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CONSUMER APPLICATIONActivities

TO THE TEACHER

Consumer Applications Activities relate economic concepts taught in the student text to

decisions that consumers make in everyday life. Whether correlated to business management,

the workplace, the marketplace, or the world of personal finance, these applications help stu-

dents understand that economic principles are important to many life choices. Answers to the

activities are in the back of this booklet.

CREATING A CUSTOMIZED FILE

The individual booklets in the Teacher’s Classroom Resources provide a wide variety of

supplemental materials to help make economics meaningful to students. These resources

appear as individual booklets in a carryall file box.

These are a variety of ways to organize the classroom resources. Three alternatives are

given here:

■ Organize by category (all activities, all tests, etc.)

■ Organize by category and chapter (all Chapter 1 activities, all Chapter 1 tests, etc.)

■ Organize sequentially by lesson (activities, quizzes, and other materials for Chapter 1, Section 1; Chapter 1, Section 2, etc.)

Regardless of the organization you choose, you may pull out individual activity sheets from

these booklets, or you may photocopy them directly from the booklets and file the photocopies.

You will then be able to keep original booklets intact in a safe place.

Copyright © by The McGraw-Hill Companies. All rights reserved. Permission is granted to reproduce thematerial contained herein on the condition that such material be reproduced only for classroom use; beprovided to students, teachers, and families without charge; and be used solely in conjunction withGlencoe products. Any other reproduction, for use or sale, is prohibited without prior written permission of the publisher.

Send all inquiries to:

Glencoe/McGraw-Hill8787 Orion PlaceColumbus, OH 43240

ISBN 0-07-822465-9

ISBN 0-07-822712-7

Printed in the United States of America.

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iii

C ONTENTSActivity 1 Making Economic Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Activity 2 The Job Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Activity 3 Filing a Consumer Complaint . . . . . . . . . . . . . . . . . . . . . . . . 3

Activity 4 Needs, Wants, and Marketers . . . . . . . . . . . . . . . . . . . . . . . . . 4

Activity 5 Pricing Collectibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Activity 6 Getting Product Information . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Activity 7 Catalog Shopping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Activity 8 How Government Agencies Affect Our Lives . . . . . . . . . . . . . . 8

Activity 9 Where to Shop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Activity 10 Using Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Activity 11 Getting Ready to Borrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Activity 12 Evaluating Savings and Investment Options . . . . . . . . . . . . . . 12

Activity 13 Why Salaries Differ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Activity 14 Federal Income Tax and You . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Activity 15 Balancing the Federal Budget . . . . . . . . . . . . . . . . . . . . . . . . . 15

Activity 16 Choosing a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Activity 17 Bull and Bear Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Activity 18 Economic Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Activity 19 The Job Market in the Year 2000 . . . . . . . . . . . . . . . . . . . . . . . 19

Activity 20 The Federal Reserve System and You . . . . . . . . . . . . . . . . . . . . 20

Activity 21 Social Security and You . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Activity 22 Buying Foreign Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Activity 23 Comparing Economic Systems . . . . . . . . . . . . . . . . . . . . . . . . 23

Activity 24 Decision Making in a Developing Country . . . . . . . . . . . . . . . 24

Activity 25 Buying American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Activity 26 Tips for Shopping Online . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Five-Step Decision-Making Model

1. State the problem.

2. List the alternatives, or choices.

3. List the criteria.

4. Evaluate alternatives, using the criteria.

5. Make a decision.

Directions: Use the decision-making model above and the following problem to complete the grid and the exercises.

Problem: Sandy’s part-time job earns her only $80 of take-home pay. This week her expenses are especially heavy.She wants to go to a rock concert, which will cost her $30. Her friend Rafael’s birthday is also this week, and the present she wants to buy him costs $25. In addition, Sandy’s car needs a brake repair, which costs $150. The repairwork should be done this week if the car is to be safe to drive. If Sandy pays for the first $75 in repairs, her dad willpay the remaining $75.

Decision-Making Grid

1. How should Sandy spend her $80?

2. What does Sandy gain with this choice? What does she lose?

3. What is Sandy’s opportunity cost based on her choices?

Problem Alternatives Criteria for alternatives

1. 1. brake repair 1. safety

2. 2.

2. 1. 1.

2. 2.

3.

3. 1. 1.

2. 2.

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Consumer Application Activities 1

M AKING ECONOMIC DECISIONSIn many ways, economics is the study of making choices. However, making wise choices is

not always easy. The five-step decision-making model described below can help you analyze

problems and make reasoned choices.

Name Date Class

1

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2 Consumer Application Activities

T HE JOB MARKETHow savvy are you about job search methods? Take this quiz to find out.

Directions: Circle the answer to each question.

Name Date Class

2

1. The way to find a job is to

a. ask family and acquaintances.

b. respond to classified ads.

c. post your resume online.

d. all of the above

2. Most job listings usually appear in a newspaper’s

a. Saturday edition.

b. Sunday edition.

c. Thursday edition.

d. none of the above

3. Many “Help Wanted” ads in the newspaperdescribe nothing or little about

a. the employer.

b. working conditions.

c. wage or salary.

d. all of the above

4. A job may offer low wages, commissions only, orpoor working conditions if the ad reads

a. “no experience necessary.”

b. “advanced degree desired.”

c. “minimum three years experience.”

d. all of the above

5. A state employment service offers

a. job counseling and aptitude testing.

b. detailed descriptions of openings.

c. to arrange job interviews.

d. all of the above

6. You or the company that hires you has to pay a feefor a job found through a

a. private employment agency.

b. college placement office.

c. state employment service.

d. all of the above

7. The Job Training Partnership Act helps job seekersbetween the ages of 16 and 20 who are

a. economically disadvantaged.

b. veterans of the armed forces.

c. alumni of colleges.

d. all of the above

8. In the twenty-first century the Internet will continueto change

a. the way job seekers find new openings.

b. the amount of time employees spend in businessoffices.

c. the way employers announce new job openings.

d. all of the above

9. You can get help in your job search from the U.S.government’s

a. Tips for Finding the Right Job.b. Job Search Guide: Strategies for Professionals.c. Occupational Outlook Handbook.

d. all of the above

10. Send a résumé and cover letter if

a. a job service sets up an interview.

b. a friend refers you.

c. a company in the Yellow Pages interests you.

d. all of the above

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F ILING A CONSUMER COMPLAINTAll families receive some kind of unsolicited, or “junk” mail. This mail might be unordered

catalogues, sample products, or unbelievable “sweepstakes” announcements. The U.S. Postal

Service can help you to rid your home of these nuisances.

Directions: Complete the following letter of complaint to the Postal Service, describing one kind of junkmail that your family wishes it didn’t receive.

1. Write the date.

2. Fill in your address.

3. Describe the type of mail.

4. Supply an appropriate adjective.

(1)

(2)

Consumer AdvocateU.S. Postal Service475 L’Enfant Plaza SWWashington, D.C. 20260

Dear Consumer Advocate:

As a whole, the postal service is commendable. Unfortunately, my family and I find repeated mailings of

(3) annoying.

