that apply. Investing in new capital equipment, Breakthroughs in technology, Investing in healthcare, Improving educational institutions, Developing new resources, and Engaging in research and development 35

Virginia Council on Economic Education Homework Write your answer in the box below and submit it on Canvas. Describe two examples of human capital that you have developed. List three additional examples of human capital you would like to develop and specifically how you might be able to develop it. Lesson 3a: Producers What economic concept does the introductory cartoon introduce? Write your answer in the box. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Producer- use scare resources (land, labor, capital) to produce goods and services that they sell to consumers. B. Total Revenue- The total amount of a firm receives for the sale of its output. 361. Examples will vary; see rubric for solutions 2. 3. A sole proprietorship

Virginia Council on Economic Education C. Total Cost- The total amount the firm spends on resources that are used to produce its output. D. Sole Proprietorship- a business owned by one person and is relatively easy to form. E. Partnership- a business with two or more owners who share the firm’s profits and losses. F. Corporation- Managed by a board of directors. Owners have limited liability. G. Franchise- a form of business in which one owner uses the model, methods, and trademarks of another. H. Cooperative- a legal form of business owned by the people who use its services or by the people who work there. __A__ 1. Another name for a business or firm. __E__ 2. Ben and Jerry start an ice cream business. __G__ 3. An individual McDonalds restaurant. __D__ 4. You start your own landscaping business in the easiest way. __C__ 5. The amount a business pays to hire resources. __B__ 6. The value of product price times the number sold. __F__ 7. Legal form of business owned by shareholders. Watch it (CEE: Producers and CEE: Profit) Check Yourself Answer the following true and false questions. 1. Producers use resources to make or do things for other people. _______True_____ 2. The primary incentive for producers to bring products to the market is the amount of personal satisfaction they derive from producing. _______False______ 37

Virginia Council on Economic Education 3. Profits are equal to total revenue minus partial costs. _______False______ 4. If Preston’s Pretzel Emporium has sales for the month of 20,000 boxes of pretzels and a box of pretzels sells for $20, what is total revenue for the month? ______ $400,000______ Watch it (MJM Foodie: Accounting Costs vs. Economic Costs) Check Yourself Write in the answers to the Check Yourself questions in the blanks below. __True________ 1. Explicit costs are direct costs or payments that firms pay for resources owned by others. __True________ 2. Implicit costs are indirect costs or the opportunity costs of using resources owned by the firm in production. ___False_______ 3. A firm's total costs are calculated by subtracting implicit costs from explicit costs. What are Dexter’s accounting profits per month? _______$15,000_____ 5. What are Dexter’s economic profits per month? _____$5,000_____ 6. If a firm’s economic profits are negative, what does that signal to the producer? The resources would be best used in another way. Check Yourself (Businesses Structures) Match each type of business structure with its definition. Sole Proprietorship- One person who receives all benefits, profits and income. Easy to start and easy to close down. Partnership – Shared decision-making with a small group of owners. Owners have unlimited liability. Corporation- Managed by a board of directors. Owners/shareholders have limited liability. 38

Virginia Council on Economic Education Franchise- A business that allows the owner to start a business by legally using someone else's expertise and ideas. Cooperative- A form of business owned by the people who use its services or by the people who work there. Check Yourself (Types of Businesses) Place each item in its appropriate category Sole Proprietorship Benefits- The owner makes all the decisions. The owner keeps all profits. Costs- The owner has unlimited liability and bears all financial risks. Life of business is limited to the time that owner can operate it. Partnership Benefits- Owners share decision-making and keep profits. Each owner has a unique set of skills & expertise. Costs- Owners face unlimited liability. There may be potential conflict between co-owners. Corporation Benefits- Unlimited life span (ownership, thru stocks, can be traded or passed on.) Company owners have limited liability. Costs- Must follow stricter government regulations. Faces double taxation Franchise Benefits- Training and marketing are provided. The owner gains exclusive right to sell in an area. Costs- Owner has a limited product line. Can be expensive to start. Cooperative Benefits- Member-owned and operated for members’ benefit. Members have a vote in how the business is run. 39

Virginia Council on Economic Education Costs- Decision-making process may be more complicated and slower. Decisions made by group may not suit all members. Think About It An entrepreneur is a type of producer you will learn more about in the next lesson.Entrepreneurs become producers by creating their own businesses. Write the name of an entrepreneur or an example of what an entrepreneur does in the box below. Lesson 3b: The Role of Producers in the Economy What economic concept does the cartoon/visual introduce? Write your answer in the box below. Vocabulary Entrepreneur- someone who seeks opportunities to profit by satisfying as yet unsatisfied needs and takes the risk of starting a new business to produce a good or service that addresses that need. Watch it (CEE: The Entrepreneur) Check Yourself Write the answer to the Check Yourself questions in the blanks below. 1. An entrepreneur is which of the following? ______________________All of these_________ 40Answers will vary. Entrepreneurs innovate and take risks.Measuring Productivity

Virginia Council on Economic Education 2. Business failures ____ provide benefits to the economy. _______________Always_________ 3. Entrepreneurs ______________________Facilitate growth in a market economy.__________ Homework Write your answer in the box below and submit it in Canvas. For each scenario below, answer the following questions: ▪Which business structure should they adopt for their new business? ▪Explain your answer and state the costs and benefits of your advice. Scenario 1 Jayden, Andrew, and Mateo have been close friends since they met freshman year in college. They all graduated last year— Jayden with a degree in Computer Science, Andrew with a degree in Graphic Design, and Mateo with a degree in Business Administration. All three are computer whizzes and have worked part-time through high school and college fixing computer problems. Each has approximately $50,000 in savings for this business venture. They have been talking about starting a computer company (JAM Computer Solutions) in their local town to help businesses and individuals with computer problems or those who need help developing and designing web sites. In doing research, Jayden found that there are only two other computer companies in their town of 100,000 people, and neither one will do both web design and computer hardware/software troubleshooting. Scenario 2 Your Uncle Craig and Aunt Carol want more out of life. Craig works as an inspector for the city health department, which involves inspecting restaurants and food service establishments to see whether they are operating according to local laws. Carol worked as an insurance agent for the first 10 years of their marriage and is now a stay-at-home mom. Their home is paid for and their son, your cousin, Charles, is a senior in high school. Neither Craig nor Carol has much experience in owning or operating a small business, yet this is what they want to do when their son graduates from high school. They have been frugal and have saved over $200,000 for this venture. Craig will not be quitting his job for a while. This will leave Carol with the responsibility of running the business. Scenario 3 Marlin Hatfield, who is married and 27, just completed his fifth year as a journeyman carpenter with John Casey Homebuilders, a small home builder 25 miles from his hometown. Marlin has just received an inheritance of $100,000 from his favorite aunt. During the past five years, Marlin has been able to purchase many of the tools and equipment that he needs to be a good finish carpenter. He has not been satisfied working 41

Virginia Council on Economic Education for John the past 2 years and has talked with his wife about starting his own business, called Hatfield Fine Carpentry. Lesson 4a: Competition What economic concept does the cartoon/visual introduce? Write your answer in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Market structure- characteristics of the market B. Perfect competition- market structure with many price-taking firms offering a homogeneous product with low barriers to entry. C. Monopoly- a market with only one seller. D. Monopsony- a market with only one buyer. E. Differentiated product (product differentiation) – one company’s product is different from another’s, to make a product different from competitors. 421. See homework rubrics for solution 2.Perfect Competition

Virginia Council on Economic Education F. Price taker- when a producer has no control over the price of their product so they must accept the price set in the market. G. Commodities- basic goods used as inputs in the production of other goods or services. __D__ 1. A market with only one buyer. __C__ 2. The only grocery store in a small town. __E__ 3. Pepsi and Coke are both carbonated cola beverages. __B__ 4. Many sellers all selling the same product. __A__ 5. For example, monopoly and perfect competition. __F__ 6. Perfect competitors have a horizontal demand curve because they are this. Watch it (MRUniversity: Competitive Firms) Check Yourself (Roll the Dice) Answer the following true or false questions. 1. Market structures are categories that identify the amount and type of advertising that firms engage in. _________False_________ 2. Competitive firms choose the price and quantity when producing for the market. _________False ________ 3. In competitive markets, there are many small sellers and many buyers. ______True __ 4. The products produced in a competitive market are different enough that consumers can identify the producer by looking at the product. ___False_______ 43

Virginia Council on Economic Education 5. Firms in a competitive industry have a hard time exiting the market. ______False_______ 6. Firms in competitive markets are called price takers. _____________True___________ Think About It Think of examples of markets that have lots of sellers, such as the market for coffee. How do you benefit from having lots of different coffee shops to choose from? Lesson 4b: The Effects of Competition in the Economy What economic concept does the cartoon/visual introduce? Write your answer in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Natural monopoly- A government granted monopoly that exists to create efficiency. B. Regulated monopoly- established by the government to benefit from the efficiency of one producer without losing from lower quantities and higher prices and profits that occur with monopolies. 44Answers will vary Competition, lower prices, access to different productsCompetition

Virginia Council on Economic Education C. Patent- a legal right granted by the government that allows an inventor to exclude others from making, using, selling, their invention for 20 years in exchange for sharing the details of the invention. D. Collusion- a collaborative agreement to prevent competition. E. Cartel- a formal arrangement for producers to set their prices and restrict competition. __C__ 1. The government grants a monopoly for 20 years by issuing these. __E__ 2. A group of sellers that has a written agreement to set price and quantity to increase profits. __B__ 3. Most electric companies are designated by the government as the only one serving their area. __D__ 4. Firms agree to restrict quantity and raise price to increase their profits. __A__ 5. When a single firm serves a market so that costs are reduced. Watch it (MJM Foodie: Market Structures) Place the four types of market structure on the spectrum from left to right with the market structure with the most producers farthest left. ___Perfect Competition___ __Monopoly___________ _Monopolistic Competition_ ____Oligopoly__________ Check Yourself (Drag and Drop) Place each item in its appropriate category. Perfect Competition- No price-setting power. Homogenous products. Very easy entry. Many Sellers. 45

Virginia Council on Economic Education Oligopoly- Considerable price-setting power. Differentiated or homogenous products. Difficult entry. Few sellers. Monopoly- Price-setting power. No close substitute for product. Impossible entry. One Seller. Monopolistic Competition- Some price-setting power. Differentiated products. Relatively Easy Entry. Many Sellers. Watch it (MJM Foodie: Collusion) Write the correct term in the blanks below. Collusion occurs when firms in a(n) _______Oligopoly_____________ market structure band together to act like a(n) _______Monopoly________. When firms collude, they agree not to compete and set a (circle one) higher lower price and produce a higher lower quantity in order to earn higher profits. When firms formally collude, they form a _________cartel_________. Homework Write your answer in the box below and submit it on Canvas. Consider the characteristics of perfect competition and imperfect competition (e.g. monopoly). List and briefly describe two benefits and three costs of an imperfectly competitive market structure. 46Benefit 1: See rubric for homework solution Benefit 2: Cost 1: Cost 2: Cost 3:

Virginia Council on Economic Education Lesson 5a: The Basic Circular Flow Model What economic concept does the cartoon/visual introduce? Write your answer in the box below. Vocabulary A. Households- all of the people within a dwelling. B. Product Markets- markets where consumers purchase goods and services. C. Factor Markets- markets where factors of production are sold. Draw a circular flow diagram in the box below. Show firms, households, product markets, and factor markets. Indicate the flow of money and the flow of factors and goods and services. 47Money flows between producers and consumersFirmsFactor MarketsProduct MarketsHouseholds$$$$G & SG & Sresourcesresources

Virginia Council on Economic Education Watch it (St. Louis Fed: Econ Lowdown) Check Yourself (Drag and Drop) Write each item in the appropriate category. Top: Goods and Services Next: Consumer Expenditures Then: Wages, Rent, and Dividends Bottom: Factors of Production Think About It Consider your own personal circular flow.Where do you get income to spend and where do you spend it? Write your answer in the box below. Lesson 5b: Expanded Circular Flow What economic concept does the cartoon/visual introduce? Write your answer in the box below. 48Circular flow of money in the economy.Answer should show a factor market (income source) and a product market (something they buy).

