Wednesday, December 16, 2009

AP Economics: 17 December 2009

Prayer (alphabetical)

Current Events:

The December holiday season in the United States is traditionally a time that many people give money to charities. But with the economic downturn in the U.S., surveys show that Americans are less likely to give to charities this year. VOA's Deborah Block spoke with one of the largest charities in the U.S., which says while donations are decreasing, the need for charitable services are going up.



Make-Up Ch. 5 Multiple Choice Test.

We will pick up where we left off: Ch. 15, Introduction to Macroeconomics, PowerPoint presentation and Handout Ch. 15 questions.

Chapter Overview

As an introduction to macroeconomics, this chapter begins with an overview of macroeconomics, discussing its origins and presenting material on the business cycle. The National Income and Product Accounts are then covered, as well as the two approaches to measuring GDP and the connection between GDP and the standard of living. The chapter concludes with a section on the work of Joseph Schumpeter and creative destruction.

Chapter Outline

Personal Income and Disposable Personal Income


GDP and Our Standard of Living
Checkpoint: National Income Accounting
Technology and Schumpeter’s Creative Destruction

We can review:

Chapter Checkpoints

The Scope of Macroeconomics
Question: Do you think the business cycle has a bigger impact on automobile and
capital goods manufacturers or grocery stores? Why or why not?

National Income Accounting
Question: People have individual senses of how the macroeconomy is doing. Is it a
mistake to extrapolate from one’s own experience what may be happening in the
aggregate? How might individual experiences lead one astray in thinking about the
macroeconomy? How might it help?

Extended Examples in the Chapter

Technology and Schumpeter’s Creative Destruction

Were computer technology and the Internet a Schumpeter innovation wave or not?
Schumpeter focused on the power of major innovations to form waves of growth
throughout the macroeconomy. So the real question is whether or not the change in
technology affected most parts of the economy in a very significant way (some definitions of creative destruction use the term “transformation” in its description). The background information provided by Wikipedia also relates creative destruction to layoffs (Cf. Creative destruction).

Also, was the HW assignment for yesterday:

Examples Used in the End-of-Chapter Questions
Questions 3 and 6 reference the National Income and Product Accounts (NIPA).
Visit the Web site at BEA National Economic Accounts to view the latest press release on GDP. Links to other data are also available.

For Further Analysis

How Can You Tell if It’s a Recession?
The example in the student handout will be used as a small group exercise. It is designed to complement the text’s material on the business cycle and also to provide a lead-in to the measurements of inflation and employment that will be covered in the next chapter. It requires students to find and begin to assess actual data on the economy.

Web-Based Exercise
This example below can be used as an individual or small group research project. It requires students to evaluate “well-being” in terms of GDP and other criteria.

Can GDP Buy You Happiness?

About 35 years ago, the king of Bhutan decided that the well-being of his country
was not best measured by its GDP, but rather by something he called its “Gross
National Happiness.”

1) Learn more about GHI and compare it to GDP.
2) Assess both as measures of “well-being.” To do so, define your own criteria
for well-being. You may agree or disagree with what is included in these
measures and add your own indicators if you wish. In all cases provide a
rationale for your choices.

A very useful source is the article by Andrew C. Revkin in The New York
Times (October 4, 2005) titled “A New Measure of Well-Being from a Happy
Little Kingdom,” available on the Web at: "A New Measure of Well-Being From a Happy Little Kingdom. Cf. http://www.nytimes.com/2005/10/
04/science/04happ.html?ei=5088&en=a4c0250cf8730dca&ex=
1286078400&partner=rssnyt&emc=rss&pagewanted=all

This is the HW for Thursday:

How Can You Tell if It’s a Recession?
Visit the Web site of the National Bureau of Economic Research (NBER) (Cf. http://www.nber.org/) to
answer the following:
1) Does the NBER define a recession as two successive quarters in which there is negative growth in GDP? Why or why not?
2) What problem does the NBER face in using data from the Bureau of Economic Analysis of the U.S. Department of Commerce?
3) Besides GDP, what other important economic data does the NBER review for its reports?

Just for historical background, consider the history of business cycles.


Outlining briefly the people and discoveries relating to economic cycles. Beginning with Sir William Herschel who around 1800 found a connection between the Sunspot cycle and wheat prices, mention is made of Clement Juglar 1860s, William Stanley Jevons 1870s, The Rothschild family 1890s and Rockerfeller family, W D Gann 1900s, Joseph Kitchin 1920, Kondratief (who I accidentally left out of this video) and his 54 year cycle in the 1920s, Alexander Chizhevsky and Raymond Wheeler around the 1930s being interisciplinary cycles researchers, R N Elliott, Joseph Schumpeter and Simon Kuznets (later to receive a Nobel Prize) and the formation of the Foundation for the Study of Cycles by Edward R Dewey and others in 1942. The age of computers arrived in cycles research with J M Hurst about 1970.

