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Teacher professional development and classroom resources across the curriculum
From the first decade of the 20th century through the early portion of the 21st century, America has been on an economic roller-coaster ride from boom to bust and back again. Economics U$A: 21st Century Edition is a 28-part multimedia distance learning course in micro- and macroeconomics for college and high school classrooms that features many of America’s leading businesspeople, politicians, and economists as they expose the inside story behind these turbulent times.
The return of U.S. troops from overseas following World War II created a massive demand for cheap housing. Rising labor and energy costs in the United States in the ‘60s and ‘70s forced domestic steel manufacturer Nucor to use a new technology to lower production costs. In 2009, pitcher phenomenon Stephen Strasburg signed the largest rookie contract in baseball history. These stories show how a free-market pricing system based on supply and demand determines what goods will be manufactured, what they will cost, and for whom goods and services will be supplied.
In 1980, renowned soda company Coca-Cola replaced sugar with high-fructose corn extract in order to lower production costs. In 1963, Studebaker closed its plant, unable to increase sales and take advantage of economies of scale. In the 21st century, printing and publishing company PrintPOD, Inc. avoided increasing domestic labor expenses by tapping into the workforce in India. These stories show how competitive firms try to minimize their costs of production by utilizing an optimal combination of inputs and scale of operation.
A two-year drought in California in the 1970s motivated areas such as Marin County to conserve by reducing their water consumption by as much as 66 percent. Following the Arab oil embargoes of 1973, the Nixon Administration latched onto the “world price” of “new” oil, encouraging domestic oil suppliers to drill again. Jordache designer jeans used creative advertising to create a demand for blue jeans. These stories illuminate factors that determine the quantity of goods demanded by consumers and the factors that determine the quantity of goods supplied.
Farmers lured into producing massive food surpluses for World War I could no longer profit when the war ended and demand plummeted. In the 1930s, dairy farmers declared a “milk strike” in order to limit supply and raise prices. Government programs originally intended to save small farmers have ended up providing subsidies to large corporate farms that don’t need them. These stories illustrate problems relating to “perfect competition and inelastic demand” and to government efforts to help the farmer.
When the Nixon Administration set up price controls for beef, farmers protested by withholding animals from the markets to stifle the supply. In preparation for World War II, the Roosevelt Administration instituted wage and price controls to curb inflation and focus production on war materials. Following World War II, rent controls established to aid returning war veterans cut into landlord profits, causing some to abandon properties. These stories illustrate how the “invisible hand” behind free markets operates, the reasons for interfering with free markets, and the costs of doing so.
In 1890, the Sherman Antitrust Act broke up the monopoly that John D. Rockefeller and his Standard Oil Company had on the oil industry. In 1914, the federal government was sold on the concept of universal telephone service provided by Ma Bell, a monopoly that was ended by court order. In 1998, the U.S. government filed a suit against the world's largest software company—Microsoft—for participating in anticompetitive practices. These stories explain what monopolies are and why government sometimes chooses to intervene.
Competition with General Motors eventually rendered Ford’s single-option Model T obsolete. In 1959, Julian Granger, reporter for the Knoxville News-Sentinel, uncovered a price-fixing collusion between three large electric companies in their closed bids to the Tennessee Valley Authority. In the late 1970s, President Jimmy Carter ordered deregulation of the airline industry, which had been a federally protected oligopoly. These stories provide significant examples of oligopolies and the forces that influence them.
In 1977, the Federal court system ordered the Reserve Mining Company to build a $400-million disposal site for carcinogenic materials. After 1970, Los Angeles was looking for a broad-ranging smog-reduction policy to reflect recently amended Clean Air Act standards. In 2009, the House of Representatives introduced the first piece of comprehensive Clean Energy legislation—the American Clean Energy and Security Act, featuring a concept called “cap and trade.” These stories show that pollution is a “negative externality” that can have serious consequences for economic efficiency.
The International Ladies’ Garment Workers’ Union (ILGWU) strike in the early 1900s was inspired by poor working conditions and low wages. In 1984, Congress bailed out the Chrysler Corporation after Chairman Lee Iacocca and Douglas Fraser, chief of the United Auto Workers, came to an agreement. Walmart achieves rock-bottom prices by paying workers low wages and keeping unions out. These stories show how labor unions and corporate managers battle to affect wages, prices, and the supply of labor.
In response to rising interest rates in the 1970s, the Maryland legislature raised usury ceilings so that more home loans would be available. In December 1980, Apple Computer went public, with substantial compensation for its founders. Pharmaceutical companies invest millions in bringing new drugs to market, often gambling on how much profit they will get in return. These stories exhibit economic reasons for interest payments and show how investments in research, entrepreneurial risk, labor, and equipment relate to profits.