Virginia Council on Economic Education Watch it (CEE: Circular Flow Model) Check Yourself (Drag and Drop) Place each item in its appropriate category. Injections- Borrowing, Government spending, Value of Exports Leakages – Saving, Taxes, Value of Imports Homework Write your answer in the box below and submit on Canvas. Draw a basic circular flow diagram that indicates consumers/flows of money using a pen or marker of one color and producers/flows of resources/goods and services with a pen or marker of a different color.Clearly indicate the direction of each flow.Show each of the following on your diagram: Households, Firms, Product Market, Factor Market 49See rubric for solutions

Module 3

Virginia Council on Economic Education MODULE 3 The Price System – Supply & Demand Module topic – Based on the Module introduction, what do you think is the major theme of this module? Write your response in the box below. Lesson 1a: Demand Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Demand and Supply Model – determines the price charged for a product and the quantity sold. Used to analyze the effect of changes on the price and quantity. Quantity Demanded – the amount of a good or service that consumers are willing and able to purchase at various prices. Demand Schedule – a table showing the quantity demanded at various prices. Demand Curve – shows how the quantity demanded responds to changes in price. Law of Demand - price and quantity demanded are inversely related (i.e. people buy more at a low price and less at a high price). Write the correct term the blanks provided. The amount of a product that consumers are willing and able to purchase at a 50Supply and demand modelDemand

Virginia Council on Economic Education given price is the ___quantity demanded_______________. The quantities demanded at different prices are illustrated along a ___demand curve________. The quantities demanded at different prices are shown in a table known as a __demand schedule________________. The ___Law of Demand_____________ states that price and quantity demanded are ___inversely____________ related. Watch it (MJM Foodie and MRUniversity: Demand) Check Yourself Write the answers to the Check Yourself questions in the banks below. 1. ____________________less__ 2. ____________ various prices__ 3. ___________________Price__ 4. _____________held constant__ 5. __________________inverse__ Check Yourself (Drag and Drop) Based on the information about ticket prices and sales, fill in the quantity demanded column in the table and use those numbers to plot a demand curve for the club's popcorn. 51

Virginia Council on Economic Education Think About it Think of examples of situations in which your demand for a good changed because of each of the following; 1. an increase or decrease in the price of a good 2. you suddenly decide you REALLY want a good 3. you no longer want a good you purchased in the past 4. an increase or decrease in your income 52Example responses: 4. I bought less because __________ cost more 5. I saw an advertisement for ___________ and really wanted one 6. I stopped needing __________ so I don’t buy it anymore 7. When I got a summer job, I bought ______________

Virginia Council on Economic Education Lesson 1b: Determinants of Demand Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Law of Diminishing Marginal Utility – as you consume more and more of a good, the additional satisfaction (utility) you receive from consuming an additional unit of the good diminishes. B. Substitute goods – a good that can be used in place of another. C. Complementary good – goods that complete each other - that is, they are consumed together. D. Normal good – a good or service that a consumer buys more of as their income increases and less of as their income falls. E. Inferior good – a good or service that a consumer buys less of as their income increases and more of as their income falls. ___E___ 1. I buy more Ramen noodles when I lose my job. ___B___ 2. I drink either a Coke or a Pepsi with my dinner. ___C___ 3. Toast and butter. ___A___ 4. I enjoy the first cookie more than the sixth cookie. ___D___ 5. I got a raise so I bought a new jacket. Watch it (St. Louis Fed: Demand) Check Yourself (Roll the Dice) Write the answers to the questions in the blanks below. 1. _______________________________________________________shift left__ 53Demand, determinants of demand, or tastes and preferences

Virginia Council on Economic Education 2. ______________________________________________________shift right__ 3. __There is a change in demand, caused by a change in consumer expectations__ 4. ________________________________________normal good; inferior good__ 5. ______There is a change in demand, caused by a change in consumer income__ 6. _____________________________The demand for tennis balls will increase__ Check Yourself (Drag and Drop) Write each scenario under the graph that shows what will happen to the demand for oranges. Left graph: 1. Consumer income decreases (oranges are a normal good) 2. Fewer people eat a large breakfast every day Middle graph: 1. The price of oranges decreases 2. The wages of orange grove workers increase Right graph: 1. The price of tangerines (a substitute for oranges) increases 2. New research shows that vitamin C prevents cancer Watch it (MJM Foodie: Changes in Demand vs. Changes in Qty Demanded) Illustrate an increase in quantity demanded and an increase in demand on the graphs below. 54

Virginia Council on Economic Education Homework For each of the following changes in the market for apples, explain why demand will increase, decrease, or remain unchanged. Also submit your answers in Canvas. 1. The price of peanut butter (a complement) increases. 2. Consumer incomes increase (and apples are a normal good). 3. It is confirmed scientifically that an apple a day DOES keep the doctor away. 4. The price of apples decreases. 5. An apple tree disease causes people to expect there will be no apples next year. 551. 2. 3. See rubric for solutions 4. 5.

Virginia Council on Economic Education Lesson 2a: Supply Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Quantity Supplied – the amount of a good or service that producers are willing and able to sell at various prices. The Law of Diminishing Returns – the more you do something, the harder it is to keep doing it—therefore the returns to doing it diminish. As firms produce larger and larger quantities, it gets harder and so the cost of producing increases. Supply Curve – shows how the quantity that producers are willing and able to provide at various prices. Law of Supply – there is a direct relationship between price and quantity supplied. Write the correct term in the blanks provided. The amount of a product that producers are willing and able to purchase at a given price is the ___quantity supplied_______________. The quantities supplied at different prices are illustrated along a ___supply curve____________________. The quantities demanded at different prices are shown in a table known as a __supply schedule________________. The ___Law of Supply_____________ states that price and quantity demanded are ___directly______________ related. Watch it (MJM Foodie and MRUniversity: Supply) Check Yourself Write the answer to the Check Yourself questions in the blanks below. 1. ____________________________more__ 2. ______________________various prices__ 3. _____________________________Price__ 56Supply (of purses)

Virginia Council on Economic Education 4. __________________________Quantity__ 5. ____________________supply schedule__ 6. ____________________________direct __ Check Yourself Based on the information about ticket prices and sales, fill in the quantity supplied column in the table and use those numbers to create a demand curve for the club's popcorn. Think About it How do you think producers would respond if wages they have to pay workers doubles? Would the producers supply more or less of their good? Write your response in the box below. Lesson 2b: Determinants of Supply Write the economic concept introduced by the introductory cartoon/visual in the box below. 57Example response - They would hire fewer workers. Producers would supply less. Determinants of supply or technology

Virginia Council on Economic Education Vocabulary Technology – refers to the way that resources are combined to produce goods and services. Watch it (St. Louis Fed: Supply&Determinants) Check Yourself (Roll the Die) Write your answer to the Check Yourself questions in the blanks below. 1. _______________________________________________________shift left__ 2. _____________________________________________________shift right __ 3. __There is a change in supply, caused by a change in input or resource prices__ 4. _____________________________________________an increase in supply__ 5. ____There is a change in supply, caused by a change in the number of sellers__ 6. _______________Direct relationship illustrated by an upward sloping curve __ Check Yourself (Determinants of Supply) Write each scenario under the graph that shows what will happen to the demand for oranges. Left: The cost of fertilizer increases. A hurricane destroys orange groves. Orange producers decide to plant grapefruit trees instead. Middle: Fruit salads made with oranges become more popular. Right: A new and better orange-picking machine is invented. The wages of orange grove workers decrease. Homework For each of the following changes in the market for apples, explain why supply will increase, decrease, or remain unchanged. Also submit your answers in Canvas. 1. The price of peanut butter increases. 2.A new and better apple picking machine is invented. 3.The wages of apple pickers increase. 58

Virginia Council on Economic Education 4.Some apple farmers go out of business and cut down their orchards. 5.The price of apples increases. Lesson 3a: Equilibrium Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Fill in the blanks below with the correct vocabulary word. Equilibrium – in general, equilibrium means that opposing forces are equal, there is balance, or there is no tendency for change. Equilibrium price and quantity in a market are the price and quantity that result when quantity demanded and quantity supplied are equal. Surplus – the unsold quantity when quantity supplied exceeds quantity demanded. Shortage – the amount that consumers want to purchase that is not available when quantity demanded exceed quantity supplied. When price is above equilibrium, there will be a ____surplus_________________ in the market. 59Supply and demand, determining priceSee rubric for solution.

Virginia Council on Economic Education When quantity supplied is equal to quantity demanded, the market is in _equilibrium_________. If quantity demanded exceeds quantity supplied, there will be a ___shortage_______________ in the market. Watch it (MRUniversity and MJM Foodie: Equilibrium) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. ____________________________________willingness to sell__ 2. ___________________________________quantity demanded__ 3. ________________________________________________4$__ 4. _____________________________________________stable__ 5. ____________________________________________surplus__ 6. ______________________________________is greater than__ 7. ____________________________________________bid up__ 8. __________________________________________decrease__ Check Yourself (Equilibrium) Write the answers to the Check Yourself questions in the blanks below. 1. _________________________________________________________________$3. 60__ 60

Virginia Council on Economic Education 2. ________________________________quantity supplied; quantity demanded; will not__ Think about it Equilibrium is a term that is used in many places outside economics. What is the general definition of equilibrium? What does it mean to "lose your equilibrium" when you are walking down the hall? Write your answers in the box below. Lesson 3b: How Markets Move to Equilibrium Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Price Ceiling – a maximum legal price established by the government. A price ceiling is set below the equilibrium price and prevents the market price from increasing. Price Floor – a minimum legal price established by the government. A price floor is set above equilibrium price and prevents the price from decreasing. Watch it (St. Louis Fed: Market Equilibrium) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 61Surpluses and shortagesOpposing forces are equal, balance, no tendency for change. You fall down when you “lose your equilibrium.”

Virginia Council on Economic Education 1. ____________True__ 2. ______________False__ 3. ______________False__ 4. ______________True__ 5. ______________False__ Check Yourself (Equilibrium in the Popcorn Example) Use the graph to insert the correct word or number into the sentences below. The equilibrium price is ______$3______ and the equilibrium quantity is ______60_____. At a price of $1, the quantity demanded is ____100___, and the quantity supplied is ____20___, which results in a ______shortage______ of ____80____bags of popcorn. This will cause the price to ______increase_______. At a price of $4, the quantity demanded is ___40___, and the quantity supplied is ___80___ which results in a ______surplus______ of ____40____ bags of popcorn. This will cause the price to ____decrease______. Watch it (CEE: Price Ceilings and Floors) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. ________________________government-imposed__ 2. ____________________________below; shortage__ 3. _____________________________above; surplus__ 62

Virginia Council on Economic Education 4. _______________________________price ceiling__ 5. ________________________________price floor__ 6. ________________________________price floor__ Homework Answer the following questions. Also submit your answers in Canvas. 1. What are the equilibrium price and quantity of yo-yos? 2. If price in the market is $2, will there be a surplus or shortage of yo-yos and how large will the surplus/shortage be? Show your work. 3. If price is $2, will price tend to increase, decrease, or stay the same over time? 4. If the price in the market is $5, will there be a surplus or shortage of yo-yos and how large will the surplus/shortage be? Show your work. 5. If price is $5, will it tend to increase, decrease, or stay the same over time? PriceQdQs$110010$28035$36060$44085$520110 631. See rubric for solutions 2. 3. 4. 5.

Virginia Council on Economic Education Lesson 4a: Changes in Demand Write the economic concept introduced by the introductory cartoon/visual in the box below. Check Yourself (Drag and Drop) Place each scenario in the appropriate category. Increases in Demand: 1. Consumer income increases. 2. More high school graduates go to college. 3. The price of computer printers decreases Decreases in Demand: 1. The price of desktop computers decreases. 2. Students prefer using tablets computers. 3. Consumers expect cheaper/better laptops to come out next year. No Change in Demand: 1. The price of microchips decreases. 64Substitute goods

Virginia Council on Economic Education 2. The price of laptop computers increases. Check Yourself (Change in Demand) Enter the new quantities demanded in the table and draw the new demand for popcorn. Watch it (CEE and MRUniversity: Shifts in the Demand Curve) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. __________________________________________Quantity demanded at every price__ 2. _________________________________________Pay a higher price at every quantity__ 3. __________________________________________Increase in both price and quantity__ 4. _________________________________________Decrease in both price and quantity__ 5. _______________________Demand for tea increases, and price and quantity increase__ 65

Virginia Council on Economic Education 6. ______________Demand for hot dogs decreases, and price and quantity decrease__ Check Yourself (Shifts in Demand) Write the answers to the Check Yourself questions in the blanks below. 1. ___________________________________________Decrease; Decrease; Decrease__ 2. ___________________________________________Decrease; Decrease; Decrease__ 3. _____________________________________________Increase; Increase; Increase__ 4. _____________________________________Not change; Not change; Not change__ Think about it How would each of the determinants of demand change to shift the demand curve to the right (that is, to increase demand)? 1. tastes and preferences 2. income (for both normal and inferior goods) 3. the price of a substitute good 4. the price of a complementary good 5. the number of buyers 661. People like the product more 2. normal good: income increases, inferior good: income decreases 3. The price of the substitute increases 4. The price of the complement decreases.

Virginia Council on Economic Education Lesson 4b: Changes in Supply Write the economic concept introduced by the introductory cartoon/visual in the box below. Check Yourself (Drag and Drop) Place each scenario in the appropriate category; increase, decrease, or not change. Increases in Supply: 1. An advance in production technology. 2. Wages of computer assemblers decrease. 3. Producers expect a new product to replace laptop computers next year. Decreases in Supply: 1. The price of computers components increases. 2. The number of computer manufacturers decreases. 3. Consumers expect cheaper/better laptops to come out next year. No Change in Supply: 1. Consumer income increases. 2. The price of laptop computers increases. Check Yourself (Changes in Supply) Enter the new quantities demanded in the table and draw the new supply of popcorn. 67Technology or determinants of supply

Virginia Council on Economic Education Watch it (CEE and MRUniversity: Shifts in the Supply Curve) Check Yourself Write your answers to the Check Yourself questions int eh blanks below. 1. ____________________________________________Quantity supplied at every price__ 2. ________________________________________Sell at a lower price at every quantity__ 3. ____________________________________Decrease in price and increase in quantity__ 4. ____________________________________Increase in price and decrease in quantity__ 5. ________________Supply of yo-yos increases, price decreases, and quantity increases__ 6. ____________Supply of hot dogs decreases, price increases, and quantity decreases__ 68

Virginia Council on Economic Education Check Yourself (Shifts in Supply) Write your answers to the Check Yourself questions in the blanks below. 1. _____________________________________________Decrease; Increase; Decrease__ 2. ______________________________________________Increase; Decrease; Increase__ 3. ___________________________________________________________Not change__ 4. ______________________________________________Increase; Decrease; Increase__ Homework For each question, start by drawing a correctly labeled graph of the market for cookies in equilibrium. Your starting graphs should have correctly labeled axes and demand and supply curves. Label the equilibrium price and quantity as p1 and p2 on the axes the starting graphs. Draw your graphs below and also submit your homework in Canvas. 1. Show the effect on the equilibrium P and Q in the market for cookies if the price of milk increases. Determine which curve is affected by the change in the price of milk and whether it increases or decreases. On your graph, draw a new curve indicating the shift-either to the right or the left. Label the new equilibrium P and Q as p2 and q2. 2. Show the effect on the equilibrium P and Q in the market for cookies if the price of flour decreases. Determine which curve is affected by the change in the price of flour and whether it increases or decreases. On your graph, draw a new curve indicating the shift-either to the right or the left. Label the new equilibrium P and Q as p2 and q2. 69See rubric for solutionsQuestion 1

Virginia Council on Economic Education Lesson 5a: Using Demand and Supply to Analyze Markets Write the economic concept introduced by the introductory cartoon/visual in the box below. Check Yourself (Drag and Drop) Write each scenario in the category that indicates what happens to the demand/supply of oranges. Increases in Demand: The price of apples decreases, and people eat apples and oranges together in fruit salads Decreases in Demand: Consumer income increases, and oranges are an inferior good Increases in Supply: New type of orange trees is developed to produce more oranges per tree Decreases in Supply: The cost of irrigation for orange groves increases Watch it (MJM Foodie: Price Floors & Price Ceilings) Check Yourself Write your answers to the Check Yourself questions in the blanks below. 70Changes in supply and demandQuestion 2