Enclosed are samples of the offending mail. I’m sure you’ll agree that they are (4) . Perhaps you can

take some action, such as (5) , to stem the flood.

I am looking forward to your reply and thoughts on my suggestion. Please contact me at the above address or call me

at (6) .

Sincerely,

(7)

Name Date Class

3

5. Suggest a way to curb the offending mail withoutviolating constitutional rights.

6. Write your phone number.

7. Sign your name.

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N EEDS, WANTS, AND MARKETERSThe American market system operates on the principle of voluntary exchange. Buyers and

sellers, exercising their economic choices, affect prices. Consumers might assume that their

choices are all completely voluntary. However, this is not really true. One goal of advertising

is to create demand through influencing consumers’ perceived needs and wants.

Directions: Choose ten products or services from the list and rank them 1-10 under “Needs,” according tohow necessary they are to you. Then rank your top ten “Wants” and answer the questions.

toothpaste vegetables haircut jeans microwave ovenwristwatch soap movies swimsuit refrigeratorsocks coat pizza CD player chewing gumtelevision telephone bed water air conditionerhair spray deodorant electricity computer fruit

1. Write down as many brand names as you can that identify suppliers of your top five needs on the list above.

2. Write down as many brand names as you can that identify suppliers of your last five wants on the list above.

3. Naming suppliers’ brands from the Wants list should have been easier. Why?

4. What kinds of advertising messages do sellers use to create demand?

Name Date Class

4

Needs Wants

1 1

2 2

3 3

4 4

5 5

6 6

7 7

8 8

9 9

10 10

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P RICING COLLECTIBLESYou have read that forces underlying supply and demand determine price. What underlying

forces determine the price of collectibles such as baseball cards? You can use what you know

to analyze the costs of baseball cards, shown in the table below.

Prices for Topps Rookie Baseball Cards in 1999

Directions: Use the information above and at the right to helpyou to complete the exercises.

1. How does a card’s condition (near mint, excellent, or very good)affect its price?

2. What is the relationship between a player’s membership in theBaseball Hall of Fame and the price of a card?

3. A rookie card is minted the year that a player begins his professionalcareer. In 1999 Nolan Ryan’s rookie card was much more valuablethan his more recent 1990s cards. Why?

4. As a path to profit, how is collecting baseball cards a gamble?

Year Player Team Near Mint Excellent Very Good

1964 Tommy John Cleveland Indians $30 $15 $7.50

1964 Charlie Dees California Angels $3 $1.50 $.75

1964 Tony Conigliaro Boston Red Sox $50 $25 $12.50

1965 Joe Morgan Houston Astros $70 $35 $17.50

1965 Dennis McLain Detroit Tigers $30 $15 $7.50

1965 Steve Carlton St. Louis Cardinals $250 $125 $62.50

1966 Fergie Jenkins Philadelphia Phillies $80 $40 $20

1966 Don Sutton Los Angeles Dodgers $80 $40 $20

1967 Monday/Pierce Kansas City Athletes $20 $10 $5

1967 Allen/Carew Washington Senators $250 $125 $62.50

1967 Tom Seaver New York Mets $700 $350 $175

1968 Nolan Ryan/Koosman New York Mets $775 $387 $193

1968 Johnny Bench Cincinnati Reds $125 $62.50 $31.25

1969 Reggie Jackson Oakland Athletics $260 $130 $65

1969 Rollie Fingers Oakland Athletics $35 $17.50 $8.75

Name Date Class

5

1989 Johnny Bench

1990 Joe Morgan

1991 Rod Carew

1991 Fergie Jenkins

1992 Rollie Fingers

1992 Tom Seaver

1993 Reggie Jackson

1994 Steve Carlton

1998 Don Sutton

1999 Nolan Ryan

Induction NameYear

Baseball Hall of Fame Inductees

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G ETTING PRODUCT INFORMATIONIn the American market system, products vary greatly. As a result, consumers must do research

to decide which products are the best buys. To learn as much as possible about competing

products takes time and energy. Therefore, consumers must weigh the cost of getting

information against the benefits that the information can provide. Some of the sources

of this information are:

Internet FriendsNewspaper and television ads Comparison shoppingConsumer Reports Sales clerks

Directions: Complete the exercises below to analyze “best buy” strategies.

1. Name at least three other sources of information besides those listed above.

2. Rank the information sources above, including the ones you listed, according to the cost involved. Base eachcost on the time and energy you would spend tracking down the sources.

3. Explain why detailed information might be worth spending additional time and money.

4. For each item in the following chart, state whether an extensive search for information would result in a high orlow payoff for a consumer. Give a short reason for each answer.

Name Date Class

6

Item Payoff Reason

a. Seasonal items, such as a bathing suit,at the end of the season

b. A low-cost item, such as a music CD

c. A product in a highly competitive market, such as computer games

d. An expensive item, such as an automobile

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C ATALOG SHOPPINGCatalog shopping is popular. Why? In many cases the buyer can avoid paying sales tax by

ordering through a catalog. But do other added costs offset the savings? A typical order blank,

such as the one below, can help you to find out.

Name Date Class

7

Directions: Use the information on the order blank above to complete the exercises.

1. Suppose you live in an area of Illinois where the combined city and state sales tax is 10%. How many dollars’worth of merchandise would you need to order so that your shipping charge would be less than the tax youwould pay on the same item at a local store?

2. Suppose that Jan, who lives in Texas, filled out an order for $129.50. She would need to pay 8% in sales tax ather local store for these same items at the same prices. Will she save money by ordering these items from thecatalog? How much?

3. Eduardo lives in Indiana and pays 6% sales tax on in-store purchases. Would he save money ordering from thecatalog? Explain.

4. What is another advantage of catalog shopping? What are some disadvantages?

Item Name Price

Flannel shirt

Corduroy jumper

Sherpa coat

$34

$38

$88

Order and Services

Call 1.800.555.0233, every day8 A.M. to 12 midnight Eastern Time.

Fax orders to 1.800.555.111124 hours every day.

* Delivery in 3–5 business days.

* No extra charge for backorder shipments.

* Credit card orders not charged until they leave our warehouse.

For orders shipped to Maine, Minnesota, Kentucky, New York, and IndianaADD APPLICABLE SALES TAX

Shipping cost within the U.S.A.

up to $24 $4.50

$25 – $49 $6.50

$50 – $74 $7.50

$75 – $149 $9.00

$150 and up $10.50

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H OW GOVERNMENT AGENCIES AFFECT OUR LIVESFederal agencies try to maintain fair prices and the quality of products by establishing

regulations. Every day, our lives are influenced by these regulations.

Directions: Read the following summary of one family’s activities on a Saturday. Then, for each activity,choose the agency whose regulations are involved in the situation. Write the name of the agency on theline next to the activity. Figure 10.14 in the textbook lists the agencies involved. Some situations mayinclude more than one agency.