During the Great Depression, President Franklin Delano Roosevelt put forth a Social Security program, using money from employer/employee contributions. In 1996, President Bill Clinton signed the Welfare Reform Act, requiring welfare recipients to move into the work force. The Perry School for Community Services, a Washington, D.C., poverty-reduction program, offers after-school programs for kids and vocational programs for adults. These stories deal with income disparities and how public policy and private funding is utilized to reduce poverty.
By 1916, Henry Ford’s assembly line had lowered the price of the Model T to $360, making it affordable and increasing its production exponentially in two years. In 1972, a group of experts known as the Club of Rome issued a report called “The Limits to Growth,” predicting that raw materials could run out and world population growth and pollution could get out of hand. The advent of the Internet is an example of a technology they could not predict, preparing the way for other innovations such as “smart” phones. These stories highlight two important determinants for economic growth: capital per worker (a.k.a. productivity) and technological innovation.
In 1937, the Tennessee Valley Authority (TVA), a government-owned utility company, was created to electrify rural communities and control flooding. The first U.S. attempt at national health insurance—the passage of Medicare and Medicaid—came in 1965. In response to 9/11, the U.S. Transportation and Security Administration replaced private airport-security firms with federal employees. These stories show how a perfectly competitive market does not always provide the right amount of goods and how the government fills the gaps with public goods.
Faced with dwindling resources, Congress fiercely debated whether to preserve 100 million acres of Alaskan land as a national park or open the land for mineral exploration. The need to provide both guns and butter during World War II led to an unprecedented period of economic growth. In the 1970s, the U.S. Supreme Court ordered U.S. textile industries to put workers’ health ahead of a company’s ability to compete with rising foreign markets. These stories illustrate the difficult economic choices a society must make in the face of limited resources.
During the Great Depression, Simon Kuznets led an investigative study resulting in the first publication of the nation’s national income. It was called the Gross National Product (GNP). Using GNP to assess the overall production-to-consumption ratio of the U.S., President Roosevelt entered World War II without jeopardizing the basic needs of U.S. citizens. Although GNP was changed into GDP in 1991, it still didn’t account for all aspects of economic growth. These stories show how GNP and GDP measurements, though not perfect, really do help us understand the U.S. economy.
The nation’s cycles of economic booms and busts were considered intrinsically capitalistic by Joseph Schumpeter, who called them “methodic economic growth,” and by Karl Marx, who lambasted capitalism as inherently flawed. John Maynard Keynes held that recessions depended on the balance of aggregate demand and aggregate supply. Economist Hyman Minsky provided a promising explanation for the Great Recession of the 21st century with his theory that the financial system plays a determining role in economic cycles. These stories reveal how evolving economic theories have led to an explanation of business cycles.
In 1932, President Herbert Hoover spoke enthusiastically about financial recovery while John Maynard Keynes expressed doubts. In 1936, Keynes published The General Theory of Employment, Interest, and Money, developing a theory that later became the basis for public policy in Washington. Franklin Delano Roosevelt did not generally trust economists, but increased government spending during World War II proved Keynes’ theories correct. These stories discuss the ideas of J. M. Keynes and how the theory behind Keynesian Economics explained the Great Depression.
In 1954, relying on “automatic stabilizers,” President Dwight Eisenhower withheld raising taxes in order to encourage consumer spending. In the 1960s, newly elected President John F. Kennedy and economic adviser Walter Heller pushed Congress to approve a $12-billion tax-cut stimulus. By 2010, economists disagreed about whether fiscal policy was effective as they argued over the success or failure of President Barack Obama’s stimulus plan. These stories are examples of how the government attempts to fine-tune the economy and reduce the severity of the business cycle.
In the 1960s, President Lyndon B. Johnson continued fueling both the domestic agenda of his Great Society and the Vietnam War, causing overspending that brought inflation. People living on marginally fixed incomes endured harsh consequences under inflation, and workers’ strikes brought costs up even more. After his election in 1972, Richard Nixon ordered a ninety-day nationwide price and wage freeze after the Federal Reserve failed to curb inflation. These stories show the factors that cause inflation and the some of the problems caused by government actions.