Virginia Council on Economic Education 1. ___________________________________Surpluses; quantity supplied__ 2. _________________________________Shortages; quantity demanded__ 3. ________________________________________________Will not be__ Watch it (MRUniversity: Price Ceilings and Price Floors) Check Yourself Write your answers to the Check Yourself questions in the blanks below. 1. ___________True__ 2. __________False__ 3. __________True__ 4. __________False__ 5. __________True__ 6. __________False__ Think About It A minimum wage law is an example of a price floor in the labor market. What happens to the surplus created by a price floor in the labor market if the minimum wage increases? What is another name for a surplus of labor in the labor market? 71It increases; unemployment

Virginia Council on Economic Education Lesson 5b: Elasticity Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Elasticity – measures the responsiveness of one thing to changes in another. When elasticity is elastic, it is very responsive and when it is inelastic it is not very responsive. Price Elasticity of Demand – measures the responsiveness of quantity demanded to changes in price. Price Elasticity of Supply – measures the responsiveness of quantity supplied to changes in price. Watch it (MJM Foodie and MRUniversity: Elasticity) Check Yourself Write your answers to the Check Yourself questions in the blanks below. 1. ______________________________________________________Responsive__ 2. __________________________________________________________Elastic__ 3. ______________________________________________________Greater than__ 4. ___________________________________________Availability of substitutes__ 5. __________________________________________________________Elastic__ 6. ________________________________________________________Decrease__ 72Demand or elasticity

Virginia Council on Economic Education Check Yourself (Drag and Drop) Place each item in the correct category. Inelastic Goods: 1. Electricity 2. Gasoline 3. Flu Medicine 4. Tap Water Elastic Goods: 1. Twix Candy Bar 2. Restaurant Meals 3. New Car Homework Answer each of the following questions. Also submit your answer in Canvas. 1. If a 10% increase in price leads to a 40% decrease in quantity demanded, what is the value of price elasticity of demand? Show your work. 2. Which of the following will cause the demand for a good or service inelastic? a. Having few substitutes b. A longer time period c. Being a luxury d. Being a large share of the consumer's budget 3. If the price elasticity of demand is equal to 0.5, is demand elastic, inelastic, or unitary elastic? 4. Will a perfectly elastic supply curve be vertical, horizontal, or upward-sloping? 5. What price elasticity of supply will lead to a smaller increase in quantity when price changes— elastic, inelastic, or unitary elastic? 73

Virginia Council on Economic Education 74See rubric for solutions

Module 4

Virginia Council on Economic Education MODULE 4 The Role of the Government in a Market Economy Module topic – Based on the Module introduction, what do you think is the major theme of this module? Write your response in the box below. Lesson 1a: The Role of the Government Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. Traditional Economy – answers the 3 questions by “what has always been done.” Market Economy – answers the three questions by the interaction of consumers and producers in markets. Command Economy – the government answers the 3 questions for society. Mixed Economy – answers the 3 questions using some elements of a market economy and some elements of a command economy. A. Public Good – available to all and once it is provided can it can be obtained without payment. 75The role of government in a market economyThe role of government in the economy

Virginia Council on Economic Education B. Externality – when the costs or benefits of an action fall on others. C. Market Power – reduced competition (for example, a monopoly). D. Inequity – unfairness. (Equity – fairness) E. Imperfect Information – when buyers or sellers do not have the information required to accurately weigh the costs and benefits of a decision. __A__ 1. Streetlights, national defense, and the justice system __D__ 2. Addressed through transfer payments and progressive income taxes __C__ 3. Prevented through Anti-trust laws __B__ 4. Second hand smoke __E__ 5. Creates the need for product labels Check Yourself (Roll the Die) Write in the answers to the check yourself in the blanks below. 1. ______True______ 4. _____True_____ 2. ______False______ 5. _____False_____ 3. ______True______ 6. _____False_____ Watch it (CEE: Roles of Government) Check Yourself (Matching) Write the answers to the Check Yourself questions int eh blanks below. 1. Imperfect information: Ingredient labels on products 2. Externality: Limits on emission of air pollutants 3. Public goods: National parks 76

Virginia Council on Economic Education 4. Market power: Limits on the price paid by a monopoly 5. Inequity: Providing free and reduced school lunches Know This (Fiscal Ship) Write out your top three priorities you think that the government should pursue and then select policies to achieve those priorities.When you have successfully achieved your goals, note the size of the government debt and whether it has increased or decreased. Priorities: 1. 2. 3. Policies: Size of Debt: ____________________________________ Increased Decreased (circle one) 77

Virginia Council on Economic Education Think About it In what way does the government require or prevent you from doing something? Why does the government want to change your behavior (which failure is the government trying to address)? Write your response in the box below. Lesson 1b: Property Rights and Contracts Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Property Rights – give people the right to use, exchange and protect their property—within the limits of the law. B. Real Property – real estate, houses, and land are considered real property. This type of property is fixed geographically in one place. It is not mobile. C. Personal Property – your clothes, school supplies, and cell phone are considered personal property. This type of property is mobile. D. Intellectual Property – the products of a person’s creative and intellectual thinking are considered intellectual property. This could include art or music. 78Example response: I am not allowed to drive before I am 16 years old. The government is trying to prevent externalities (car accidents) Property ownership/property rights

Virginia Council on Economic Education E. Contract – a legal agreement between two parties that is enforceable by law. F. Liability – A liability is a legal obligation. You may be required to pay for any damages you cause if you fail to uphold your legal obligation. G. Liability Law – ensures people can freely enjoy their property rights as long as they do not violate the property rights of others. __A__ 1. Your ability to buy, sell, and live in a house __B__ 2. A gas station __E__ 3. A rental agreement __D__ 4. An author’s book __C__ 5. Your car __F__ 6. Your responsibility if you cause an automobile accident Watch it (CEE: Property Rights) Write the answers to the Check Yourself in the blanks below. 1. _______Intellectual__________ 2. _________Patent____________ 3. _____All of these options _____ 4. ________Copyright __________ 5. _______ All of these options ____ 79

Virginia Council on Economic Education Check Yourself (Roll the Die) Write the answer to the Check Yourself questions in the blank below. 1. ______True______ 2. ______False______ 3. ______True______ 4. ______False______ 5. ______False______ 6. ______False______ Homework Identify something that you own and write a sentence to describe how you do (or could do) each of these with that property in the box below. 1. control it 2. enjoy it 3. exchange or dispose of it 4. exclude others from enjoying it 5. enforce your rights if someone tried to take it 80See rubric for solution.

Virginia Council on Economic Education Lesson 2a: The Sources of Market Failure Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Market Failure – occurs when the property rights system in a free market does not allocate resources efficiently. The government aims to reduce market failures. Watch it (CEE: Market Failures) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. ____________Antitrust laws____________ 2. ____________Market failures____________ 3. ____________Education________________ 4. ____________Large corporations_________ 5. ____________Inadequate competition______ Watch it (MJM Foodie: Market Failures) Check Yourself (Matching) Write the answers to the Check Yourself in the blanks below. 1. Public good: A city provides a public park for all of its citizens to enjoy 81Roles of government/market failures

Virginia Council on Economic Education 2. Imperfect information: Product labels are required to include the number of servings 3. Externality: Smoking is prohibited in public spaces 4. Inequality: Medical care is provided to low-income individuals at no cost 5. Market power: The only two firms in a market are not allowed to merge Check Yourself (Market Failures) Write the answers to the Check Yourself in the blanks below. 1. _________________Provides a benefit to someone else _______________ 2. __________________Unfair_____________________________________ 3. __________________Public Good________________________________ 4. _______________To ensure consumers can weigh costs and benefits_____ Think About it Think of an example of the government addressing a market failure that has affected you directly. What is the type of market failure represented by your example? Write your response in the box below. 82

Virginia Council on Economic Education Lesson 2b: Public Goods Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Excludable – when individuals can be prevented from consuming a good. B. Non-Excludable – when anyone can use a good, even if they do not pay for it. C. Rival – when one person’s use of a good means that someone else can’t use it at the same time. D. Non-Rival – one person's use of a good does not mean that someone else can’t use it at the same time. E. Private Good – a good that is excludable and rival. F. Public Good – a good that is non-excludable and nonrival. G. Common Property Good – a good that is non-excludable and rival. H. Club Good – a good that is excludable but non-rival. I. Free-rider problem – when an individual benefits from a good but does not pay for it (the individual “rides free” while others pay). 83Public goodExample response: The government provides roads (public good)

Virginia Council on Economic Education __H__ 1. Cable TV access requires equipment to access but one person watching cable doesn’t mean someone else can’t watch it __B__ 2. Everyone can use the light from a street lamp without paying for it __A__ 3. I can prevent you from using my headphones __C__ 4. When I use my laptop, you can’t use it too __D__ 5. We can both enjoy a beautiful view at the same time __E__ 6. You can’t use my pen when I am and I can prevent you from using it. __G__ 7. No one can be prevented from fishing in the ocean, but when I catch fish, you can’t catch that fish. __F__ 8. Everyone can use the signal of a lighthouse and when I use the signal, it is still available for you to use. Watch it (MJM Foodie & MRUniversity: Public Goods) A soda is a private good because it is both ___rival/excludable____________ and _____excludable/rival___________. An asteroid defense system is a public good because it is both __non rival/non excludable__ and _non excludable/non rival.__ Because people benefit from asteroid defense even if they don’t pay for it, it must be provided by ____the government____. This is known as the __free rider_____ problem. Watch it (Vulcan Productions: Natural Resources) Check Yourself Write the name of each item in the appropriate category. Public Goods: Police protection, Streetlights, Clean air, and National defense Private Goods: Potato chips, Haircut, Car, and Computer 84

Virginia Council on Economic Education Club Goods: Hulu streaming service, Cable TV, Movies, and Radio broadcast Common Property Goods: National forests, Ocean fish, Deer, and Rivers Homework Provide three examples of public goods in your hometown. Explain how each is nonrival and non-excludable. Write your response in the box below and submit in Canvas. Lesson 3a: External Costs and Benefits Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. Externality – results when a cost or benefit affects a third party not involved in the production or consumption of a good. Negative Externality – results when an external cost of production or consumption falls on a third party. 85Externality (negative)See rubric for solutions.

Virginia Council on Economic Education Positive Externality – results when an external benefit from production or consumption goes to a third party. For each of the following, indicate whether it is a positive (P) or negative (N) externality. __N__ 1. Pollution __N__ 2. Loud music when you are trying to sleep __N__ 3. Second-hand cigarette smoke __P___ 4. A beautiful view Watch it (MJM Foodie: Externalities) Check Yourself (Drag and Drop) Write the name of each item in its appropriate category. External Cost: Smoker’s cigar makes you sick, classmates talk in class, factory emits awful smell, and you rear-end a car in front of you External Benefit: Coworker has pretty desk flowers, Sister’s flu vaccine works, and roommate plays great music No External Cost/Benefit: Lunch tastes awful, you stream a great movie, and you buy a car Think about it Think of an external cost and an external benefit that you have experienced as a result of others’ decisions to produce or consume. Write your examples in the box below. 86Examples: External cost – smell of someone else’s burnt popcorn External benefit – enjoying listening to someone else’s music

Virginia Council on Economic Education Lesson 3b: Government Response to Public Goods and Externalities Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the correct term in the blanks provided. A. Private Costs – the costs to producers. B. Private Benefits – the benefits to consumers. C. Social Costs – sum of the private costs of producers PLUS any external costs. D. Social Benefits – sum of the private benefits of consumers PLUS any external benefits. E. Subsidy – a payment from the government (the opposite of a tax). Social benefits = ___private benefits____ + ____external benefits____ Social costs = _____private costs_____ + _____external costs_____ Check Yourself (Drag and Drop) Write the name of each item in its appropriate category Public Good: Military, Police, and Fireworks Private Good: Paper, Candy bar, and Pencil Watch it (FRBSL: How Government Prevents Market Failures) With negative externalities, like pollution, the price of the good produced is too (circle one) high low and the quantity is too (circle one) high low. The government can “internalize” the external cost of the pollution by placing a (circle one) tax subsidy on the firm creating the pollution. 87Externality (negative)/ market failure

Virginia Council on Economic Education An example of an external benefit from education is _better citizens/productivity/higher living standard_. Producers of education produce too (circle one) much little education because they don’t receive the revenue from the full benefits of the education. The government can encourage positive externalities like education by placing a (circle one) tax subsidy on the producers of education. Watch it (MRU: Regulation and Externalities) Check Yourself (Roll the Die) Write you answers to the Check Yourself questions in the blanks below. 1. ________True________ 2. ________True________ 3. ________False________ 4. ________False________ 5. ________False________ 6. ________True________ Homework Respond to only one of the options. Write your answer in the box below and submit on Canvas. 88

Virginia Council on Economic Education Option A. Suppose one of your classmates has been placing an external cost on you by distracting you while you are trying to complete your assignments. Use what you have learned about how the government aims to address externalities in the market to explain how your teacher could address this negative externality so that your classmate chooses not to distract you. Option B. Explain how providing education to all children in grades K-12 provides external benefits to everyone in the community. Lesson 4a: Market Power and Imperfect Information Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. 89Government regulationsSee rubric for solution.