7:30 A.M. Linda Lee is getting ready for her part-time job. However, thecurling iron she is using is not heating properly. She checks to see when the warranty runs out.

8:00 A.M. Over breakfast, Linda’s father shows the family the newly designed helmet he has to wear at the plant.

8:30 A.M. Linda’s mother backs her car out of the garage. The automatic garage door closes when she presses the button on the car’s radio transmitter.

9:30 A.M. Mr. Lee goes to the supermarket to do the food shopping. He checks the labels on several boxes of cereal to compare their nutritional content.

Noon At lunch hour Linda goes to an electronics store to buy a new stereo. This store’s ad seemed to give truthful, complete information.

2:00 P.M. Mr. and Mrs. Lee attend a special meeting at the town hall. The townspeople are attempting to clean up the pollution in a nearby lake.

4:00 P.M. Cable TV service has just come to the area. Linda’s younger sister enjoys the children’s programs that the community college produces for the cable company’s “public access” channel.

7:00 P.M. Linda’s parents watch a business report on the investigation of investment counselors accused of defrauding their customers.

Name Date Class

8

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HERE TO SHOPIn the market system, consumers may buy products from a manufacturer, a wholesaler, or a

retailer. Each of these distribution stages has various types of sellers and advantages.

Directions: Study the chart below. Then use it to complete the following exercise by choosing the distribu-tion channel or channels that best meet the needs of the individual. Next explain why you would chooseeach seller.

1. Rachel has a new job and needs to buy a new wardrobe. Her budget is limited.

2. Cooler Fruit Juice needs 1,000,000 bottles to package its product.

3. Kwan Li has much holiday shopping to do, but she does not have the time to go from store to store.

4. Hector wants a new stereo system. He is not as much concerned about the price as he is interested in the typeof service available.

5. Hills’ Paint Store is a small business that does not need to have a large stock on hand. Hills’ buys new paint everytwo weeks.

MANUFACTURING WHOLESALE RETAIL

Distribution Direct-to-user Full-service Department storechannels Drop shipper Specialty shop

Cash-and-carry Discount storewarehouse Door-to-doorFactory outlet Mail order

Advantages Goods are less expensive (no Goods are less expensive Stores are convenient, accept middleperson) and manufacturer may than retail. exchanges, arrange for repairs,act more quickly to solve problems. deliver goods, have a wider

variety than factories andwholesalers, and sell one itemat a time to consumers.

Disadvantages Consumers usually must buy large Wholesale stores are Goods are more expensive quantities and have the time and not as convenient as in retail stores.money to travel to the factory. retail. They do not

handle repairs, oftensell in larger quantitiesthan retail, and do notmake exchanges.

Name Date Class

9W

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U SING CREDITMillions of teenagers have credit cards or charge cards at local stores. However, having

access to credit carries responsibilities. To avoid abusing credit and running into financial

difficulties, a card user should understand what credit can cost. The situations below can help

you to understand what your responsibilities are.

Directions: Read each situation and complete the exercises about it.

1. Hector is trying to decide which credit card to apply for. Card A gives him a $2,000 limit. It also charges anannual fee of $25 and has an 18% yearly interest rate on amounts not paid within 20 days. Card B gives Hectora $1,000 limit. It charges only 15% interest on amounts not paid within 30 days and has no annual fee. Hewants a credit card to make purchases that he will pay off over several months.

a. Which credit card will be easier to abuse and more difficult to pay off? Explain your answer.

b. Which credit card should Hector apply for? Why?

2. Kayla wants to get a charge card for one of two department stores in her town. Both stores charge the sameinterest rate for unpaid balances, but the method for calculating the principal that is used is different.

• Store A calculates its principal using the average daily balance method; that is, the principal is the average daily balance of all unpaid charges.

• Store B uses the past due balance method; that is, the principal is the amount left unpaid from the last month.

Kayla expects that she will make payments every month, but that she will have an unpaid balance in some months.

a. Which method will result in a greater principal in some months? Explain.

b. To which store should Kayla apply for a charge card? Why?

c. Assume that the annual finance charge at Store B is 2% less than at Store A but that Kayla likes the merchandise better at Store A. For which store should she get a charge card? Why?

Name Date Class

10

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G ETTING READY TO BORROWWhat large purchase do you see in your future? The latest computer system? A snazzy sports

car? Many people need to borrow money to purchase expensive items like these. No matter

how far in the future you see your purchase, you can begin now to build your credit rating.

This is a rating of your credit risk—good, average, or poor—when money is lent to you.

Directions: Complete the descriptions of capacity to pay, character, and collateral below with terms fromthe following list.

capital credit creditors debt educational incomelaw loans payments reputation trustworthy

Capacity to pay is related to (1) and (2) . If

your employment has been spotty, your capacity to pay off a loan will be questioned. If your debts are large,

(3) may be reluctant to extend more (4) to you.

Character refers to a person’s (5) as a reliable and (6)person as well as his or her (7) background, and whether that person had problems

with the (8) or in repaying earlier (9) .

Collateral is the size of your (10) , or personal wealth. It indicates to lenders your past

ability to save and your present ability to pay off a loan. Even if you lose your job, you could sell your belongings to

make (11) .

Directions: Describe how you measure up in each area. Suggest ideas for strengthening your weak spots.

Capacity to pay:

Character:

Collateral:

Name Date Class

11

Saving/Investment Return onOption Definition Investment Safety Liquidity

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E VALUATING SAVINGS AND INVESTMENT OPTIONSPeople save and invest for very different reasons. Three criteria involved in deciding how to save

or invest money are return on investment, safety, and liquidity. These are defined as follows:

Return on investment: the increase in value of the original sum over timeSafety: the degree of risk involvedLiquidity: the ease with which an asset can be converted to cash

Directions: The following table lists various saving and investment options. Define each option in the column provided. Then rate each option for return on investment, safety, and liquidity as good (��), adequate (�), poor (�), or variable (��).

Name Date Class

12

1. Passbook savings

2. Money market account

3. Certificate of deposit (CD)

4. Stocks

5. Bonds

6. Individual retirement account (IRA)

7. Straight life insurance

8. Real estate

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HY SALARIES DIFFERSeveral factors affect salaries. They differ from industry to industry, region to region, but

most significantly, from one level of education and training to the next. According to the

U.S. Department of Labor, the average salaries of college-educated workers have grown

almost 25% in the last 20 years while the median wage for male workers with only high

school diplomas actually dropped 20%, and wages for men without a high school diploma

dropped by 33%.

The Bureau of Labor Statistics calls the following chart Education Pays:

Unemployment and Earnings by Educational Attainment (for full time workers age 25 and over)

Directions: Use the data above to answer the questions below.

1. Which level of education experienced the highest rates of unemployment?

The second highest?

2. What is the median weekly earnings of a high-school graduate? Of someone with

a bachelor’s degree?

