Chapter 20 Economic Challenges

1. Chapter 20Economic Challenges Section 1: The Business Cycle Section 2: Coping with Economic Challenges Section 3: Labor and Management

2. Chapter 20 Section 1: The Business Cycle OBJECTIVES • What are the different parts of the business cycle? • What are the old theories of the business cycle, and when did they exist? • How did the Great Depression change the government’s role in the economy?

3. Chapter 20 Section 1: The Business Cycle Different parts of the business cycle: • Expansion • Peak prosperity • Contraction or recession • Trough or depression • Expansion

4. Chapter 20 Section 1: The Business Cycle Old theories of the business cycle prior to the Great Depression: • Business cycle should be left alone: problems cure themselves. • Recessions could not last long: workers would accept lower wages, thus lowering costs of production. • Expanding businesses would help other businesses expand.

5. Chapter 20 Section 1: The Business Cycle The Great Depression and the government’s role: • New Deal—designed to provide jobs and create financial stability. • Civilian Conservation Corps—young people were to restore natural resources • FDIC and SEC created to insure funds and inhibit fraud

6. Chapter 20 Section 1: The Business Cycle The Great Depression and the government’s role: (continued) • Social Security System set up to provide funds for retirees • Unemployment compensation established Government intervention in the economy remains a matter of dispute.

7. Chapter 20 Section 2: Coping with Economic Challenges OBJECTIVES • What economic problems exist, and what causes them? • How does the government address economic problems? • How can citizens work to improve the economy?

8. Chapter 20 Section 2: Coping with Economic Challenges Economic problems and their causes: • Inflation—prices increase faster than wages; • Unemployment—unemployed workers cannot pay bills or purchase goods • Recession—production, spending, and consumer demand decline • Money and loans—too much money in circulation leads to inflation

9. Chapter 20 Section 2: Coping with Economic Challenges Economic problems and their causes: (continued) • Government and consumer spending—over-borrowing reduces savings, increases debt; helps raise prices • Productivity—foreign productivity hurts American businesses; contributes to unemployment

10. Chapter 20 Section 2: Coping with Economic Challenges The government addresses economic problems through • Changes in fiscal policy—in a recession, government may lower taxes and increase government spending. • Changes in monetary policy—in a recession, the Federal Reserve may increase the money supply or lower interest rates. • Actions may be reversed in boom periods.

11. Chapter 20 Section 2: Coping with Economic Challenges Citizens can aid the economy by • Increasing savings—consumer savings give banks more money to lend to business. • Reducing credit debt—reduced debt can lead to more savings. • Buying American-made products, which preserves and creates jobs in America. • Increasing productivity—efficient management and workers aid business and may increase wages.

12. Chapter 20 Section 3: Labor and Management OBJECTIVES • What conditions led to the rise of labor unions in the 1800s? • What methods do labor and employers use to negotiate with one another, and what major labor laws protect them? • What is the state of labor relations today?

13. Chapter 20 Section 3: Labor and Management The rise of labor unions in the 1800s: • Large factories used machines and employed hundreds of workers. • Factory managers and owners had little contact with workers. • Heavy immigration led to too many available workers.

14. Chapter 20 Section 3: Labor and Management The rise of labor unions in the 1800s: (continued) • Workers were forced to accept long working days, low wages, and harsh conditions. • Workers organized unions to improve conditions. • Collective bargaining was used to reach agreements with employers.

15. Chapter 20 Section 3: Labor and Management Methods of negotiation and major labor laws: • Workers’ methods: strikes, picketers, job actions • Employers’ methods: blacklists and lockdowns • Right-to-work laws—no one is forced to join a union • 1935—National Labor Relations Act or Wagner Act • 1947—Labor-Management Relations Act or Taft-Hartley Act • 1959—Landrum-Griffin Act

16. Chapter 20 Section 3: Labor and Management The state of labor relations today: • Union leaders know companies must make profits to ensure jobs. • Companies know workers must have suitable conditions and reasonable wages. • Modern unions cooperate with companies to run efficient businesses. • Compromises help settle strikes when they occur.

17. Chapter 20 Section 3: Labor and Management The state of labor relations today:(continued) • Mediators make nonbinding recommendations to end a strike. • Arbitrators make binding decisions to end a strike.