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  1. 1. Labor, Wages, and Employment Chapter 9
  2. 2. Wage Rate <ul><li>The wage rate is the price of labor </li></ul><ul><ul><ul><li>Surplus of labor = lower wage rate </li></ul></ul></ul><ul><ul><ul><li>Shortage of labor = higher wage rate </li></ul></ul></ul><ul><ul><ul><li>Supply and demand helps us to understand why some people earn higher wages than others </li></ul></ul></ul><ul><ul><ul><li>The higher the demand for your occupation, the higher your wage rate will be </li></ul></ul></ul>
  3. 3. Average Base Salaries <ul><li>Teacher - $35,000 </li></ul><ul><li>Physician - $130,000 </li></ul><ul><li>Attorney - $78,000 </li></ul><ul><li>Registered Nurse - $45,000 </li></ul><ul><li>Accountant - $35,000 </li></ul><ul><li>Retail Associate - $17,000 </li></ul><ul><li>Gas Station Attendant - $15,000 </li></ul>
  4. 4. Benefits <ul><li>Benefits include money benefits and non-money benefits </li></ul><ul><li>Possible non-money benefits: </li></ul><ul><ul><ul><li>Job satisfaction </li></ul></ul></ul><ul><ul><ul><li>Job security </li></ul></ul></ul><ul><ul><ul><li>Health insurance </li></ul></ul></ul><ul><ul><ul><li>Hours </li></ul></ul></ul><ul><ul><ul><li>Vacation time </li></ul></ul></ul>
  5. 5. Minimum Wage <ul><li>A federal law that specifies the lowest hourly wage that can be paid to workers </li></ul><ul><li>The law was passed during the Great Depression and established a minimum wage of $.25 an hour </li></ul><ul><li>Some states, such as California, Washington, and Massachusetts have set the minimum wage higher that the federal rate </li></ul>
  6. 6. Two types of wages <ul><li>Money Wage (Nominal Wage) – how much money you make </li></ul><ul><li>Real Wage – measuring a persons wage by how much it will actually buy (including benefits) </li></ul><ul><li>Can a persons money wage rise while their real wage falls? </li></ul>
  7. 7. Consumer Price Index (CPI) <ul><li>An average of the price of goods and services purchased by consumers over a certain period of time </li></ul>
  8. 8. Labor <ul><li>Labor Union – an organization that seeks to increases the wages and improve the working conditions of its members </li></ul><ul><li>Closed Shop – an organization that hires only union members </li></ul><ul><li>Taft Hartley Act – passed in 1947, made the closed shop illegal </li></ul><ul><li>Right to Work Law – a state law that prohibits the practice of requiring employees to join a union in order to work </li></ul><ul><li>Union Shop – an organization that requires employees to join the union within a certain period of time after being hired </li></ul><ul><li>Strike – a work stoppage called by a union to put pressure on an employer </li></ul>
  9. 9. Chapter 10 – Money, Banking, and the Federal Reserve <ul><li>Money – a good that is widely accepted for the purposes of exchange and the repayment of debt </li></ul>
  10. 10. Three Functions of Money <ul><li>Medium of Exchange </li></ul><ul><li>Unit of Account </li></ul><ul><li>Store of Value </li></ul>
  11. 11. Medium of Exchange <ul><li>Anything that is generally acceptable in exchange for goods and services </li></ul><ul><li>Consumers use money to purchase gas, groceries, clothes, </li></ul><ul><li>and computers </li></ul>
  12. 12. Unit of Account <ul><li>Common measurement in which values are expressed </li></ul><ul><li>A candy bar may cost a $1, and the price of a new book is $15. The exchange value for both goods is measured in dollars. </li></ul>
  13. 13. Store of Value <ul><li>An item that maintains value over time </li></ul><ul><li>$100 today will be worth $100 a year from now </li></ul>
  14. 14. Money and Banking <ul><li>Money Supply – the total supply of money in circulation composed of currency, checking accounts, and traveler checks </li></ul><ul><li>Currency – includes both coins and paper money that is issued by the U.S. Treasury </li></ul><ul><li>Demand Deposit Account (Checking Account) – Checking accounts are sometimes called demand deposit accounts because finds can be converted into currency on demand </li></ul><ul><li>Savings Account – an interest earning account </li></ul><ul><li>Near-Money – assets such as savings accounts that can quickly be turned into money </li></ul>
  15. 15. Are Credit Cards Money?