3. Why did the Bureau of Labor Statistics report the above data using the age of 25 as its lower limit?

4. Suppose everyone in the U.S. were to earn at least a master’s degree. How would it change the data in the tableabove? What other effects might it have?

5. What do you give up by going to college after high school? What do you gain?

Name Date Class

13W

Unemployment Annual MedianRate Earnings Education Attained

1.4 72,700 Professional degree

1.3 62,400 Doctorate

1.6 50,000 Master’s Degree

1.9 40,100 Bachelor’s Degree

2.5 31,700 Associate Degree

3.2 30,400 Some college, no degree

4.1 26,000 High school graduate

7.1 19,700 Less than a high-school diploma

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F EDERAL INCOME TAX AND YOUFederal income taxes appeared on the American scene in 1913. That year, the tax was a flat

rate of 1% on incomes more than $3,000 and only one in every 271 Americans paid income

taxes. How things have changed! Today even dependent children may pay income taxes, as

the following tax rules show.

Any child under age 19, or a full-time student under age 24, must file a return if he or she:

• earned $4,300 or more during the year

• received unearned income (i.e., stock dividends or interest on savings accounts) of $700 or more

Most children are taxed at the lowest rates:

• 15% for wages and bank interest

• 10% for dividends on stocks and other capital gains

The exception is the “kiddie rule,” which states that children must pay at their parents’ rate if:

• the child is under age 14

• the child has investment income of more than $1,400

Parents should declare their children’s income on their own income tax return if the child is

• under age 14, and

• makes an income of less than $700 in bank interest and dividends

Directions: Use the information above to complete the exercises.

Last year Maria, a high school senior, made $3,900 baby-sitting and $500 in dividends from stocks her grandmothergave her.

1. Does Maria have to file an income tax return? Why or why not?

2. Does the government get any tax money from Maria’s earnings? Explain.

This year Perry is a college freshman and plans to use the $3,000 his investments will earn to pay for his entertainment expenses, such as rock concerts.

3. How much should Perry set aside for income taxes?

Tomo has banked all the checks he ever received as birthday gifts. Now, at age 13, he earns $1,500 interest on hissavings each year.

4. How much tax will Tomo have to pay on the interest?

5. How did you arrive at your answer?

Name Date Class

14

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B ALANCING THE FEDERAL BUDGETWhenever the federal government spends more money than it takes in, there is a budget

deficit. The government must then balance the budget by raising taxes, reducing spending, or

borrowing money.

Directions: Assume that you are a presidential adviser and have been asked by the president to recom-mend a plan to reduce the deficit by decreasing spending. However, any cut in spending will hurt somepeople and help others. You will have to weigh the trade-offs.

A. Below is a list of 10 programs that could be cut. Each program serves one or more of the following nationaleconomic goals: efficiency, growth, security, equity, and individual freedom. In the chart below, list the goal(s)that each of these programs serves.

B. Now select six of the above programs that you would keep in the budget. List each one below. State the trade-off you made in economic goals, and who gains and who loses by your choice.

1. 2.

3. 4.

5. 6.

Name Date Class

15

Program Economic Goals

1. Medical care for the poor and elderly

2. Aid to farmers

3. Grants to states for fighting crime

4. Job training for the unemployed

5. Food stamps for low-income families

6. New weapons for defense

7. Financing road and bridge repairs

8. Financing toxic waste clean-ups

9. Financing drug rehabilitation centers

10. Financing international war on drug dealers

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C HOOSING A BANKBanks offer many consumer services. However, not every consumer wants to or can take

advantage of every service.

Directions: Below is a list of services, followed by descriptions of different depositors. For each potentialdepositor, write the letter or letters of the services that, in your opinion, he or she is most likely to want.

a. Automated teller machines throughout the areab. Interest on checking when depositor has more than $2,500 in accountc. Automatic deposit of paychecks and other types of income checksd. Safe-deposit boxese. Overdraft checkingf. No charge for writing checks when depositor has more than $2,500 in accountg. Money ordersh. Traveler’s checks

1. A business owner who writes many checks each month, and who often needs extra money for special expenses

2. A person who makes only $150 a week, but who write few checks

3. A retired couple who has saved many thousands of dollars and who travels often

4. A young family with two incomes, but with large expenses that keep their checking balance near zero

5. An elderly person who must take a long bus ride to pick up each month’s Social Security check

6. Knowledgeable investors who want all their money earning interest

7. A landlord who has many documents and deeds that must be kept safe from fire or theft

8. A person who like to use cash when shopping, but who does not want to carry the cash until reaching eachshopping area

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B ULL AND BEAR MARKETSA bull market occurs when stock prices keep rising. A bear market occurs when stock prices fall

15% or more. People who invest in bonds and gold futures fare better in bear markets because

they are usually accompanied by rising interest rates. People who invest in stocks, or equities,

fare better when interest rates are low. Then companies can borrow more money to expand

their businesses, which then make more profits to distribute to their stockholders.

In September 1998, Aaron, Bonnie, Diego, and Kayla each invested $10,000. Aaron put his money in a foreign stockfund. Bonnie bought utility stocks. Both reinvested the dividends they made during the year. Diego invested in a 30-year bond, and Kayla purchased gold futures. In September 1999, the four compared investments. Aaron had26% more money than last year. Bonnie had 7.5% more. Diego, however, had 8.4% less, and Kayla had lost 11.6%.

Directions: Use the information above to complete the following exercises.

1. Calculate the amount of each investment in September 1999, and show it on the bar graph below.

2. What kind of market—bull or bear—probably dominated between September 1998 and September 1999?Explain.

3. The value of the dollar decreases when the price of gold increases. So the price of gold is a good inflation indicator. Was inflation most likely high or low between September 1998 and September 1999? Explain.

4. In September 1999, should someone who was planning to buy a house have put money in a savings account for purchase at a later time or should they have bought then, getting a larger mortgage? Explain.

0 1 2 3 4 5 6 7 8 9 10 11 12 13

Initial Investment(each person)

Foreign Stock Fund (Aaron)

Utility Stocks (Bonnie)

30-year Bond (Diego)

Gold (Kayla)

Results of Investing $10,000 for One Year in Four Investments

Thousands of Dollars

Name Date Class

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E CONOMIC PERFORMANCEThe broadest measure of an economy’s health is real gross domestic product (GDP). Real

GDP is the total dollar value of all final goods and services produced in a nation during a

year, adjusted for inflation. Another statistic that measures performance is the unemployment

rate. This is the percentage of the civilian labor force, 16 years of age or older, that is

unemployed and looking for work.

Directions: The line graphs below show real GDP and unemployment in a hypothetical nation over a 15-year period. Use these two graphs to help you answer the questions that follow.

1. Look at the percentage change in GDP for years 1–6. What can you assume about the economic activity in theseyears? Explain your answer.

2. Look at the percentage change in GDP for years 7–10. What can you assume about the economic activity inthese years? Explain your answer.