Virginia Council on Economic Education A. Market power – a producer’s ability to raise price. B. Antitrust laws– aim to prevent market power and promote competition. C. Horizontal merger – a merger between two firms that make the same product. D. Vertical merger – a merger between companies involved at different stages of the supply chain producing a good or service. E. Conglomerate merger – a merger between unrelated businesses. F. Patent – a property right that gives the patent holder the right to exclude others from making, using, or selling an invention for a set period of time. G. Copyright – grants property rights for literary, artistic, or musical material, assign intellectual property rights. H. Natural monopoly – exists when it is more efficient to have one firm produce all of the output in a market. I. Economics of scale – the cost per unit to produce decreases as larger quantities are produced. Identify each of the following mergers as horizontal (H), vertical (V), or conglomerate (C). __V__ 1. A grocery store merges with a dairy farm. __C__ 2. A cigarette manufacturer merges with a cookie company. __H__ 3. Two soft drink companies merge. __H__ 4. A Ford dealership merges with a Chevrolet dealership. __V__5. A shoe manufacturer merges with a leather company. Watch it (MJM Foodie: Antitrust) Ownership of companies in which 3 key industries in the economy led to the passage of U.S. anti-trust laws? 1. Oil 2. Steel 3. Railroads 90

Virginia Council on Economic Education What are the three major antitrust laws? 1. ______Sherman____________________________ Act 2. ______Clayton_____________________________ Act 3. ______FTC _______________________________Act Watch it (MJM Foodie: Mergers) Check Yourself (Drag and Drop) Match each type of merger with the firm that would correctly complete it. 1. Horizontal merger: Swiss cheese producer — Cheddar cheese producer 2. Vertical merger: Swiss cheese producer — Dairy Farm 3. Conglomerate merger: Swiss cheese producer — Tire manufacturer 4. Horizontal merger: City newspaper — County newspaper 5. Vertical merger: City newspaper — Paper manufacturer Think about it Think of an example of information provided on a food product’s packaging that you have used to weigh the costs and benefits of consuming the product. What did you learn from the product labeling and did it add to the product’s costs or benefits as you decided whether or not to consume the product? Write your response in the box below. 91

Virginia Council on Economic Education Lesson 4b: Regulatory Agencies and Government Failure Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Federal Trade Commission (FTC) – protects consumers by promoting competition, enforcing antitrust laws, ensuring fair competition, and protecting consumers from deceptive or unfair practices. Food and Drug Administration (FDA) – created to protect consumers by monitoring the safety of drugs, medical devices, and food. National Highway Traffic Safety Administration (NHTSA) – oversees all issues involving automobile and truck safety, prevent accidents, and protect lives. Consumer Product Safety Commission (CPSC) – protects consumers from unreasonable risks of injury or death associated with the use of consumer products. Occupational Safety and Health Administration (OSHA) – monitors issues of workplace safety and health. 92Government agenciesExample response: I looked at the calories in a can of soup and decided to eat it because low calories increased the benefits of choosing the soup for lunch.

Virginia Council on Economic Education Equal Employment Opportunity Commission (EEOC) – enforces laws involving job discrimination based on race, color, religion, sex, national origin, age, or disability. Environmental Protection Agency (EPA) – is tasked with "protecting all Americans from significant risks to human health and the environment where they live, learn, and work." Unintended consequences – outcomes that were not intended. Government failure – the cost of solving a market failure with a law or government regulation is greater than the benefits. List the initials of the agency responsible for addressing each of the following issues. __EPA__ 1. Protects health and the environment __FTC__ 2. Enforces anti-trust laws __FDA__ 3. Promotes food safety _OSHA_ 4. Protects workers from dangerous workplaces _CPSC 5. Protects consumers from dangerous products _NHTSA_ 6. Promotes vehicle safety Check Yourself (Matching) Write the description next to each agency. 1. Federal Trade Commission (FTC): Promotes competition 2. Food & Drug Administration (FDA): Protects consumer health 3. National Highway Traffic Safety Administration (NHTSA): Promotes auto safety 93

Virginia Council on Economic Education 4. Consumer Product Safety Commission (CPSC): Protects consumers from mechanical and other hazards 5. Occupational Safety and Health Administration (OSHA): Protects worker safety 6. Equal Employment Opportunity Commission (EEOC): Protects against job discrimination 7. Environmental Protection Agency (EPA): Protects the environment Homework Find a government regulation imposed by the Commonwealth of Virginia that addresses a market failure. Identify the agency that enforces the regulation and describe how it protects consumers, workers, or the environment. Write your response in the box below and submit in Canvas. Lesson 5a: Government Services and Revenues Write the economic concept introduced by the introductory cartoon/visual in the box below. 94Government expendituresSee rubric for solution.

Virginia Council on Economic Education Watch it (MJM Foodie: Taxes & Budgets) Check Yourself (Roll the Die) Write the answer to each Check Yourself question in the blanks below. 1. _____True_____ 2. _____True_____ 3. _____False_____ 4. _____False_____ 5. _____True_____ 6. _____False_____ Check Yourself (Matching) Write the spending category that goes with each percentage. Federal Government Spending: 1. 23% - Social Security 2. 15% - Defense 3. 10% - Safety Net Programs Virginia Government Spending: 1. 40% - Healthcare 2. 25% - Other (Welfare, Transportation, etc.) 3. 20% - Education 4. 15% - Pensions 95

Virginia Council on Economic Education Check Yourself (Fiscal Ship) Return to the Fiscal Ship game at fiscalship.org and play again. This time your goal is to bring the national debt down to the target level. When you have achieved your goal, record the policies that you enacted and the level of the national debt you achieved in the box below. Note: you'll need this information for the 4.05b Homework assignment. Think About It Go to theCommonwealth Data Point website and view the “Individual and Family Services” portion of the budget. Choose “expenditures” and then under category choose“function”. Which of the following areas of spending makes up most of the Commonwealth’s spending: income, food, or healthcare? Write your response in the box below. 96Healthcare

Virginia Council on Economic Education Lesson 5b: Inequality and Income Redistribution Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. Income Redistribution – The government sometimes seeks to increase the income of poorer families in an attempt to address inequity (unfairness) through income redistribution. Governments can redistribute income through government taxing and spending decisions. Gini Index – is a measure of income inequality often used to evaluate a country’s level of income equality. The index ranges from 0 (complete equality) to 1 (complete inequality). Safety-net programs – help those vulnerable to economic hardships with necessities like food, housing, and medical care such as Medicare, Medicaid, and Children's Health Insurance Program [CHIP]. Unemployment Compensation benefits – For eligible workers, unemployment compensation makes up for some of an unemployed worker’s lost income. Entitlement Programs – a program for anyone who meets eligibility requirements to receive benefits. Social Security – a federal insurance program that provides benefits to retired people and those who are unemployed or disabled. Proportional tax – high-income and low-income families pay the same percentage of their income in taxes. Progressive tax – high-income families pay a higher percentage of their income in taxes compared to low-income families. Regressive tax – low-income families pay a higher percentage of their income in taxes compared to high-income families. 97Equity or fairness

Virginia Council on Economic Education Family A earns $20,000 each year while Family B earns $50,000 each year. Identify each of the following taxes as progressive (Prog), regressive (Reg) or proportional (Prop). __Prog__ 1. Family A pays $200 while Family B pays $1000 __Reg__ 2. Family A pays $1000 while Family B pays $1500 __Prop__ 3. Family A pays $2000 while Family B pays $5000 Watch it (CEE: Income Distribution) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. ____________Skills and abilities _____________ 2. ____________Advanced degree ______________ 3. ____________Wages and salaries _____________ 4. _______________Rent ______________________ 5. _____________Your education _______________ Watch it (Vulcan Productions: Our Tax System) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. _______True_______ 2. _______False_______ 3. _______False_______ 98

Virginia Council on Economic Education 4. _______True_______ 5. _______True_______ 6. _______True_______ Check Yourself (Matching) Write the definition that goes with each type of tax. 1. Progressive tax (e.g., individual income tax): High-income families pay a higher percentage of their income in taxes. 2. Regressive tax (e.g., sales tax): Low-income families pay a higher percentage of their income in taxes. 3. Proportional tax (e.g., flat rate tax): All families pay the same percentage of their income in taxes. Homework Refer to the results of your two Fiscal Ship games (from Module 4, Lesson 1a and from Module 4, Lesson 5a). Write a paragraph comparing your choices and results in the box below and submit it in Canvas. 99See rubric for example paragraph.

Module 5

Virginia Council on Economic Education MODULE 5 National Economic Indicators and Goals Module topic – Based on the Module introduction, what do you think is the major theme of this module? Write your response in the box below. Lesson 1a: Gross Domestic Product Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the correct terms the blanks provided. Gross Domestic Product (GDP) – the market value of all final goods and services produced within the borders of a country during a time period, usually a year. Productivity – measure of the quantity of goods and services produced by a given amount of resources. Productivity measures how efficiently an economy is using its available resources. Standard of Living– the amount of goods and services available to each person in a society. Net Exports – the value of exports minus the value of imports. Gross domestic product (GDP) is the _____market__________ value of all ____final_____ goods and _____services_________ produced in the economy during a year. 100The main theme of the module the three key economic indicators (GDP, unemployment, inflation). Productivity

Virginia Council on Economic Education Watch it (BLS and CEE: What is productivity?) An increase in productivity occurs when more output is produced using (circle one) more fewer the same resources. An increase in productivity also occurs when the same amount of output is produced using (circle one) more fewer the same resources. Indicate whether each of the following increases (+) or decreases (-) when productivity increases. ____-____ 1. Per unit labor costs ____+____ 2. Wages ____+____ 3. Profits ____+____ 4. Standard of living Watch it (MRUniversity: What is GDP?) Check Yourself (Drag and Drop) Place each item in its appropriate category. Counted in U.S. GDP This Year: A Toyota automobile made at a plant in Kentucky, A Boeing airplane made in Seattle, and A semi-truck used to transport goods to stores in your area. Not Counted in U.S. GDP This Year: Tires purchased by General Motors for new truck assembly, A shirt bought from a thrift store, A bottle of vanilla flavoring made in Mexico, and Cloth produced in the United States and purchases by a U.S. furniture maker for the production of chairs and sofas. Watch it (MRUniversity: Splitting GDP?) Check Yourself (Drag and Drop) Place each item in its appropriate categories. Personal Consumption Expenditures: Shoes, Bicycle, and Haircut. 101

Virginia Council on Economic Education Investment Expenditures: New truck for FedEx, New copier, and New warehouse. Government Expenditures: State highway, U.S. military, and County firefighter. Think About it Identify three different goods or services you have purchased in the last week. Determine whether or not each would each be counted as part of gross domestic product. Why or why not? Write your response in the box below. Lesson 1b: Nominal versus Real GDP Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Answer the questions in the blanks provided. Nominal GDP – GDP measured using the current price of goods. Real GDP – GDP that is adjusted for price changes. Real GDP per capita – real GDP divided by the country's population. 102Example responses: 1. A pair of sweatpants. Yes, they are a final good produced this year. 2. A haircut. Yes, it is a service produced this year. 3. A used car. No, it was produced in a previous year. Economic growth

Virginia Council on Economic Education 1. When a country experiences inflation (rising prices), which will be larger, nominal GDP or real GDP? ________nominal GDP______________ 2. If nominal GDP is equal to real GDP, what must be true about prices in the economy – have they increased, decreased, or stayed the same?_____stayed the same____________ 3. If two countries have the same real GDP, which will have a larger real GDP per capita – the one with a higher population or the one with a lower population? _________the one with lower population____________ Watch it (FRBSL: Gross Domestic Product (GDP) Check Yourself Fill in the blanks to calculate nominal GDP in year 2: ___$60, and $60, and $120___ Fill in the blanks to show the difference between year 1 and year 2: ___$50, $40, and $90___ Fill in the blanks below to calculate what GDP would have been if prices did not change between year 1 and year 2: ________$20, $25, and $45_______ Check Yourself Write your answer to the Check Yourself questions in the blanks below. 1. __Cannot be determined__ 2. __Country X__ Homework Choose a country other than the United States. Research the real GDP per capita of that country and compare it to the real GDP per capita of the United States. Explain how the standard of living for residents of the two countries might be different based on the different values for real GDP per capita. Write your response in the box below and submit it on Canvas. 103

Virginia Council on Economic Education Lesson 2a: Introduction to Unemployment Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Out of the labor force – people that are not willing and able to work. B. In the labor force – people who either have a job or are actively looking for work. Unemployment rate – the percentage of the labor force that is classified as unemployed. As you can see, the unemployment rate fluctuates over time. Discouraged worker – a worker gives up seeking a job because they don't think they will be able to find one in a weak economy. Discouraged workers fall out of the labor force, which causes the unemployment rate to decrease. Underemployed – when a worker works in a job for which they are overqualified. __A__ 1. Stay-at-home parents __B__ 2. Factory workers 104UnemploymentSee rubric for solution.

Virginia Council on Economic Education __B__ 3. Teachers __A__ 4. Retirees __A__ 5. Full-time students Check Yourself (Unemployment) Write in the answers to the Check Yourself questions in the blanks below. 1. __the percentage of the labor force not presently working but seeking a job__ 2. __11.5 million__ 3. __Unemployment fluctuated but decreased overall__ Watch it (MRUniversity: Is Unemployment Undercounted?) Check Yourself Write in your answers to the Check Yourself questions in the blanks below. 1. __Employed__ 2. __Discouraged workers__ 3. __Unemployed__ 4. __Out of the labor force__ Think About it Think about the working status of one person you know (perhaps even yourself). Is the person employed, unemployed, or out of the labor force? Why? Write your response in the box below. 105

Virginia Council on Economic Education Lesson 2b: Causes and Consequences of Unemployment Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Frictional Unemployment – when people are between jobs and search for another job they prefer, they are temporarily unemployed. B. Structural Unemployment – when people are looking for jobs and firms are looking for workers, but the people's skills don't match those the firms need. C. Cyclical Unemployment – is unemployment that results from the ups and downs in the economy (known as the business cycle). Human Capital – is the combination of skills and education that makes your labor valuable. __A__ 1. A college graduate looking for their first “real” job. __C__ 2. A worker laid off during a recession. __A__ 3. A computer analyst quits their job to go live and work in another state. __B__ 4. A coal miner loses their job because less coal is demanded by firms. 106(Types of) UnemploymentExample responses: I am not in the labor force because I am a full-time student.

