THE ECONOMYTHE ECONOMY

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLE

Conceptualized by: Jermaine Conceptualized by: Jermaine HarrisHarris

THE ECONOMYTHE ECONOMY

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLE

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLE

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLE

Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLE

Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLE

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLE

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLE

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLE

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLE

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

w - Wages

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

w - Wages

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

Y - Nat’l Income

w - Wages

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

Y - Nat’l Income

w - Wages

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

In - Inflation Y - Nat’l Income

w - Wages

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

In - Inflation Y - Nat’l Income

w - Wages

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

In - Inflation Y - Nat’l Income

w - Wages

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

r - Interest rates

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

In - Inflation Y - Nat’l Income

w - Wages

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

r - Interest rates

RHETORICAL ECONOMIC CYCLERHETORICAL ECONOMIC CYCLEUn - Unemployment

In - Inflation Y - Nat’l Income

w - Wages

r - Interest rates

In - inflation Y - Nat’l Income

w - Wages

Un - Unemployment

r - Interest rates

The Two Controlling Policies The Two Controlling Policies

Monetary PolicyMonetary Policy - the process by which the Federal - the process by which the Federal Reserve Bank (the central bank) controls the supply of Reserve Bank (the central bank) controls the supply of money, the availability of money, and the cost of money money, the availability of money, and the cost of money (interest rates), in order to attain economic growth and (interest rates), in order to attain economic growth and stabilitystability

Fiscal PolicyFiscal Policy - the use of government spending and - the use of government spending and revenue collection to influence the economy revenue collection to influence the economy

Ben Bernanke Ben Bernanke Federal Reserve Board ChairmanFederal Reserve Board Chairman

How does the Fed control the How does the Fed control the supply of money?supply of money?

The Federal Reserve Controls The The Federal Reserve Controls The Economy like a Mixing Board Economy like a Mixing Board

controls soundcontrols sound

The Federal Reserve’s jobThe Federal Reserve’s job is to monitor the Economy by balancing a is to monitor the Economy by balancing a steady rate of Unemployment with a steady rate of Inflation. All while steady rate of Unemployment with a steady rate of Inflation. All while promoting steady economic growth. Too much Unemployment or high promoting steady economic growth. Too much Unemployment or high Inflation changes the soundness of our economy to a level that is Inflation changes the soundness of our economy to a level that is dangerous or unacceptable. By adjusting the 4 knobs on the Mixing dangerous or unacceptable. By adjusting the 4 knobs on the Mixing Board, the Fed attempts to maintain Economic soundness. Board, the Fed attempts to maintain Economic soundness. The four mixing board knobs areThe four mixing board knobs are

1 1 Reserve requirements Reserve requirements 22 Federal Funds Rate Federal Funds Rate 33 Discount RateDiscount Rate44 Open Market Committee Open Market Committee

Operations Operations

The Lotto-Ball DistributorThe Lotto-Ball Distributor

C. By removing money from the economy the value of the dollar changes.

Represents money in the system

The Lotto-Ball DistributorThe Lotto-Ball Distributor

D. Air pressure creates different levels of Velocity. Rate at which $ circulates in the economy.

B. By putting money in the system the value of the dollar changes.

A. The Reserve requirement is adjusted to change the level of money circulating in the system. The main purpose of this reserve is to make sure the banks have money on hand for withdrawal request. If they don’t people may panic and create a run on the banks.

C. By removing money from the economy the value of the dollar changes.

Represents money in the system

The Lotto-Ball DistributorThe Lotto-Ball Distributor

D. Air pressure creates different levels of Velocity. Rate at which $ circulates in the economy.

B. By putting money in the system the value of the dollar changes.

A. The Reserve requirement is adjusted to change the level of money circulating in the system. The main purpose of this reserve is to make sure the banks have money on hand for withdrawal request. If they don’t people may panic and create a run on the banks.

C. By removing money from the economy the value of the dollar changes.

Represents money in the system

The Lotto-Ball DistributorThe Lotto-Ball Distributor

D. Air pressure creates different levels of Velocity. Rate at which $ circulates in the economy.

B. By putting money in the system the value of the dollar changes.

A. The Reserve requirement is adjusted to change the level of money circulating in the system. The main purpose of this reserve is to make sure the banks have money on hand for withdrawal request. If they don’t people may panic and create a run on the banks.

Teeter Tauter Teeter Tauter Inflation vs. UnemploymentInflation vs. Unemployment

Inflation Unemployment

The Money MultiplierThe Money Multiplier Every bank is required to hold Every bank is required to hold

10% of all deposits in a cash 10% of all deposits in a cash reserve.reserve.

The reserves are to be The reserves are to be available for withdrawals. available for withdrawals.

This is to prevent panic and a This is to prevent panic and a bank rush. bank rush.

In the U.S., only about 3% of In the U.S., only about 3% of the total money supply the total money supply consists of physical coins and consists of physical coins and paper money.paper money.

For Example: if the reserve For Example: if the reserve requirement is 10%, for every requirement is 10%, for every $100 this creates a total of $100 this creates a total of $1000 ($100 / 0.2) in deposits. $1000 ($100 / 0.2) in deposits.