3. Look at the unemployment rates for years 1–6 and 7–10. How do these rates reflect the growth of the economyduring those periods?

4. The unemployment rate jumped dramatically in years 7 and 11. Referring to the GDP graph, what can you saywould have caused this?

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T HE JOB MARKET IN THE YEAR 2000With the rapid pace of change in today’s and tomorrow’s business worlds, the phrase “lifelong

learning” has replaced the concept of “lifelong employment” in one company. Today’s workers

must keep on learning throughout their careers.

In addition, most employees are likely to work for several companies and even change fields

more than once before they retire. In fact, the Occupational Outlook Handbook published

by the Bureau of Labor Statistics predicts that more employees may end up working for them-

selves or for small entrepreneurial companies rather than for large corporations. Some trends

in the American labor market are shown in the following chart.

Directions: Use the information above to complete the following exercises.

1. Name two or three broad categories that would include all or most of these fields.

2. What personal characteristics will be required in most of these jobs?

3. How much education or training will be required for most of these jobs?

4. What skills will be valuable in most of these jobs?

5. What occupation do you prefer? Is it listed above? How will the growth or lack of growth in your field affectyour career?

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The 15 Fastest-Growing Occupations, Projected to 2006

Occupation Percent Growth

1 Database and support specialists for computer services 118%

2 Computer engineers 109%

3 Systems analysts 103%

4 Personal and home care aides 85%

5 Physical and corrective therapy assistants 79%

6 Home health aides 77%

7 Medical assistants 74%

8 Desktop publishing specialists 74%

9 Occupational therapy assistants 69%

10 Paralegals 68%

11 Occupational therapists 66%

12 Teachers, special education 59%

13 Human services workers 55%

14 Data-processing equipment repairers 52%

15 Speech language pathologists and audiologists 51%

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T HE FEDERAL RESERVE SYSTEM AND YOUThe time between writing of a check and the debiting of the account is called float time. At

one time float time was four or five days. Due to technology, float time today is much shorter.

Before 1979 one-third of the nation’s checks floated for days between banks while going

through the Federal Reserve System. The system would credit the amount of a check to one

bank before it debited the other bank. This practice was like loaning the banks billions of

interest-free dollars each year. Congress demanded that the Fed cut the float time. Now,

with the help of technology and jet planes, the Fed clears 97% of its checks overnight.

The following chart shows the route of out-of-state checks. Use the chart and what you have read to answer thequestions below.

A check from your grandfather inHawaii arrives Monday morning.You deposit it in your bank accountat noon, but you cannot withdrawthe money for three to five days.

Your grandfather's bank uses high-speed machines to sort checks.Your grandfather's check is debitedto your grandfather's account by2 P.M. Tuesday.

On Monday night, your bank shipsthe check by truck to the localdistrict Federal Reserve.

Early Tuesday morning, the localdistrict Federal Reserve ships thecheck by jet to the Federal Reservein Hawaii.

The Federal Reserve in Hawaiidelivers the check by noon to your grandfather's bank.

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Directions: Use the information above to complete thefollowing exercises.

1. To a check writer who earns an annual rate of 2.5% on hisor her checking account balance, lost float time has meantthe loss of (pennies, millions) in interest.

2. To a corporation that makes thousands of transactionseach day, lost float time has meant the loss of (pennies,millions) in extra interest.

3. Who has the use of your money on the day after it is debited from your grandfather’s account? (you, your bank,or your grandfather’s bank)

4. Do you think the Federal Reserve cut float time to benefitbanks or bank customers? Explain.

5. Imagine you are a member of Congress eager to pleasethe people of your district. What additional change to thecheck-clearing system might you propose? Why?

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S OCIAL SECURITY AND YOUDo you ever imagine yourself at age 65 or 70? Today many people look forward to getting

older, leaving stress-filled jobs behind. However, before the 1930s being old and without a

job was usually a scary prospect. Most elderly, jobless people were poor. So the government

mandated that workers pay social security taxes to support the elderly. The time line below

shows some of the influences on, and changes to, Social Security since its inception.

Directions: Use the information above to answer the following exercises.

1. How much did the government receive in Social Security taxes for every $60,000 of wages in 1999?

2. Why do you think the ratio of contributors to retirees was so high in 1950?

3. Why do you think the ratio was so much lower in 1997?

4. How does the increase in average life span affect Social Security funding?

5. Do you think the government should continue to force workers to put aside money for their old age? Why orwhy not?

1930

The average life expectancy for Americans is 63 years of age.

1935

1950

1997

1999

2000 2025

President Franklin Roosevelt approves the bill that creates Social Security. The first Social Security tax is 2% on the first $300 that a worker earns.

For each person who receives Social Security benefits,16 workers pay into the system.

For each person who receives Social Security benefits,three workers pay into the system.

The tax rate for Social Security, including contributions fromthe employer and employee, is 12.4% on wages up to $72,600.

The average lifeexpectancy forAmericans is 75years of age.

For every person who will receive Social Security benefits,two workers will be contributing to the system.

Name Date Class

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B UYING FOREIGN GOODSTwo significant factors describe United States foreign trade. First, the United States is

the world’s number one trading nation. Second, since the mid-1970s the United States

has imported more than it has exported. As a result, the nation’s businesses lost sales, profits,

and the ability to employ more people.

Protectionists support restrictions on foreign imports. The United States government, however,

has generally followed the principle of free trade and has tried to influence other nations to

open their markets to American goods. For example, the North American Free Trade

Agreement (NAFTA) has increased trade with Canada and Mexico. However, before NAFTA

we had trade surpluses with both countries. Today we have trade deficits. Striking a balance

between protecting American businesses and allowing free trade is difficult.

Directions: Complete the following exercises using the information above to help you analyze the twosides of this issue.

1. Describe the arguments protectionists give to explain how the following policies would help American businesses compete with foreign companies.

a. Higher tariffs

b. Import quotas

c. Depreciating the dollar’s value

2. Explain what free trade advocates mean when they oppose the protectionist viewpoint with the following arguments.

a. Protectionism means higher prices.

b. Protectionism weakens us by helping inefficient companies to stay in business.

c. Protectionism causes other countries to retaliate.

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C OMPARING ECONOMIC SYSTEMSCuba has one of the world’s few remaining command economies. Its planning commission

determines how to satisfy present and future demand for most products. Planners allocate

resources to produce goods for consumers, the military, and export. They also estimate how

many people are needed in most goods- or service-producing industries.

Directions: Assume that you are a member of Cuba’s economic planning commission and want to changethe economy. Read the statistics below on present-day Cuba and decide how the employment categoriesshould be divided up among the 4,710,000 workers to improve the standard of living in Cuba. Display yourdecisions in the circle graph started below.