Virginia Council on Economic Education Watch it (FRBSL: Unemployment) Check Yourself (Drag and Drop) Write the name of each scenario under the type of unemployment it describes. Frictional Unemployment: I’m searching for a job after graduating from school and I left my job voluntarily to search for a better one. Structural Unemployment: I have a specialized skill set that was replaced by technology and I can’t find any work in my area, but there may be opportunities elsewhere. Cyclical Unemployment: My job prospects will improve when the economy strengthens and I lost my job during a recession. Check Yourself (Roll the Die) Write the answer to each Check Yourself question in the blanks below. 1. __cyclical____________________ 2. __frictional___________________ 3. __cyclical____________________ 4. __structural___________________ 5. __frictional____________________ 6. __structural____________________ Check Yourself (Education and Unemployment) Write the answer to each Check Yourself question in the blanks below. 1. __a lower unemployment rate for persons with a high level of education __ 107

Virginia Council on Economic Education 2. __2.2%_________ 3. __15%_________ Homework Think about the job you want in the future. Write a brief scenario about something happening that causes you to lose your job and become unemployed in the future. Be as specific as possible and explain what type of unemployment you are experiencing. Also include your ideas of how you can decrease your chances of becoming unemployed in the future. Write your response in the box below and submit it on Canvas. Lesson 3a: Inflation and Its Indicators Write the economic concept introduced by the introductory cartoon/visual in the box below. 108InflationSee rubric for solution.

Virginia Council on Economic Education Vocabulary Write the correct term in the blank provided. Inflation – a sustained increase in the general price level of goods and services. Purchasing power – the quantity of goods/services that a unit of currency can buy. Deflation – a sustained decrease in the general price level of goods and services. Consumer Price Index (CPI) – measures changes in the price of a market basket of goods and services. Disinflation – reduction in the inflation rate to a lower, but still positive, rate. Hyperinflation – an extremely high rate of inflation. A sustained increase in the price level is known as ____inflation__________. When there is a sustained increase in the price level, the purchasing power of currency ___decreases_______. ______Hyperinflation____ results when there is an extremely high rate of inflation. Watch it (Philadelphia Fed and MJM Foodie: Inflation) Indicate whether each of the following statements is true (T) of false (F). ___F___1. Inflation is bad for the economy but deflation is good for the economy. ___T___2. An important goal of the Fed is to keep inflation low and stable. ___F___3. Deflation and disinflation refer to the same thing. ___T__ 4. Stable prices indicate a healthy economy. ___F___5. The Consumer Price Index of the base year is equal to zero Watch it (MRUniversity: Who wants to be a Trillionaire?) Check Yourself Write the definition that goes with each term. 109

Virginia Council on Economic Education 1. Inflation: A sustained increase in the general price level of goods and services over time 2. Market basket: Represents the goods and services bought by a typical urban American household 3. Consumer Price Index: Measure of the average change in prices of goods and services paid by a typical urban American household 4. Deflation: A sustained decrease in the general price level of goods and services over time 5. Disinflation: Reduction in the inflation rate to a lower, but still positive, rate 6. Hyperinflation: A rapid rise in the price level that leads to extremely high inflation 7. Purchasing power: The quantity of goods and services that a unit of currency can buy Check Yourself (Inflation) Write the answers to the Check Yourself questions in the blanks below. 1. __Russia__ 2. __Greece and Japan __ 3. __India __ Think About It A relative offers to either send you a gift of $1,000 for your birthday now or to hold on to it for you and send you $1,050 next year. You know that the rate of inflation over the past few years has been around 3%. Using what you have learned about inflation, which has a higher purchasing power, $1,000 now or $1,050 next year? Explain. Write your response in the box below. 110

Virginia Council on Economic Education Lesson 3b: The Costs of Inflation Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letters in the blanks provided to correctly complete the equation. Money Supply (M) – the supply of money in the economy. Velocity (V) – the number of times a dollar is spent. Price (P) – the price level of goods and services in an economy. Output (Y) – the value of final goods and services produced in the economy. Demand-pull inflation – inflation created by an increase in the demand for goods and services. Cost-push inflation – inflation caused by an increase in the cost of inputs used throughout the economy. Fill in the blanks with M, V, P, and Y to indicate the equation of exchange according to the quantity theory of money. ___M___ x ___V___ = ___P___ x ___Y___ = Nominal GDP 111Inflation, deflation, price stabilityExample responses: The $1050 next year is 5% more than you would get this year (50/1000 = 5%). That is a larger increase than the increase in the price level of 3%, so the purchasing power is higher next year.

Virginia Council on Economic Education Watch it (MRUniversity: Causes of Inflation) Check Yourself Write the answer to the Check Yourself questions in the blanks below. 1. __the velocity of a dollar __ 2. __ all finished goods and services sold in an economy__ Watch it (MRUniversity – 3 videos) Answer each of the following true (T) or false (F) questions. ___T___ 1. In the long-run, an increase in the money supply (M) will lead to an increase in the price level (P) if velocity (V) and output (Y) are constant. ___T___ 2. An increase in M can boost the economy in the short run. ___F___ 3. Inflation is an effective way for the government to impose a tax. ___T___ 4. Expected inflation does not create significant costs in the economy. ___F___ 5. The real interest rate is equal to the nominal interest rate when there is high inflation. ___T___ 6. Unexpected inflation causes price confusion and money illusion. Think About It Assume the economy is experiencing low and stable inflation, averaging 2% a year. Nadia loans her good friend Brett $12,000 to buy a car. Nadia and Brett agreed that he would repay the loan over the next 5 years at a 5% fixed interest rate. How would Nadia and Brett be affected if next year the inflation rate unexpectedly rises to 6%? Write your response in the box below. 112

Virginia Council on Economic Education Lesson 4a: Business Cycles Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Indicate the area showing a recession on the graph below. Business Cycle – the fluctuations of real GDP growth over time. Recession – a significant decline in economic activity lasting more than a few months. Depression – when a recession becomes very severe. 113The business cycleExample response: Nadia would lose and Brett would gain because the real interest rate is -1%, not the agreed upon 3%.

Virginia Council on Economic Education Circle the area on the unemployment graph below that indicates a recession. Watch it (CEE: The Business Cycle) Check Yourself (Drag and Drop) Label the components of the business cycle. Top left box: Peak Top right box: Trough Bottom left box: Contraction Bottom right box: Expansion Check Yourself (Business Cycle) Write the answer to the Check Yourself question below. 1. ________1981-1982 and 2007-2009_________ 114

Virginia Council on Economic Education Think About It Without using real data, draw a graph in the box below showing how real GDP changes over a business cycle. Label each of the phases of a business cycle on your graph (recession, trough, expansion, peak). Lesson 4b: Impacts of the Business Cycles Write the economic concept introduced by the introductory cartoon/visual in the box below. Watch it (CEE: The Business Cycle) Check Yourself Write the answer to the Check Yourself question in the blank below. 1. _____2009_____ Check Yourself (Drag and Drop) Write the answers to the Check Yourself questions in the blanks below. 115(Cyclical) UnemploymentRGDP P E R T

Virginia Council on Economic Education Recession: 1. Manufacturing slows in the face of lower consumer confidence 2. The stock market plunges as news spreads of dark economic days ahead 3. Layoffs cut deep into the economy; thousands lose jobs at major companies Expansion: 1. Auto manufacturing is on the rise in response to a boom in sales 2. In March, 150,000 new jobs are created, and tech industry reports record profits Homework Find a news headline that refers to the business cycle. What phase of the business cycle does your headline reference? Explain. Write your response in the box below and submit on Canvas. Lesson 5a: National Economic Goals Write the economic concept introduced by the introductory cartoon/visual in the box below. 116Economic policySee rubric for solutions.

Virginia Council on Economic Education Vocabulary Economic Growth – when real GDP increases over time. Full Employment – rates are as low as possible (but not zero). Check Yourself Write your answers to the Check Yourself questions in the blanks below. 1. ____Yes____ 2. ____1982____ 3. ____2000____ Watch it (FRBP: What is the business cycle?) Check Yourself Write your answer to the Check Yourself questions in the blanks below. 1. ___________True_____ 2. _____7.5 percent_____ 3. __________False_____ 4. _________60,000 _____ 5. ____________production in goods and services____________ 6. _______________________Gross Domestic Product________ 7. _____________________________________$120,000______ 8. _______________________Economic Growth ____________ Watch it (FRBP: What is unemployment?) and (FRBP: Price Stability) Answer each of the following true (T) or false (F) questions. 117

Virginia Council on Economic Education ___F___ 1. A person is unemployed if they are out of work. ___T__ 2. Inflation occurs when there is too much spending chasing too few goods. ___T__ 3. Inflation helps borrowers. ___T__ 4. Inflation is caused by increasing the money supply too rapidly. Think About It There are three national economic goals: economic growth, full employment, and price stability. Can you think of an example of a problem that results when each of the goals is not met? Write your response in the box below. Lesson 5b: Introduction to Economic Policy Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Fiscal policy – the federal government’s use of spending and taxing to influence the economy to achieve the three economic goals. 118Economic policy/StabilizationExample responses: Inflation hurts lenders. Unemployment makes it hard for people to provide for their families.

Virginia Council on Economic Education B. Monetary policy – when the Federal Reserve uses its tools to affect the interest rate in the economy to achieve the three economic goals. C. Government spending – government purchases of goods and services. D. Consumer spending – consumers purchases of goods and services. E. Budget deficit – when government spends more money than it collects in taxes. F. Budget surplus – when the government collects more taxes than it spends. G. National debt – the sum of the government’s deficits and surpluses over time. H. Contractionary policies - used to slow inflation. I. Expansionary policies - used in recessions to stimulate employment and GDP. __B__ 1. Changing the money supply to change interest rates to prevent inflation or unemployment. __E__ 2. The result when the government has a balanced budget but then increases its spending. __A__ 3. Decreasing taxes to combat a recession. __H__ 4. Cutting spending or increasing interest rates to improve the economy. __F__ 5. when spending is cut and taxes are raised the budget moves toward this. __I__ 6. Cutting interest rates and increasing government spending to improve the economy. __G__ 7. Increased when the government runs a deficit and decreases when it runs a surplus. Watch it (MRUniversity: Introduction to Fiscal Policy) Check Yourself Write your answers to the Check Yourself questions in the blanks below. 1. _____True_____ 2. _____False_____ 119

Virginia Council on Economic Education 3. _____False_____ 4. _____True_____ 5. _____True_____ 6. _____True_____ Watch it (FRBP: Monetary Policy) Check Yourself Write your answers to the Check Yourself questions in the blanks below. 1. _______increase_______ 2. _______decrease_______ 3. _______increase_______ 4. _______increase_______ 5. _______decrease_______ Homework Assume the economy has entered a recession. Identify two fiscal and two monetary policy actions that could be used to alleviate the recession and explain how each policy would improve the economy. Write your response in the box below and on Canvas. 120Fiscal policies 1. See rubric for solutions. 2.Monetary Policy 1. 2.

Module 6

Virginia Council on Economic Education MODULE 6 Fiscal and Monetary Policy Module topic – Based on the Module introduction, what do you think is the major theme of this module? Write your response in the box below. Lesson 1a: What is Fiscal Policy? Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Fill in the blanks below with the correct term. Fiscal policy - the federal government’s use of spending and taxes to stabilize the economy. Aggregate demand – the demand for all goods and services (also known as gross domestic product). Disposable income – income remaining after deduction of taxes and other mandatory charges, available to be spent or saved. Expansionary fiscal policy – increase in government spending or decrease in taxes to increase aggregate demand and gross domestic product during a recession. Contractionary fiscal policy – a decrease in government spending or increase in taxes to decrease aggregate demand and gross domestic product to address inflation. 121The main theme of the module is economic policy (fiscal and monetary policy)Taxation

Virginia Council on Economic Education Fiscal policy is the government use of __spending (taxes)______ or ___taxes (spending)_____ to achieve its goals for the economy. During a recession, the government will (circle one) increase decrease spending or (circle one) increase decrease taxes. This is known as _____expansionary_________ fiscal policy. During inflation, the government will (circle one) increase decrease spending or (circle one) increase decrease taxes. This is known as _________Contractionary________ fiscal policy. Watch it (CEE: Fiscal Policy) Check Yourself (Drag and Drop) Place each item in its appropriate category. Expansionary Fiscal Policy: Increase in government spending, decrease personal income taxes, and increased transfer payments. Contractionary Fiscal Policy: Decrease in government spending, increase personal income taxes, and decreased transfer payments. Watch it (MRUniversity: Introduction to Fiscal Policy) Check Yourself Write in the answers to the Check Yourself questions in the blanks below. 1. _____________________________More than $1__ 2. ____________________________By the same $1__ 3. ______________________________________Yes__ 122

Virginia Council on Economic Education Think About it How do you recommend the government change GDP and taxes to stabilize the economy in each of the following scenarios? Write your response in the box below. •Economic growth has started slowing and the unemployment rate has increased over the past four months. •There has been strong growth in GDP over the past year, unemployment is very low, and inflation has started to rise. •Prices are stable, unemployment is low and the economy is growing at an average rate. Lesson 1b: Fiscal Policy in Action Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Discretionary fiscal policy – when the government makes a decision to change taxes or spending to improve the economy. Automatic stabilizers – actions that are built into the economy and work to address recession and inflation, without requiring anyone to make a decision. Label each of the following as discretionary fiscal policy (D) or an automatic stabilizer (A). 123Consumer confidenceExample responses: •Increase spending and/or decrease taxes •Decrease spending and/or raise taxes •No change I spending/taxes

Virginia Council on Economic Education __A__ 1. Progressive income taxes __D__ 2. Emergency stimulus checks from the government __D__ 3. Income tax rate reduction __A__ 4. Unemployment compensation __A__ 5. Social programs Check Yourself (Fiscal Policy) Write in your answer to the Check Yourself questions in the blanks below. 1. __Decrease taxes, Increase government spending, and Implement expansionary fiscal policy__ 2. __Increase taxes, Decrease government spending, and Implement contractionary fiscal policy__ Watch it (MJM Foodie: Fiscal Policy) Check Yourself (Drag and Drop) Write each item in its appropriate category. Inflationary Gap: 1. __Decrease employment_____________________ 2. __Increase taxes to decrease consumer spending__ 3. __Decrease aggregate demand_________________ 4. __Decrease government spending_______________ 5. __Decrease price level________________________ 124

Virginia Council on Economic Education Recessionary Gap: 1. __Increase employment________________________ 2. __Decrease taxes to increase consumer spending____ 3. __Increase aggregate demand___________________ 4. __Increase government spending_________________ 5. __Increase GDP________________________________ Homework Write your response in the box below and submit it on Canvas. 1. Define a progressive income tax system. 2. What will happen to the amount of taxes collected by the government during a recession when there is a progressive income tax system? Explain. 3. Explain how a progressive income tax system works as an automatic stabilizer in the economy during a recession; that is, explain what happens to income and taxes paid during a recession and how that change in taxes paid affects disposable income and consumption. 125See rubric for solution.