  16. 16. The Federal Reserve System – THE FED <ul><li>Central Bank of the United States </li></ul><ul><li>Board of Governors – made up of seven members, appointed to 14 year terms by the President with Senate approval </li></ul><ul><li>As money manager, the Fed has two goals: </li></ul><ul><ul><li>Maintain stable prices (control inflation) </li></ul></ul><ul><ul><li>Maintain maximum employment and production </li></ul></ul>
  17. 17. Federal Reserve Banks
  18. 18. Six responsibilities of the Fed <ul><li>Control the money supply </li></ul><ul><li>Supply the economy with paper money (printed by the Bureau of Engraving and Printing) </li></ul><ul><li>Hold bank reserves (a checking account foe banks) </li></ul><ul><li>Provide check clearing services </li></ul><ul><li>Supervise member banks </li></ul><ul><li>Serve as a lender of last resort when banks are in financial trouble </li></ul>
  19. 19. Bank Reserves <ul><li>Total Reserves – deposits in the reserve account at the Fed and vault cash </li></ul><ul><li>Required Reserves – reserve requirement X value of checking account deposits </li></ul><ul><li>Excess Reserves – total reserves – required reserves </li></ul>
  20. 20. Fed Monetary Tools <ul><ul><ul><li>Open Market Operations – buying and selling of government bonds </li></ul></ul></ul><ul><ul><ul><li>Buy back bonds - $ supply increases </li></ul></ul></ul><ul><ul><ul><li>Sell bonds - $ supply decreases </li></ul></ul></ul><ul><ul><ul><li>Reserve Requirement – a certain % that the bank is supposed to keep in its reserve account and in the vault </li></ul></ul></ul><ul><ul><ul><li>Raise reserve requirement - $ supply decreases </li></ul></ul></ul><ul><ul><ul><li>Lower reserve requirement - $ supply increases </li></ul></ul></ul><ul><ul><ul><li>Discount Rate – the interest rate the Fed charges a bank for a loan </li></ul></ul></ul><ul><ul><ul><li>Raise discount rate - $ supply decreases </li></ul></ul></ul><ul><ul><ul><li>Lower discount rate - $ supply increases </li></ul></ul></ul>
  21. 21. Who’s this guy?
  22. 22. Chapter 11 – National Income <ul><li>Gross Domestic Product (GDP) – the total market value of all final goods and services produced annually in a country </li></ul><ul><li>Gross National Product (GNP) – the total market value of all final goods and services produced by the citizens on a country </li></ul><ul><li>Final Good – a good sols to its final user </li></ul>
  23. 23. How is GDP measured? <ul><li>Economists break the economy into four sectors: households, businesses, government, and foreign </li></ul>
  24. 24. Households <ul><li>Expenditure – consumption </li></ul><ul><li>TV’s, Cell Phones, Clothes </li></ul>
  25. 25. Businesses <ul><li>Expenditure – investment </li></ul><ul><li>Tools, machines, factories </li></ul>
  26. 26. Government <ul><li>Expenditure – government purchases </li></ul><ul><li>Paper, pens, planes, tanks </li></ul>
  27. 27. Foreign <ul><li>Expenditure – imports and exports </li></ul><ul><li>Exports – wheat, lumber </li></ul><ul><li>Imports – manufactured goods </li></ul>
  28. 28. GDP Formula <ul><li>GDP = Consumption + Investment + Government Purchases + Export Spending – Import Spending </li></ul><ul><li>Real GDP – An inflation adjusted measurement of GDP. Often referred to as “constant price” or “inflation corrected” GDP </li></ul>