Statistics on CubaPopulation: 11,000,000; 22 percent 15 years old or younger, 9.5 percent 65 years old or olderMajor industries: oil, sugar, food and tobacco processing, tourismAgricultural products: sugar, citrus fruit, coffee, tobacco, riceMinerals: cobalt, nickel, iron, copper, manganese, saltExports: coffee, sugar, nickel, shellfish, tobacco, medical products, citrus fruitImports: oil, food, machinery, chemicalsVehicles: 16,500 passenger cars; 30,000 commercial vehicles

Rates per 1,000 peopleAnnual births: 13 Newspapers: 122 Telephones: 32.2Annual deaths: 7 Radios: 327 Hospital beds: 7.5Literacy: 960 Televisions: 200 Physicians: 4.3

Use an almanac to compare Cuba’s economic facts with similar facts in countries with free market economies, such asthe United States.

.

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Employment CategoriesTransportationManufacturingMiningAgricultureOtherEducationTradeEntertainmentMedicalGovernmentCommunications

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D ECISION MAKING IN A DEVELOPING COUNTRYAs you have learned, consumer decisions come in many forms. Groups as well as individuals

make consumer decisions. One type of group decision concerns how a community should

spend government grants. There may be many important projects that need money to be

implemented, but only a limited amount of money is available.

Directions: Read the passage below, which describes the situation in a mountain village in a developingcountry. The people of the village must decide how to spend grant money from the government. Thenanswer the questions that follow.

The village of Sanjar is part of the country’s Rural Development Program. Under the program, the government pro-vides money for improvements that the village could not have made otherwise. The village council decides whatimprovements will be made each year and uses the money to buy the necessary materials. The villagers provide volun-teer labor to complete the project.

Last year, the village rebuilt a bridge that connects the village to the main highway. This year, the council mustchoose between two worthy projects. The first is to improve the road that leads to the market town. The second is toimprove the system that brings water to the village.

The road needs to be strengthened so that cars, trucks, and buses can travel over it during the rainy season. Thiswould require the village to buy tons of gravel. The villagers would need to grade the road and spread the gravel. Theimproved road would allow the villagers to transport their goods to market. It would also provide access to much-needed medical care, available only in the market town.

Improving the town’s water supply requires rebuilding storage tanks, replacing pipes, and moving the water tapsto a more convenient site. This would require the purchase of cement of the tanks, and new pipes and taps. Thecleaner water would reduce disease in the village. It would also make hauling water to homes much easier.

1. What are the major problems that the village faces? List at least four of them.

2. If you were on the village council, which project would you vote for? Why?

3. What would be the opportunity costs of completing the project you would vote for?

4. Relate the experience of Sanjar to your own community. Name two or three important projects that are competing for scarce funds. Then explain the opportunity costs of each project.

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B UYING AMERICANAt times various industries, such as the textile and the auto industries, have launched ad

campaigns for Americans to “Buy American.” Is this always a good policy for consumers?

Directions: Read the following paragraph. Then complete the exercises to help you decide when “buyingAmerican” is a good idea.

During the first half of the twentieth century, the American automobile industry dominated the U.S. market, makingcars that were bigger, faster, and more expensive each year. Then in the early 1960s Volkswagen, a German company,introduced its “Beetle” in the United States. It was smaller than the smallest U.S.-made cars, used half to one-third asmuch fuel, and cost about 30% less than the cheapest U.S. cars. It was scoffed at initially, but gradually increased itsmarket share, convincing other foreign manufacturers that they too could compete in the United States. By the early1970s U.S. auto makers started laying off employees because of the reduced demand for their products. By the late1970s, however, U.S. auto makers had smaller, more practical cars for their customers to choose. They began increasing their market share, but they have never regained the dominance that they enjoyed in the first half of the century.

1. What were the advantages and disadvantages of buying American-made cars? Look at options from the view ofan individual purchasing a new car and from the view of the overall economy. Complete the grid below.

2. Why is it important to “buy American”? Is it always a good idea?

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In the 1960s In the late 1970s

From an Advantage: Advantage:

individual

perspective Disadvantage: Disadvantage:

From the Advantage: Advantage:

perspective of

the economy Disadvantage: Disadvantage:

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T IPS FOR SHOPPING ONLINEShopping online can save time and shoe leather, but it can also cause problems. A few

simple tips, listed below, can help to avoid most of these problems.

a. Determine how much money you can spend before logging on to the Internet.

b. Do not shop at sites that require your social security number.

c. Avoid shopping at sites that do not give phone numbers or mailing addresses.

d. Before you order, check out the shopping site’s refund and return policies.

e. Ask if the site has a secure browser, which scrambles your credit card number and other information. If the answer is no, shop somewhere else.

f. Remember to copy and keep the confirmation number for your order.

g. Read each item on your monthly credit card statement, and immediately report any charges an authorized user did not make.

Directions: Match each dilemma below with the shopping tip that could have prevented the problem.

1. After several weeks, Pat still had not received the compact discs he had ordered online. Butwhen he logged on to complain, he had no way to identify his order.

2. Paloma had received the wrong size in a dress she ordered online, but the company had aliberal return policy. When Paloma tried to access the shopping site, it had disappeared andshe had no idea where to return the dress or where to ask for a refund.

3. Renee ordered her entire winter wardrobe online. She continued to make payments on thebill through the spring, summer, and fall.

4. All month Carlos shopped for groceries online. When his credit card bill arrived, it included$300-worth of meals charged at out-of-state restaurants he had never heard of.

5. All year Margo paid her bills, including online charges, without studying them. While doingher taxes, she looked over her monthly credit card statements and realized that a dozencharges made in June were unauthorized. She called the credit card company to complain. A representative told her she was ineligible for a refund.

6. Calvin ordered a calendar from an online company that promised to contribute half the saleprice to a shelter for homeless kittens. The company required his social security number so itcould report his tax-deductible contribution to the government. The following month, hereceived a bill for a store account that someone else had opened in his name.

7. When Yoko tried on her new online purchase, it looked less attractive on her than it did onthe Web site model. When she contacted the company to ask how to follow its return policy,the representative informed her there was none.

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ANSWER KEY

Activity 1: MAKING ECONOMIC DECISIONS

Answers will vary. The following are sample responses:

1. Sandy should repair her car and get a $5 gift forRafael.

2. She gains convenience, mobility, and the pleasure ofremembering Rafael’s birthday. She loses the oppor-tunity to go to the concert.

3. Sandy traded a night at a concert for mobility andshowing friendship to Rafael.

Activity 2: THE JOB MARKET

1. d

2. b

3. d

4. a

5. d

6. a

7. a

8. c

9. d

10. d

Activity 3: FILING A CONSUMER COMPLAINT


1. January 1, 2000

2. 45607 Dunnbrook

Moorcreek, IL 60035

3. “sweepstakes” announcements

4. misleading

5. raise or eliminate bulk rate postage

6. (708) 555-1234

7. Melissa Mullins

Activity 4: NEEDS, WANTS, AND MARKETERS

1. Answers will vary.

2. Answers will vary. The list should be longer than thelist for the first question.

3. Answers may vary. The items on the Wants list aremore likely to be advertised by brand namesbecause these sellers must try to convince con-sumers that they need the items.