Virginia Council on Economic Education Lesson 2a: Limitations of Fiscal Policy Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the letter of the term associated with each statement in the blank provided. A. Observation lag – the time it takes to identify there has been an economic downturn. B. Wait and see lag – the time it takes for policymakers to determine if fiscal policy is necessary. C. Legislative lag – the time it takes to determine and approve a policy proposal. D. Transmission lag – the time it takes for the approved policy to be carried out. E. Effectiveness lag – the time it takes for the policy to begin having an impact on real GDP and employment. __D__ 1. From when Congress and the President makes a decision until the government makes the requested action. __A__ 2. From when a downturn begins until Congress and the President know it is happening. __B__ 3. From when Congress and the President know there is an economic downturn until they decide they need to take action. __C__ 4. From when Congress and the President decide to take action until they pass the required legislation. __E__ 5. From when the government undertakes fiscal policy until it affects the economy. 126Federal budget/budget deficit

Virginia Council on Economic Education Watch it (MRUniversity: Introduction to Fiscal Policy) Check Yourself Write in your answers to the Check Yourself in the blanks below. 1. __recession during a demand shock________________________________________ 2. __timely, temporary, and targeted __________________________________________ 3. __transfer payments and progressive income taxes_____________________________ Watch it (MJM Foodie: Fiscal Policy) Check Yourself (Matching) Write each definition next to the terms. 1. Observation lag – the time it takes to identify there has been an economic downturn 2. Wait and see lag – the time it takes for policymakers to determine if fiscal policy is necessary 3. Legislative lag – the time it takes to determine and approve a policy proposal 4. Transmission lag – the time it takes for the approved policy to be carried out 5. Effectiveness lag – the time it takes for the policy to have an impact on real GDP and employment Check Yourself (Fill in the Blank) Fill in the blanks. Crowding out can occur when the government _______borrows_______, causing interest rates to ________increase_______, which then causes private investments to ___decrease___. 127

Virginia Council on Economic Education Check Yourself (Drag and Drop) Write Place each item in its appropriate category. Recognition/ Observation – Time to collect economic data Wait and See – Time to analyze economic data Legislative – Time for federal legislation to be debated and approved. Time for state government to decide what economic projects are most useful. Transmission – Time for approved government projects to begin. Effectiveness – Time to receive and spend wages. Time for the fiscal multiple to work through the economy Think About It Respond to the following questions in the box below. Navigate to the Council for Economic Education's National Budget Simulation (via econedlink.org). Make changes in the government spending categories listed to balance the federal budget. Remember that every budget cut you make has an opportunity cost! Identify a category that you increased and a category that you decreased and explain why. 128Responses will vary based on student’s choices.

Virginia Council on Economic Education Lesson 2b: Fiscal Policy in the Long Run Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Fill in each blank with the correct term. Balanced budget – when the government’s revenue from taxes equals the government’s spending. Budget deficit – when the government's tax revenues are less than government spending. Budget surplus – when the government's tax revenues are greater than government spending. National debt (Public debt) – the sum of all federal budget surpluses and deficits to date. The total amount of money the U.S. government owes. Crowding out – the decrease in private expenditure, or spending by consumers and businesses, that occurs as a result of government spending or borrowing. The government’s budget is balanced when _________government spending ________ is equal to ___tax revenues______. There is a budget deficit when spending is (circle one) < = > tax revenues. There is a budget surplus when spending is < = > tax revenues. Check Yourself (National Debt) Write the correct answer for each of the Check Yourself true or false questions. 1. __False_______ 2. __True_______ 3. __True_______ 4. __True_______ 5. __False______ 129Budget deficits/debt

Virginia Council on Economic Education Watch it (CEE: Budget Deficits and Public Debt) Check Yourself (Matching) Write the definition of each term. 1. Public debt – Total government accumulation of debt over time 2. Budget surplus – Occurs when government revenues in a budget period exceed spending 3. Budget deficit – Occurs when government spending in a budget period exceeds revenues 4. Government bonds – Debt instruments issued by the government 5. Debt to GDP ratio – Percent of the public debt in terms of the level of GDP Watch it (MRUniversity: Fiscal Policy and Crowding Out) Check Yourself Write the answer to the Check Yourself questions in the blanks below. 1. __money offset_______________________________ 2. __borrows, increase, and decrease_______________ 3. __increase and zero____________________________ Homework Answer the following questions in the box below and submit them on Canvas. Return to the National Budget Simulation at econedlink.org. 1. List the categories of spending you would decrease, and how much you would decrease each in order to balance the budget. 2. Identify a category of spending you would like to increase and explain why. What will have to happen in order to balance the budget if you increase spending in that category? 3. Select one category of spending you chose to decrease. Give an example of a specific potential opportunity cost of decreasing spending in that category. 4. Do you think that balancing the federal budget would be relatively easy or relatively difficult? Explain. 130

Virginia Council on Economic Education Lesson 3a: Money Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Barter – the exchange of goods and services for other goods and services. Divisible – can be divided into smaller amounts to make change Portable – easy to carry around Accepted – can be used to make all purchases throughout the economy Scarce – there is less than everyone wants so that it has value Durable – lasts a long time. Commodity money – Objects that have a use but are also used in exchange for goods and services Fiat money – money by government decree, backed by a central bank 131MoneySee rubric for answers.

Virginia Council on Economic Education Check each item’s best two characteristics if it were used as money. Gold bars Pebbles Tomatoes Diamonds Divisible _____ _____ __√___ _____ Portable _____ __√__ __√__ _____ Scarce __√_ _____ _____ __√_ Durable __√___ __√__ _____ __√_ Watch it (FRBP: Money versus Barter and What is money?) Check Yourself Write in the definition of each term. 1. Divisible – Money can make change in smaller units 2. Stable – Money holds its value over time 3. Scarce – Money is relatively hard to acquire 4. Acceptable – Money is taken in exchange for goods and services 5. Portable – Money can be transported easily 6. Durable – Money lasts and doesn't wear out easily 7. Fiat Money – Money by government decree, backed by a central bank 8. Commodity Money – Objects that have a use and are used in exchange for goods and services Watch it (MJM Foodie: What is money?) Check Yourself (Money) Write in the answers to the Check Yourself questions in the blanks below. 1. _____True_____ 2. _____False_____ 132

Virginia Council on Economic Education 3. _____True_____ 4. _____False_____ 5. _____False_____ 6. _____False_____ 7. _____True_____ 8. _____False_____ Think About It Write your response in the box below. Now that you know the three functions of money, determine if a credit card is considered money. Lesson 3b: Banking Write the economic concept introduced by the introductory cartoon/visual in the box below. 133Banks/banking/safekeepingA credit card is not money because it is not a store of value, it is a loan.

Virginia Council on Economic Education Vocabulary Financial institution – provides safekeeping, accepts and pays interest on deposits and uses the funds to make loans, processes payments and transfers A. Bank – a financial institution that accepts deposits and makes loans B. Credit Union – a non-profit financial cooperative whose members can deposit and borrow money C. Savings and Loan – accepts savings and makes loans, often for home mortgages D. The Federal Reserve – the central bank of the United States E. The Federal Deposit Insurance Corporation (FDIC) – a federal agency that insures deposits in financial institutions in the event of bank failures F. The Comptroller of the Currency – regulates and supervises financial institutions to ensure that that they operate in a safe and sound manner G. The Securities and Exchange Commission (SEC) – protects investors, maintains functioning of securities markets, and facilitates capital formation Fractional reserve banking – a system in which only a fraction of deposits in a financial institution are actually held in its vault and available for withdrawal Write the letter(s) of the place(s) you could go for each of the following services. __A, B, C__ 1. Deposit your savings __A, B, C__ 2. Apply for a loan __G______ 3. File a complaint about a stock trade __D, E, F__ 4. File a complaint about a financial institution __A, B, C__ 5. Transfer a large payment Watch it (FRBP: How Banks Make Money and MRU: Saving and Borrowing) Check Yourself Write in the answers to the Check Yourself questions in the blanks below. 1. ____________________borrowers__ 134

Virginia Council on Economic Education 2. _________________________pay__ 3. _______________________charge__ 4. ___________________less; charge__ Watch it (FRBP: Fractional Reserve Banking) Assume the Federal Reserve requires banks to keep 5% of deposits on reserve so that it is available for customers who want to withdraw funds. That is, the reserve requirement is 5%. Fill in the blanks below. A bank that receives a new deposit of $1000 must keep $__50____ in required reserves and can then lend out $__950____. Because the bank only has to keep 5% of the deposit in required reserves, the banking system is known as a _______fractional__________ ____reserve_____________ banking system. Watch it (MJM Foodie and FRBP: Creating Money) Answer the following questions. 1. If you deposit money in a bank, does the bank hold all, none, or a fraction of the money that you deposit? a fraction 2. What is the term for the amount that banks hold in their vault or in an account with the Fed? Reserves 3. How do banks “create” money? by making loans 4. Will a new deposit of $500 into the banking system increase the money supply by less than, more than, or equal to $500? more than Homework Let's say that you have put $1,000 in your savings account at a local financial institution, and an employee of the banks tells you that the bank does not have the money you deposited in its vault (or anywhere else) in the bank. 135

Virginia Council on Economic Education 1. Could the employee be correct and, if so, then where is the money that you deposited into your savings account? 2. Should you be worried about getting your deposit back from the bank? Why or why not? Lesson 4a: Federal Reserve System Structure Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary A central bank – manages the money supply, oversees the financial system, and conducts monetary policy. The Fed has a dual mandate from Congress to help the economy achieve maximum employment and stable prices (low/stable inflation). The Federal Reserve System – composed of three parts—the Board of Governors, the twelve regional Federal Reserve Banks, and the Federal Open Market Committee (FOMC). 136The Federal ReserveSee rubric for solution.

Virginia Council on Economic Education Watch it (FRBP: Central Banking, The Federal Reserve, Structure of the Fed) Check Yourself (Federal Reserve) Write the definition next to each term. Federal Open Market Committee – the monetary policymaking body of the Federal Reserve System, composed of 12 voting members: the 7 members of the Board of Governors and 5 of the 12 Reserve Bank presidents Federal Reserve Banks – the decentralized component of the Federal Reserve System. There are 12 in total, serving different regions of the United States. Federal Reserve Systems – the central bank of the United States, consisting of the Federal Reserve Board of Governors, 12 regional Federal Reserve Banks, and the Federal Open Market Committee Board of Governors – the independent government agency that provides general oversight of the Federal Reserve System Check Yourself (Federal Reserve) Write the answer to the Check Yourself questions in the blanks below. 1. _____________________________Federal Reserve____________________________________ 2. ___________do not trust their financial institutions___________________________________ 3. _____________________________All of the above____________________________________ 4. ____ appointed by the President of the United States and confirmed by the Senate__ 5. __All of the above are true_________________________________________________________ Think About It The U.S. Treasury prints Federal Reserve Notes (the official name for a dollar bill). But each dollar bill enters the economy only after it is issued by one of the 12 Federal Reserve banks. 137

Virginia Council on Economic Education Look at a dollar bill. The letter to the left of George Washington's portrait identifies the Federal Reserve District where it was issued and you can read the name of the Federal Reserve Bank in the circle around the letter. The bill shown on the course page course was issued by the Federal Reserve Bank of Atlanta. Lesson 4b: Federal Reserve System Functions Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Bank Supervision and Regulation – promote the safety and soundness of financial institutions and assure compliance with banking laws and regulations. Payments and Financial Services – distribute currency and coin to banks, provide check collection services to banks, operate electronic payment systems, and provide financial services to the U.S. government. Liquidity – refers to the ease of obtaining cash. The Fed provides liquidity to the financial system is by lending to banks. Discount Rate – the interest rate that banks pay to borrow from the Fed. Monetary policy – the Fed's control of interest rates to stabilize the economy. The Fed influences the availability and cost of money and credit in the economy (the interest rate) to promote maximum employment and price stability. The Federal Funds Rate – the overnight interest rate banks pay each other when borrowing reserves. Open market operations – the purchase and sale of government bonds. List the functions of the Federal Reserve. 138Functions of the Federal ReserveExample responses include the 12 Federal Reserve Bank cities.

Virginia Council on Economic Education 1. Supervise and regulate banks 2. Provide payments and financial services to the U.S. government 3. Conduct monetary policy Watch it (FRBP: Federal Reserve Functions, Reserve Requirements, Discount Rate, Monetary Policy Tools, Monetary Policy) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. ______________________________central bank__ 2. ___________________________monetary policy__ 3.______________________the federal government__ Check Yourself (Federal Reserve) Write the definition next to each term. Liquidity – the ease of obtaining cash Federal funds rate – the overnight interest rate banks pay each other to borrow reserves Open market operations – purchase and sale of government bonds by the Federal Reserve Reserve requirement – the percentage of deposits that commercial banks are required to hold as vault cash or on reserve at the Fed Discount rate – the interest rate banks pay the Fed when they borrow from the Fed Homework Write your answer to the homework questions in the box below and post them on Canvas. 139

Virginia Council on Economic Education 1. What is the federal funds rate? 2. What are open market operations? Which open market operation would the Fed use to increase the money supply? 3. What is the reserve requirement? What would happen to the reserve requirement if the Fed wanted to decrease the amount of money available for loans? Lesson 5a: What is Monetary Policy? Write the economic concept introduced by the introductory cartoon/visual in the box below. 140Monetary policySee rubric for solutions.