The Knickerbocker Bank’s failure led to the Bank Panic of 1907 and ultimately inspired a need for a central bank. When thousands of banks failed in the 1930s, President Roosevelt declared a national bank holiday, closing individual banks and creating regulatory agencies to guard the system. In the wake of the 2008 Great Recession, and the failure of regulators to act, the Dodd-Frank Wall Street Reform and Consumer Protection Act became law. These stories explain the role of banks in the U.S. economy and how government agencies act to prevent individual bank failures from becoming banking crises.
The Federal Reserve was originally created in 1913 as an emergency lender to banks—a sort of bank of last resort. The Banking Act of 1935 and the Treasury-Federal Reserve Accord of 1951 broadened the powers of the Federal Reserve, widening the range of options and tools it could use to manage the economy. Until the first decade of the 21st century, the "Fed" did fairly well, but the housing bubble and Great Recession provided the agency with difficult challenges it has had trouble meeting. These stories showcase the Fed’s abilities, while exploring how its responsibilities and challenges have expanded over the years.
America in the 1970s saw a new kind of inflation based on supply and not demand: “stagflation,” caused by Arab oil embargoes and worldwide crop failures. In 1973, President Ford and Federal Reserve Chairman Arthur Burns tried to control inflation by choking the money supply, but failed. In the 1990s, the U.S. had three ways to ease inflation: technological innovation, market globalization, and expenditure restraint. These stories show that demand-management policies fight cost-push inflation only by causing extremely high unemployment, and that rising inflation and rising unemployment can parallel each other.
In the 1970s, businesses struggled with rising energy costs, newly imposed environmental regulations, and inflation that contributed to the slowing of productivity. By 1980, a new group of economists called “supply-siders” were calling for government deregulation to spur productivity, amidst great objections from Democrats and some economic experts. Some thought that productivity was at an end, but government-supported technological innovation spurred productivity to new heights. These stories highlight the factors that affect productivity and how government programs have both helped and hindered growth.
During World War II, when our national debt more than quadrupled, the government encouraged citizens to buy war bonds and federal stamps to help defray the costs. In 1960, President Eisenhower achieved a surplus and reduced the debt, a feat not repeated until the 1990s. But after a large tax cut, three wars, a down market, and expensive entitlement costs pushed the deficit and the national debt to unsustainable heights, the president and the Congress decided it was time to take action. But how? These stories show that deficits can be helpful or harmful, but that long-term debt is serious business.
In the 1980s, Federal Reserve Chairman Paul Volcker pushed the U.S. through two deep recessions, using monetary policy and increased interest rates to combat inflation. Fed Chairman Alan Greenspan used a different tactic in the early 1990s and 2000s, flooding the market with liquidity to prevent freezing. In the first decade of the 21st century, Fed Chairman Benjamin Bernanke struggled to combat the ravages of the Great Recession with monetary policy. These stories discuss the relationship between the money supply, economic growth, and inflation, and explain the tools of monetary policy, their effectiveness, and their limitations.
Between 1982 and 1985, under the leadership of Paul Volcker, the Fed was able to combat inflation by tightening the money supply despite rising unemployment. At the same time, stabilization policy was challenged by the rise in international trade, which brought increasing U.S. job losses. In the first decade of the 21st century, when employment skyrocketed and the banking system and major corporations needed bailouts to survive, whether monetary and fiscal policy can still stabilize the economy is in question. These stories reveal the complexities of stabilization policy in the modern and increasingly global world.
The U.S. auto industry lost a lot of mileage in 1973 with the rise of the more efficient Japanese imports. In the 1970s, the “trigger-price mechanism” was developed in order to differentiate between fair and unfair trade practices. Debate over the North American Free Trade Agreement (NAFTA) divided those who believed that American jobs would suffer—and American firms would relocate south of the border—from those who insisted that increased trade would create new American jobs and industries. These stories examine the pros and cons of free trade.
In 1925, Great Britain went off the gold standard. As a result, a flood of British goods came into U.S. markets and American exports suffered. In July 1944, world economic leaders met in Bretton Woods, New Hampshire, for a “New World Economic Order,” and soon the dollar became the new standard. Then, in 2002, the euro became the standard currency for the entire European Union and threatened to compete with the dollar. These stories portray the evolving efforts to create an international system for currency exchange, which affects trade, domestic growth, and inflation.
The economic landscape has drastically changed throughout history. Use this timeline to dig deeper, discover relationships, and explore concepts.
Neither the president nor Congress appears to be near a solution on how to control the U.S. debt. Use this exercise to show them how to do it.
Michael and friends are planning a skiing weekend. Show them how to afford it.
To price his product and maximize his profit, Albert Moose needs to know all his costs and revenue. Assist Albert with his decision.