4. Answers will vary. Sellers use messages such as“everybody uses this product; you deserve thisbrand; it makes you happy, brings you friends, earnsyou respect, improves your social life, provides com-fort,” etc.

Activity 5: PRICING COLLECTIBLES

Answers will vary but should be similar to the following responses:

1. A card in near mint condition always commands a better price than the same card in less perfectcondition.

2. The near-mint cards of all the players who were alsomembers of the Hall of Fame commanded morethan $30.00 each.

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ANSWER KEY

Decision-Making Grid

Problem Alternatives Criteria for alternatives

1. Car needs immediate repair 1. brake repair safety, mobility2. do without a car for a week

2. Wants to go to concert 1. buy ticket, try to find ride enjoyment, convenience,2. have a car but no concert or showing friendship

special gift for Rafael

3. Rafael’s gift 1. special $25 gift, no ride, enjoyment, showing friendshipnight at the concert if she canget there

2. $5 balloon and a joy ride withRafael for his birthday

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ANSWER KEY

3. In 1968, the year Ryan’s rookie card appeared, noone knew that he would become an outstandingplayer, much less a hall-of-famer. So few collectorsvalued the card then. As a result, thirty years later,the supply of mint condition rookie cards was shortof the demand.

4. The forces underlying supply and demand of col-lectibles are difficult to measure and even harder topredict.

Activity 6: GETTING PRODUCT INFORMATION


1. family members, magazine ads, and product labels

2. From least to most expensive: family members,friends, newspaper and television ads, magazineads, the Internet, product labels, sales clerks,Consumer Reports, comparison shopping

3. Spending time and money to get information canmake the consumer aware of special deals on prod-ucts, leading to substantial savings for a potentiallybetter product.

4. a. high; the consumer can take advantage of sales

b. low; the cost of finding additional information offsets savings on inexpensive item

c. low; the cost of finding additional information ishigh because of the number of competitors, andprice variation will be minimal

d. high; The consumer needs to be sure that suchan expensive item fits his or her needs, andthere can be considerable variation in price.

Activity 7: CATALOG SHOPPING

1. $91 or more

2. Jan would pay $10.36 in sales tax for the sameitems at a local store. By ordering through the cata-log, she saves $1.36.

3. No, if Jan lived in Indiana, she would not savemoney by ordering from the catalog because shewould have to pay the sales tax plus the shippingcharge.

4. Answers will vary. Possible answers are that the lateshopping hours are an advantage and that disad-vantages include the 3-5 day wait for delivery andnot having the opportunity to try on clothing pur-chases or view other items in person.

Activity 8: HOW GOVERNMENT AGENCIES AFFECT OUR LIVES

7:30 a.m.—Federal Trade Commission; 8:00 a.m.—Occupational Safety and Health Administration; 8:30a.m.—Federal Communications Commission; 9:30 a.m.—Food and Drug Administration; noon—Federal TradeCommission; 2:00 p.m.—Environmental ProtectionAgency; 4:00 p.m.—Federal communicationsCommission; 7:00 p.m.—Securities and ExchangeCommission

Activity 9: WHERE TO SHOP

1. Factory outlet—It is worth Rachel’s time to find thebest buy for the least amount of money.

2. Direct-to-user—Cooler Fruit Juice needs a largequantity of bottles, and the lowest price would befrom the manufacturer.

3. Mail order—Kwan Li can shop from home.

4. Specialty shop or department store—These storeswill provide better service.

5. Drop shipper or cash-and-carry warehouse—Thesecan provide Hills’ with just the amount of paint itneeds, and Hills’ can choose to take delivery or topick up the order.

Activity 10: USING CREDIT

1. a. Card A will be easier to abuse and more difficultto pay off because it has a higher credit line, ahigher rate of interest, and less time to pay offthe month’s charges.

b. Hector should apply for Card B (despite its annual fee) because it has a lower rate of interest and offers more time to pay off themonth’s charges. Also the lower credit limit prevents Hector from running up exorbitantdebt.

2. a. The average daily balance method uses the average balance in the account for the month tofigure the charge. The past due balance methodonly charges interest for the credit amount if it isnot paid before the due date, generally about amonth after the purchase.

b. Store B because she it gives her about 30 daysgrace so she can avoid paying any interest onher credit by paying the bill on the due date.

c. Kayla should shop at store A but pay in cash.Otherwise, she probably would end up in debtat a high rate of interest.

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ANSWER KEY

Activity 11: GETTING READY TO BORROW

1. income

2. debt

3. creditors

4. credit

5. reputation

6. trustworthy

7. educational

8. law

9. loans

10. capital

11. payments

Answers will vary. The following responses are samples:

Capacity to pay: I have no outstanding debts and make$6 an hour working at the local supermarket. Although I only work 15 hours a week now, I can work up to 20hours a week and clear $90.

Character: My school attendance is steady, and I havenever been arrested. Friends and teachers will vouch formy character.

Collateral: I have a disc player and 24” screen televisionthat I paid for with my earnings. I also have the supportof my parents who make more than $50,000 annually.

Activity 12: EVALUATING SAVINGS AND INVESTMENT OPTIONS

1. Passbook savings—Depositor receives booklet inwhich all transactions are recorded. Return (�),Safety (��), Liquidity (��)

2. Money market account—Savings account requiring$2,500 minimum balance; allows 3 checks a monthto be written on the account. Return (�), Safety(�), Liquidity (��)

3. Certificate of deposit—Time deposit that statesamount of deposit, date of maturity, and rate ofinterest to be paid. Return (�), Safety (��),Liquidity (�)

4. Stocks—Shares of ownership in company; entitleowner to certain part of company’s profit. Return(�/�), Safety (�/�), Liquidity (�)

5. Bonds—Certificates issued by company or govern-ment in exchange for money borrowed for aspecific time at stated rate of interest. Return (�),Safety (�), Liquidity (�)

6. Individual retirement account—Private retirementplan on which interest is tax-exempt until money iswithdrawn. Return (�), Safety (�), Liquidity (�)

7. Straight life insurance—Insurance plan that com-bines savings with insurance coverage. Return (�),Safety (�), Liquidity (�)

8. Real estate—Investment in land or buildings. Return(�), Safety (�/�), Liquidity (�)

Activity 13: WHY SALARIES DIFFER

1. Those with no high-school diploma experienced thehighest levels of unemployment, followed by thosewith only a high-school education.

2. High-school graduate $500, Bachelor’s $771

3. Prior to age 25 the data might be distorted by fac-tors such as college attendance and entry levelearnings of employees just out of high-school andcollege.

4. With an increased supply of employees with masterdegrees it is likely that the median earnings of thiseducational level would fall and that factors otherthan education would determine who received thehigher paying jobs. Students are likely to anticipatea wide variety of life style and social changes insuch a well educated population.