Virginia Council on Economic Education Vocabulary Fill in each blank below with the correct term. Monetary Policy – the central bank’s use of its tools to change the interest rate to affect the country's overall levels of spending and therefore employment and the prices of goods and services. Expansionary monetary policy – increases the money supply to lower interest rates and encourage economic growth during periods of economic contractions or recessions. Contractionary monetary policy – decreases the money supply to increase interest rates to prevent inflation. Monetary policy is the Federal Reserve’s use of its tools to affect __interest__________ rates to achieve its goals for the economy. During a recession, the Fed will (circle one) increase decrease interest rates to stimulate the economy. This is known as _________expansionary_________ monetary policy. During inflation, the Fed will (circle one) increase decrease interest rates. This is known as _________Contractionary________ fiscal policy. Watch it (FRBP: Price Stability and Maximum Employment, Money Supply, Monetary Policy) Check Yourself Write the definition that goes with each term. Goals – dual mandate; maximum employment; low and stable inflation Monetary Policy – target for the federal funds rate and communications. Transmission Channels – Expectations of households and businesses and overall financial conditions: interest rates; asset prices; exchange rates. Effects – Spur or restrain growth in overall demand for goods and services Check Yourself (Federal Reserve) Write the actions that go with each type of policy. 141

Virginia Council on Economic Education Expansionary Monetary Policy: 1. Increase the money supply 2. Decrease the reserve requirements 3. Buy government bonds 4. Decrease discount rate 5. Target a lower federal funds rate Contractionary Monetary Policy: 1. Decrease the money supply 2. Increase the reserve requirements 3. Sell government bonds 4. Increase discount rate 5. Target a higher federal funds rate Check Yourself (Federal Reserve) Write the effects that go with each policy action. Effects of Increasing the Money Supply 1. Increases employment 2. More household and business spending 3. Increases aggregate demand 4. Lower interest rates 5. Increases inflation 6. Increases output Effects of Decreasing the Money Supply 1. Decreases employment 2. Less household and business spending 142

Virginia Council on Economic Education 3. Decreases aggregate demand 4. Higher interest rates 5. Decreases inflation 6. Decreases output Think About It The Federal Reserve has been given a dual mandate to pursue the economic goals of price stability and maximum employment. What type of monetary policy (expansionary or contractionary) would the Federal Reserve System use in the following situations? Write your response in the box below. 1. The economy is growing quickly, so quickly that the rate of inflation has been rising every month for a year. People are uncertain about the future. 2. The economy has been in decline and the unemployment rate is starting to rise. Economists are starting to use the "r" word—recession—in their economic forecasts. Lesson 5b: Monetary Policy in Action Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Maximum employment – is the level at which cyclical unemployment—the type that rises during economic downturns—is eliminated. 143Example responses: 1. Contractionary 2. Expansionary Monetary policy

Virginia Council on Economic Education Watch it (MRUniversity: The Fed before the Great Depression, The Fed after the Great Depression) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. _____________________new tool__ 2. ________________________more__ 3. _________________________less__ 4. ____________________short-term__ 5. _____________________long-term__ Watch it (FRBP: Interest on Reserves) Answer the following questions. The Federal Reserve pays banks interest on the reserves the banks keep in an account at the Fed. 1. What happens to the amount of reserves that banks keep with the Fed if the interest rate they are paid increases (increase or decrease)? How does this change the money supply (increase or decrease) and is this an expansionary or contractionary monetary policy? Increase, decrease, contractionary 2. What happens to the amount of reserves that banks keep with the Fed if the interest rate they are paid decreases (increase or decrease)? How does this change the money supply (increase or decrease) and is this an expansionary or contractionary monetary policy? Decrease, increase, expansionary 144

Virginia Council on Economic Education Homework After playing Chair the Fed: A Monetary Policy Game from the Federal Reserve Bank of San Francisco, respond to each of the following: 1. Identify the two goals of monetary policy. 2. What type of monetary policy should be implemented to raise the federal funds rate? 3. What type of monetary policy should be implemented to lower the federal funds rate? Write your answer in the box below and submit it on Canvas. 145See rubric for solutions.

Module 7

Virginia Council on Economic Education MODULE 7 The Global Economy Module topic – Based on the Module introduction, what do you think is the major theme of this module? Write your response in the box below. Lesson 1a: What is Voluntary Trade? Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Fill in the blanks with the correct term. Voluntary exchange – happens when both parties are willing and able to exchange a product for an agreed-upon value. Involuntary exchange – happens when one party forces another party to exchange a product. One drawback is that both parties do not gain. International trade – allows voluntary exchange between consumers and producers in different countries. Exports – goods and services that it sells to buyers in other countries Imports – goods and services purchased from sellers in other countries. Trade deficit – means that a country buys more from other countries than it sells to other countries, that is, its imports exceed its exports. Trade surplus – means that a country sells more to other countries than it buys from them, that is, its exports exceed its imports. 146International trade/globalizationVoluntary exchange/trade

Virginia Council on Economic Education The goods that are bought from another country are called _________imports___________ and the goods that are sold in another country are called _____exports_______________. When the value of the goods and services sold to another country is greater the value of the goods and services bought from another country, there is a trade _________surplus___________. The value of goods and services that the U.S. purchases from other countries is greater than the value of the goods and services it sells to other countries, so the U.S. has a trade _____deficit_______________. Check Yourself (Drag and Drop) Write the name of each item in it appropriate category. Voluntary exchange: 1. In exchange for washing the car, your parents allow you to use it for the evening 2. You make a car payment for the car you own 3. You trade your yogurt for a granola bar with a friend at lunch. Involuntary exchange: 1. You pay tax on chocolate ice cream and discover 2. You set down your grocery bags on the ground while waiting for the bus 3. You experience identity theft as someone uses your name to open up a credit card account. Check Yourself (Matching) Write the definition that goes with each term. Trade deficit – A situation where imports are greater than exports. Export – A product that is produced domestically but sold internationally. 147

Virginia Council on Economic Education International trade – When voluntary exchange happens across borders. Trade surplus – A situation where exports are greater than imports. Import – A product that is produced in another country but purchased domestically Watch it (MRUniversity: Trade) Check Yourself Write in the Check Yourself answer in the blanks below. 1. _________________________less; lower__ 2. _____________________________highly__ 3. _________________________waterways__ Think About It Have you made any voluntary trades today? If so, how did they make you and the other party better off? Write your response in the box below. Think About It We participate in voluntary and involuntary exchanges all the time, often without even thinking about it. Write three examples of voluntary exchanges that you have had in the last week in the box below. 148Answers vary Example: I bought a cup of coffee this morning. I enjoyed the coffee and the coffee shop made moneyAnswers vary Examples: I bought lunch in the cafeteria I traded a friend some paper for a candy bar I traded my labor for wages

Virginia Council on Economic Education Lesson 1b: Benefits of Trade Vocabulary Interdependence – trading partners who come to rely on each other for the goods and services they want and need. Watch it (CEE: Benefits of Trade) Check Yourself (Roll the Dice) Write the answer to the Check Yourself questions in the blanks below 1. _______________True__ 2. _______________True__ 3. ______________True__ 4. ______________True__ 5. ______________True__ 6. ______________True__ Watch it (Common Sense Economics: Gains from Trade) Fill in the blanks with the correct phrase or term. With voluntary trade, benefits ___exceed (are greater than)__ costs for both parties. “Do what you do best and trade for the rest” describes the Law of ______________comparative advantage___________. The Smoot-Hawley _____tariff____________ decreases trade by 60% and was a cause of the Great Depression. Homework Take a look at the labels on your shoes, your shirt, and your computer. Were these things produced in the United States or were they imported? Now find another shirt and another pair of shoes. Where were these made? Based on the information in this lesson, why do 149

Virginia Council on Economic Education you think those items were produced in those countries? Write your response in the box below and submit it on Canvas. Lesson 2a: Absolute vs. Comparative Advantage Vocabulary Absolute advantage – an individual or a country has an absolute advantage when they can produce a good with fewer resources than a trading partner Comparative advantage – when a country has comparative advantage in the production of a good, it means it can produce that good with a lower opportunity cost than a trading partner. Production Possibility Curves – show the maximum amount of output possible given the quantity of resources and level of technology in a particular time period. 150See rubric for solution

Virginia Council on Economic Education Draw a graph showing a production possibilities curve for a country that produces food and clothing. Watch it (MRUniversity: Comparative Advantage) Check Yourself (Roll the Dice) Write in the answers to the Check Yourself questions in the blanks below. 1. ____________________France__ 2. ______________________Italy__ 3. _______________1/10 mustard__ 4. ________________1/4 mustard__ 5. _______________________Italy__ 6. _____________________France__ 151foodclothingNote: axes labels may be reversed and line may be a negaAvely sloped curve

Virginia Council on Economic Education Think About It Use the table to answer the questions that follow. 1. Which country has the absolute advantage in the production of radios? How do you know? 2. Which country has the comparative advantage in the production of radios? How do you know? 3. Which one of the PPCs below represents the numbers seen for England in the table? RadiosTentsEngland5025Ireland4010 1521. England; 50 > 40 2. Ireland; ¼ < ½

Virginia Council on Economic Education Lesson 2b: Specialization is promoted by trade Vocabulary Specialization – when an individual, firm, or country focuses on producing a good or service in which it has a comparative advantage. Open economy– nations are free to trade goods with one another. Closed economy– nations are not free to trade goods with one another. Watch it (MJM Foodie: Terms of Trade) Check Yourself (Roll the Dice) Write the answer to the Check Yourself questions in the blanks below. 1. __________________________Export__ 2. __________________________Import__ 3. _____________________Specialization__ 4. __________________________outside__ 5. ____________________________True__ 6. ____________________________will__ Watch it (MRUniversity: Comparative Advantage) Circle the correct response or fill in the blank with the correct term. In the video example, the U.S. can produce computers and shirts with (circle one) more less labor than Mexico and therefore has an absolute advantage in producing both computers and shirts. This (circle one) does does not mean that the U.S and Mexico should trade. The opportunity cost of producing computers is lower in (circle one) the United States Mexico and the opportunity cost of producing shirts is lower in (circle one) the United States Mexico. 153

Virginia Council on Economic Education Based on comparative Advantage, the U.S. will produce (circle one) computers shirts and Mexico will produce (circle one) computers shirts. Specialization and trade will increase decrease total wealth for the U.S. and Mexico. When combined with trade, “diversity is ____Strength___________________.” Homework The United States and Canada have the production possibilities curves shown above. It is determined that the United States has the comparative advantage in peanuts. Will both nations gain from trade if the terms of trade that are offered are 1 Peanut= 2 Corn? Why or why not? Show your work. Write your response in the box below and submit it on Canvas. Lesson 3a: Define Imports and Exports Write the economic concept introduced by the introductory cartoon/visual in the box below. 154(International) trade/imports and exportsSee rubric for solution

Virginia Council on Economic Education Vocabulary Trade barriers – restrictions that governments impose on trade such as import quotas and tariffs. Exchange rate – refers to the price of a currency compared to another currency. Check Yourself (Drag and Drop) Identify each description as an import, an export, or neither. Exports – China buys refined oil from the United States. A pharmaceutical company located in Boston sells $100 million in vaccines to the Chinese government. Imports – An American hospital buys medical equipment from a German company. Neither – Automobiles produced in Michigan are sold in Texas. Check Yourself (Balance of Trade) Write the answers to the Check Yourself questions in the blanks below. 1. ____________________Decrease__ 2. _____________________Increase__ 3. _____________________Increase__ 4. _____________________Increase__ Think About It Steel is imported from other countries to make cars in the United States. The United States then exports some of those cars to other countries. Has the importing of steel helped or harmed the United States? Write your response in the box below. 155

Virginia Council on Economic Education Lesson 3b: Trade Deficit and Surplus Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Insert a <, >, or = sign in each of the blanks below. Balance of trade – the difference in the value of a country’s exports and imports. Trade surplus – if exports are greater than imports, a country has a trade surplus. Trade deficit – If exports are less than imports, a country has a trade deficit. When imports _____=_____ exports, there is balanced trade. When imports _____>_____ exports, there is a trade deficit. When imports are _____<_____ exports, there is a trade surplus. Check Yourself (Balance of Trade) Write the answers to the Check Yourself questions in the blanks below. 1. __26 million__________ 2. __True______________ 3. __0 ________________ 156ImportsResponses should mention the benefits of trade and/or the effects of trade on different groups (steel industry versus auto industry).

Virginia Council on Economic Education Check Yourself (Roll the Dice) Write the answers to the Check Yourself questions in the blanks below. 1. _____________________________________a trade surplus__ 2. ____________________________trade deficit of $20 million__ 3. ___________decrease imports by all sectors of the economy__ 4. ____________________________________a balanced trade__ 5. ______________________________slower economic growth__ 6. ___________________________________an increase in GDP__ Homework View the data on the trade balance below. Then answer the questions that follow. Write your response in the box below and submit it on Canvas. 1. Is the United States currently in a trade deficit or a trade surplus situation? 2. What is the most recent amount of deficit or surplus? 3. There’s a time between July 2008 and February 2009 when the value of the trade deficit changed substantially. Did the trade deficit increase or decrease during this time? 157See rubric for solution

Virginia Council on Economic Education Lesson 4a: Exchange Rates Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Write the correct term in the blanks below. Exchange Rate – is the price of one country’s currency in terms of another country’s currency. Floating Exchange Rate – the exchange rate is determined by the forces of supply and demand and will change any time there is a change in demand or a change in supply. Appreciated – An increase in a currency's exchange rate is called appreciation and the currency is said to have appreciated. Depreciated – A decrease in a currency's exchange rate is called depreciation and the currency is said to have depreciated Currency Revaluation (Devaluation) – under a fixed exchange rate, the authorities (like a government’s central bank) change the exchange rate rather than letting it be determined by market forces. A devaluation is similar to depreciation. Purchasing Power – the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. If the exchange rate between the U.S. dollar and the Euro, expressed as Euros per dollar, goes from .85 to 1, the dollar has ______appreciated______________ and the Euro has ______depreciated________. Check Yourself (Exchange Rate) Write the answers to the Check Yourself questions in the blanks below. 1. ____________$2,505__ 2. ____________$3,031__ 3. ______February 2006__ 158Foreign currency/exchange rates

Virginia Council on Economic Education Check Yourself (Roll the Dice) Write the answers to the Check Yourself questions in the blanks below. 1. _________________True __ 2. _________________False__ 3. _________________False__ 4. _____________weakened__ 5. __________strengthened__ 6. _________________False__ Watch It (MJM Foodie: Exchange Rates) Check Yourself (Exchange Rates) Write the answers to the Check Yourself questions in the blanks below. 1. ______________________________These are all reasons why foreign money is needed__ 2. _________________U.S. families vacation more on the Canadian side of Niagara Falls__ 3. ____________________________________________________________Appreciate in value__ 4. ___________________________________________________________________depreciate__ 5. _______________________________________________________________________1,900__ 159

Virginia Council on Economic Education Think About It You are going to Japan on an exchange trip in a few months and need to turn your dollars into the Japanese currency, the yen. Right now the exchange rate is $1 = 105 yen, but you expect the dollar to appreciate next month and it should be valued at $1= 107 yen. 1. If you exchange $200 for yen today, how many yen will you receive? 2. If you decide to wait and exchange your dollars when they are worth $1= 107 yen, how many yen will you receive? 3. Based on this information, should you exchange your money now or wait a few months? Write your response in the box below. Lesson 4b: Strong vs. Weak Dollar Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Circle the correct term in the statements below. Strong Dollar – The dollar strengthens when the units of foreign currency per dollar increases. Weak Dollar – The dollar weakens when the units of foreign currency per dollar decreases. When the dollar weakens, it (circle one) helps hurts foreign travelers abroad and (circle one) helps hurts U.S. importers of foreign goods. When the dollar strengthens, it (circle one) helps hurts foreign travelers in the U.S. and (circle one) helps hurts foreign importers of U.S. goods. Check Yourself (Strong vs. Weak Dollar) Write the answer to the Check Yourself questions in the blanks below. 160Value of the dollar/exchange rates1. 21000 2. 21400 3. wait to get more yen

Virginia Council on Economic Education 1. ____________False__ 2. ____________True__ 3. ____________True__ 4. ____________False__ Watch It (CEE: Foreign Currency Markets) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. ____________________________________Euro__ 2. ____________________________Exchange Rate__ 3. ________________________Supply and demand__ 4. ___________________The currency appreciates__ Check Yourself (Winners vs. Losers) Write the answers to the Check Yourself questions in the blanks below. 1. _____________________________Loser__ 2. ___________________________Winner__ 3. ___________________________Loser__ 4. ___________________________Loser__ 5. _________________________Winner__ 161

Virginia Council on Economic Education Check Yourself (Strong vs. Weak Dollar) Write the answer to the Check Yourself questions in the blanks below. 1. __True__ 2. __True__ 3. __True__ Homework View the data below for the exchange rate between the US dollar and the Japanese yen. 1. How many yen could you get per dollar at the earliest date shown on the chart? 2. How many yen could you get per dollar at the most recent date shown on the chart? 3. Has the dollar appreciated or depreciated in value over time? Lesson 5a: Forms of trade barriers Write the economic concept introduced by the introductory cartoon/visual in the box below. Vocabulary Tariff – tax on imported goods. Quota – limits on the quantity of a good that can be imported. Embargo – a ban on imports to or exports from a country, typically for political reasons. Non-tariff barrier – an obstacle to trade other than a tariff, such as licensing requirements for importers. 162Trade barriers/TariffsSee rubric for solutions

Virginia Council on Economic Education Check Yourself (Matching) Write the definition that goes with each term. 1. Embargo – a ban on imports to or exports from a country, typically for political reasons. 2. Tariff – taxes charged on imports. 3. Non-tariff barrier – an obstacle to trade, such as licensing requirements for importers. 4. Quota – a set limit on the quantity of a specified good that can be imported in a given year. Watch It (MJM Foodie: Types of Trade Restrictions) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. _____________________________________________________a decrease__ 2. ________________________________________________________higher__ 3. ______________________________________________________decreased__ 4. ___________________________________________________________less__ 5. _________________________________________________________higher__ 6. ______________________U.S. consumers who buy foreign-made televisions__ Check Yourself (Trade Restrictions) Write the answers to eh Check Yourself questions in the blanks below. 1. __________________True__ 2. _________________False__ 163

Virginia Council on Economic Education 3. _________________True__ 4. __________________True__ 5. __________________True__ Check Yourself (Drag and Drop) Write the answers to the Check Yourself questions in the spaces below. True: 1. In a new start-up industry there may be 2. When evaluating special circumstances that might warrant 3. Industries supplying national defense products False: 1. Infant industries need barriers because they are older companies that are already very competitive in the marketplace. Watch It (CEE: Barriers to Trade) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. ___________________________________________________________Tariff__ 2. ____________________________________________Comparative advantage__ 3. ________________To both protect domestic industries and combat job losses__ 4. _________________________________Domestic products are less expensive__ 5. ___________________________They hurt efficient and competitive industries__ 164

Virginia Council on Economic Education Think About It Locate a recent local or national news article (published within the past year) that is about a trade barrier of either a tariff or a quota. 1. What is the product that has the trade barrier? 2. What is the type of trade barrier (tariff, quota, other)? 3. Which countries are involved? Lesson 5b: Trade Agreements, purposes, and examples Vocabulary Write the letter of the term associated with each statement in the blank provided. Free Trade Agreement (FTA) – An agreement between countries to reduce or eliminate trade barriers, such as tariffs and quotas. North American Free Trade Agreement (NAFTA) – an FTA that has increased trade among the United States, Canada, and Mexico since 1994 (renamed USMCA in 2020). European Union (EU) – trade agreement between European nations that allows free movement of resources across borders, with some nations even sharing a common currency. World Trade Organization (WTO) – administrator of trade agreements and overseer of negotiations when trade disagreements arise. Dumping – selling something in a foreign market below the cost of production Check Yourself (Matching) Write the answer to the Check Yourself questions in the blanks below. NAFTA – trade agreement between the United States, Canada, and Mexico created in the 1990s. EU – trade agreement between European nations that allows free movement of resources across borders, with some nations even sharing a common currency. 165Answers will vary based on article selected

Virginia Council on Economic Education WTO – administrator of trade agreements and overseer of negotiations when trade disagreements arise. Dumping – selling something in a foreign market below the cost of producing that item. Watch It (WTO: Let’s Talk Trade and MJM Foodie: Trade Blocs) Check Yourself Write the answers to the Check Yourself questions in the blanks below. 1. ______________False__ 2. ______________False__ 3. ______________True__ 4. ______________True__ 5. ______________True__ 6. ______________True__ Homework The Bureau of the Census tracks the top trading partners for the United States. Go to the Bureau of the Census website, where you will see the most recent listing of the top trade partners for the United States (year to date, in dollar value of goods). List the top 3 countries shown there. Are you surprised at the order of the countries listed? Are any of the countries listed part of an FTA with the United States? Which ones? Write your answer in the box below and submit it on Canvas. 166See rubric for solution

End-of-course Practice Exam

Virginia Council on Economic Education Practice End-of-Course Exam Write the letter of the correct answer in the blank provided. _________ 1. The fundamental economic problem is scarcity. Scarcity exists because of a. Limited Wants b. Limited Needs c. Limited resources* d. Unlimited Costs e. Unlimited resources _________ 2. If Leslie buys one bagel for $2 and gets the second one free, the marginal cost of the second bagel is a. $4 b. $3 c. $2 d. $1 e. $0* ________ 3. Which of the following is NOT an economic resource? a. Money* b. Land c. Labor d. Capital e. Entrepreneurship ________4. Which of the following is an important feature of a traditional economy? a. Restricted resources use b. The profit motive c. Reliance on long-established practices* d. Public ownership of resources 167

Virginia Council on Economic Education e. All of these ________ 5. As people consume more and more of a good or service, the additional satisfaction from consuming it declines. This describes which of the following a. The law of demand b. The law of supply c. The law of diminishing returns* d. The law of nature e. The principle of decreasing utility ________ 6. Consumer sovereignty is the idea that the consumer is ____________in a market economy. a. rational b. insignificant c. manipulated d. king* e. dominant ________ 7. The business form that is owned by the people who use its services is a a. sole proprietorship. b. franchise. c. corporation. d. partnership. e. cooperative.* ________ 8. Workers’ education and experience are part of their a. natural resources. b. productivity. c. human capital.* d. worker capital. 168

Virginia Council on Economic Education e. employee investment. _________ 9. Compared to a monopoly market, the price in a perfectly competitive market will be ______ and the quantity sold will be _____. a. higher, lower b. lower, higher* c. lower, lower d. higher, higher e. higher, similar ________ 10. Which of the following moves from households to businesses in the circular flow of economic activity? a. Saving b. Interest c. Goods and services d. Resources* e. Wages ________ 11. Sugar and sweetener are substitutes and sugar and coffee are complements. If the price of sugar increases, the demand for sweetener will _____ and the demand for coffee will _____. a. decrease, increase b. increase, increase c. not change, decrease d. increase, decrease* e. decrease, decrease ________ 12. At a price below equilibrium, quantity supplied is _____ quantity demanded and the price will tend to_____. a. greater than, increase b. less than, increase* c. greater than, decrease d. less than, decrease e. equal to, not change ________ 13. A price ceiling is a maximum price set by the government. To be effective, a price ceiling must be set _______ equilibrium. 169

Virginia Council on Economic Education a. above b. below* c. equal to d. to the left of e. to the right of ________ 14. An increase in consumer income will increase the demand for _____ goods and decrease the demand for _____ goods. a. normal, inferior* b. normal, superior c. abnormal, inferior d. inferior, normal e. inferior, abnormal ________ 15. Which of the following goods is most likely to have a very elastic demand? a. A Hershey candy bar* b. Electricity c. Gasoline d. Medication e. Water ________ 16. Which of the following is a public good provided by the government? a. Pollution b. National defense* c. Food d. Transportation e. Home alarm systems ________ 17. Which of the following is NOT a type of market failure? a. Public goods b. Externalities c. Inequity d. Imperfect information e. Government regulation* ________ 18. If low income families pay a _____ percentage of their income in taxes than high income families, the tax is regressive. a. equal b. lower 170

Virginia Council on Economic Education c. higher* d. more variable e. less variable ________ 19. ____________ is a major spending category of the federal government. a. Pension funding b. Transportation c. Public safety d. Education e. Healthcare* ________ 20. Which government agency promotes food safety? a. CPSC b. OHSA c. EEOC d. EPA e. FDA* ________ 21. When there is inflation in the economy, real GDP is _________ nominal GDP. a. unrelated to b. greater than c. less than* d. equal to e. double ________ 22. Which of the following is NOT a national economic goal? a. Economic growth b. Low unemployment c. Economic growth d. High employment e. Low taxes* ________ 23. What type of unemployment is experienced by a worker who quit their job and moved across the country to look for another one? a. Frictional* b. Cyclical c. Structural d. Seasonal e. Technological 171

Virginia Council on Economic Education ________ 24. What is the term for a sustained decrease in the average price level? a. deflation* b. inflation c. disinflation d. hyperinflation e. contraction ________ 25. Unanticipated inflation hurts ____________. a. consumers b. lenders* c. people with variable incomes d. borrowers e. all of these groups ________ 26. Which of the following happens during an economic expansion? a. Employment decreases b. Inflation decreases c. GDP rises* d. The unemployment rate increases e. Productivity decreases ________ 27. Contractionary fiscal policy includes which of the following? a. Raising taxes* b. Increasing government spending c. Increasing interest rates d. Reducing the money supply e. Increasing the budget deficit ________ 28. A budget surplus result when government a. borrows too little. b. spends more than its tax revenue. c. spends less than its tax revenue.* d. reduces the national debt e. uses expansionary fiscal policy ________ 29. Which of the following is NOT a function of the Federal Reserve? a. Conduct monetary policy 172

Virginia Council on Economic Education b. Make loans to businesses* c. Supervise and regulate financial institutions d. Hold reserves for commercial banks e. Act as the government’s fiscal agent ________ 30. To promote an increase in employment the Federal Reserve would do which of the following? a. Decrease taxes b. Raise government spending c. Lower interest rates* d. decrease the supply of money e. Any or all of these ________ 31. Which of the following is a reason a producer might choose to import inputs from another country? a. The other country has better quality resources than in the domestic country b. The resource is only available in the other country c. The price of the resource is lower in the other country d. It is cheaper to import the resource than to transport it within the domestic country e. All of these* ________ 32. Goods a country buys from other countries are called _________ and goods a country sells to other countries are called ________. a. Imports/surplus b. Exports/surplus c. Imports/exports d. Exports/imports* e. Quotas/surplus ________ 33. If a country imports more goods and services than it exports, it operating with a. a trade deficit.* b. a trade surplus. c. balanced trade. d. negative net exports. e. a closed economy. ________ 34. When the U.S. dollar becomes stronger, which of the following is true? a. The price of Mexican goods for U.S. buyers increases b. It becomes less expensive for Mexicans to travel to the U.S. c. It becomes cheaper for Americans to buy Mexican goods* d. It becomes cheaper for Mexicans to buy American goods 173

Virginia Council on Economic Education e. All of these ________ 35. A limit on the number of goods that can be imported into a country is called a a. goods tax. b. tariff. c. quota.* d. capital gains tax. e. foreign tax. 174

Practice Exam Solutions

Virginia Council on Economic Education Practice Exam Solutions Check your answers to the practice test and use your incorrect answers to help identify which modules you need to review! Answer Module 1. c M1 2. e M1 3. a M1 4. c M1 5. c M2 6. d M2 7. e M2 8. c M2 9. b M2 10. d M2 11. d M3 12. b M3 13. b M3 14. a M3 15. a M3 16. b M4 17. e M4 18. c M4 19. e M4 20. e M4 21. c M5 22. e M5 23. a M5 24. a M5 25. b M5 175

Virginia Council on Economic Education 26. c M5 27. a M6 28. c M6 29. b M6 30. c M6 31. e M7 32. d M7 33. a M7 34. c M7 35. c M7 176