5. Answers will vary but should be similar to the fol-lowing response: By going to college, you wouldgive up the salary at a full time job as well as themoney college would cost. However, once out ofcollege, you would have increased earning potentialand the satisfaction of doing a job that takes skill.

Activity 14: FEDERAL INCOME TAX AND YOU

1. No, because she did not make $4,300 or more inearned income or $700 or more in unearnedincome.

2. No, since Maria is older than 14, her parents do nothave to declare her earnings on their income taxform.

3. $300

4. $225

5. Tomo pays the 15% rate for interest because the$1,500 was not capital gains.

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ANSWER KEY

Activity 15: BALANCING THE FEDERAL BUDGET

A. Economic Goals

1. security, freedom

2. equity, security, growth


4. growth, efficiency, security

5. freedom, security, equity

6. security

7. security, efficiency

8. security


10. security

B. Answers will vary, depending on the six programsstudents choose. Gains and losses should target aspecific segment of the population.

Activity 16: CHOOSING A BANK

1. b, e, f

2. c, g

3. b, d, f, h

4. a, e

5. c

6. b

7. d

8. a

Activity 17: BULL AND BEAR MARKETS

1. Aaron: $12,600; Bonnie: $10,750; Diego: $9,160;Kayla: $8,840

2. A bull market, because the equity investments wentup

3. Inflation was most likely low because the price ofgold decreased rather than increased during theyear.

4. The person should take out a mortgage becauselow interest rates generally accompany a bull mar-ket. Low interest rates would mean small returns onsavings but good deals on mortgages.

Activity 18: ECONOMIC PERFORMANCE

1. Economic activity has been robust as shown by theconsistently high percentage of growth in GDP

2. Economic activity has been slowing down. Therehas been little change in the GDP.

3. When economic activity increases, more jobs arecreated and fewer people are out of work. Wheneconomic activity decreases, fewer jobs are createdand more people are out of work.

4. Severe economic slowdowns probably caused thejump in the unemployment rate.

Activity 19: THE JOB MARKET IN THE YEAR 2000

1. Answers will vary. Sample response: computerindustry, medical care, and business support services.

2. For most of these jobs, students must be able towork well with computers or people.

3. Most require a college education or at least special-ized training.

4. Most need people who can keep up with changesin their professions and in customer needs.

5. Students’ answers will vary. If students’ chosencareers are on the list, they can expect to havemany job opportunities and perhaps higher salariesand more choices in where they work than thosewho choose careers that are not on the list. If stu-dents’ job choices are not on the list, they may havefewer job opportunities, less choice about where towork, lower salaries, and fewer benefits. However,the competition may be less because fewer peoplewill be attracted to the field.

0 1 2 3 4 5 6 7 8 9 10 11 12 13

Initial Investment (each person)

Foreign Stock Fund (Aaron)

Utility Stocks (Bonnie)

30-year Bond (Diego)

Gold (Kayla)

Results of Investing $10,000 for One Year in Four Investments

Thousands of Dollars

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ANSWER KEY

Activity 20: THE FEDERAL RESERVE SYSTEM AND YOU

1. pennies

2. millions

3. your bank

4. Answers may vary. A possible answer is thatCongress meant to help the bank customersbecause it seemed unfair that the banks benefitedfrom the use of customers’ money during floattime.

5. Answers may vary. A possible answer is that the stu-dent would propose a law to give the check casherthe use of his or her money as soon as the moneyhas been debited from the check writer’s account.As the system stands now, the check casher’s bankcan use the money for several days during whichthe check casher cannot.

Activity 21: SOCIAL SECURITY AND YOU

1. $7,440

2. Answers may vary. The probable answer is thatyounger people greatly outnumbered older peoplebecause life expectancy was short.

3. Answers may vary. The probable answer is that allthose people who supported the generation beforewere now retirement age and living longer thantheir parents.

4. As a greater number of people receive benefits, thesystem must find additional funds.

5. Answers may vary. A possible response is yes,because the government has a responsibility to lookafter all the people’s welfare or no, because work-ers should be allowed to invest the money theyspend in social security taxes to provide for theirown future.

Activity 22: BUYING FOREIGN GOODS

1. a. Higher tariffs would raise the price of imported goods, making American-made products more competitive.

b. Import quotas would hold foreign products to a certain percentage of the market, allowing American companies a greater share of the market.

c. Depreciating the dollar’s value makes other nations’ currencies go up in relation to the dollar. Fewer yen and euros can be traded for each dollar, making imported goods costlier.

2. a. Protectionism allows domestic companies to keep their prices higher, because the foreign competition must include tariffs in the prices of imported goods.

b. Protectionism allows companies to stay in business even though they are not competitive and keeps prices artificially high.

c. If one country raises high trade barriers, other countries will retaliate by creating similar barriers against the first country.

Activity 23: COMPARING ECONOMIC SYSTEMS

Graphs will vary. Ask students to explain why theyassigned specific percentages to certain categories. Thefollowing percentages are sample labels for the graph:

Transportation: .5% or 23,550 workers

Manufacturing: 17% or 800,700

Mining: 5% or 235,500

Agriculture: 20% or 942,000

Other: 16% or 753,600

Education: 2.5% or 117,750

Trade: 11% or 518,000

Entertainment: 2% or 94,200

Medical: 1% or 47,100

Government: 24% or 1,130,400

Communications: 1% or 47,100

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ANSWER KEY

Activity 24: DECISION MAKING IN A DEVELOPING COUNTRY

1. The village faces these problems: no way of gettingto the market during the rainy season; poor watersystem; lack of medical care; diseases caused bypoor water; no indoor plumbing.

2. Answers will vary. Students should consider whichproject will solve the greatest number of problems.

3. Opportunity costs of building the road are the timespend grading the road and spreading the gravel,thereby making a road that can be traveled in therainy season.Opportunity costs of improving the water systeminclude the time spent reconstructing the system,making possible a better water supply.

4. Answers will vary. You may wish to choose projectsfor students to research and compare.

2. Answers will vary. Sample response: “BuyingAmerican” helps preserve jobs in the United Statesin the manufacturing sector. These jobs have tradi-tionally paid a reasonable wage for persons withlittle education. No, because in cases in which theAmerican production does not have a comparativeadvantage buying American is less efficient for thewhole economy.

Activity 26: TIPS FOR SHOPPING ONLINE

1. f

2. c

3. a

4. e

5. g

6. b

7. d

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ANSWER KEY

Activity 25: BUYING AMERICAN

In 1960s In late 1970s

Individual Advantage: Could have a full range ofchoices and still preserve American jobs

Disadvantage: None

Economy Advantage: American jobs would be Advantage: American jobs would bepreserved preserved

Disadvantage: Auto makers would Disadvantage: A loss of competitionhave no incentive to make smaller, could make auto makers unresponsivemore practical cars to customer needs

Advantage: Got a bigger, faster car

Disadvantage: Got a very expensiveand fuel inefficient car

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