For more information about cycles research:
http://www.cyclesresearchinstitute.org/
http://foundationforthestudyofcycles....
http://ray.tomes.biz/

There is an interdisciplinary cycles discussion forum open to all people to search and read, and people can join to participate, at http://tech.groups.yahoo.com/group/cy...

For more on the history of economic cycles:
http://www.datacomm.ch/dbesomi/Links/...
http://www.timesizing.com/1kondrat.htm

Email HW to gmsmith@shanahan.org.

1.

How Can You Tell if It’s a Recession?
Visit the Web site of the National Bureau of Economic Research (NBER) (Cf. http://www.nber.org/) to
answer the following:
1) Does the NBER define a recession as two successive quarters in which there is negative growth in GDP? Why or why not?
2) What problem does the NBER face in using data from the Bureau of Economic Analysis of the U.S. Department of Commerce?
3) Besides GDP, what other important economic data does the NBER review for its reports?

WH II Honors: 16 December 2009

Prayer (alphabetical):

Current Events:

WBZ: An 8-year-old boy was sent home from school and ordered to undergo a psychological evaluation after he was asked to make a Christmas drawing and came up with what appeared to be a stick figure of Jesus on a cross, the child's father said Tuesday. Chester Johnson told WBZ-TV that his son made the drawing on Dec. 2 after his second-grade teacher asked children to sketch something that reminded them of the holiday.
Meanwhile, in another holiday story, a public school wanted second graders to sing a song declaring, “Allah is God.”
Here’s what the children were assigned to sing:

“Allah is God, we recall at dawn,
Praying ‘til night during Ramadan
At this joyful time we pray happiness for you,
Allah be with you all your life through.”

But when it came time to perform the “Christian” part of Christmas, children were assigned to say:

“I didn’t know there was a little boy at the manger. What child is this?
I’m not sure if there was a little boy or not.
Then why did you paint one on your nativity window?
I just thought if there was a little boy, I’d like to know exactly what he (sic) say.
At the last minute parents asked that the "Allah is God" reference removed; that drew the ire of the Muslim Alliance of Indiana. “It’s unfortunate if that was removed from the program just because of Islamophobic feelings,” Shariq Siddiqui told the Indianapolis Star. “Schools are a place where we should learn more about each other rather than exclude each other based on stereotypes and misconceptions.”

As a follow-up to a question yesterday about how many places the Marxist curriculum may be adopted; I found the answer.

According to a Zinn Educational Project report, in April 2008, with support from an anonymous donor, ZEP partnered with 32 organizations to offer 31,000 teachers and teacher educators free packets for instilling the "people's history" in schools across the country. The ZEP reports it quickly received requests for its available 4,000 free packets, nearly half of which were sent to schools in California, New York and Illinois.

A graphic illustrating where ZEP sent the packets is below:


German Unification

Bismarck pictured greeting representatives at the Congress of Berlin.



Note Taking

Reading Skill: Recognize Sequence

Keep track of the sequence of events described in this section by completing a chart like the one below. List the causes that led to a strong German nation.






The Price of Nationalism Audio: Germany

The last half of the 1800s can be called the Age of Nationalism. By harnessing national feeling, European leaders fought ruthlessly to create strong, unified nations. Under Otto von Bismarck, Germany emerged as Europe’s most powerful empire—but at a considerable cost. In his 1870 diary, Crown Prince Friedrich wrote:

“[Germany had once been admired as a] nation of thinkers and philosophers, poets and artists, idealists and enthusiasts . . . [but now the world saw Germany as] a nation of conquerors and destroyers, to which no pledged word, no treaty, is sacred. . . . We are neither loved nor respected, but only feared.”
Bismarck: Germany From Blood and Iron (clip)


Blood and Iron: Audio

Otto von Bismarck succeeded where others had failed. Bismarck came from Prussia’s Junker (yoong kur) class, made up of conservative landowning nobles. Bismarck first served Prussia as a diplomat in Russia and France. In 1862, King William I made him prime minister. Within a decade, the new prime minister had become chancellor, or the highest official of a monarch, and had used his policy of “blood and iron” to unite the German states under Prussian rule.

Bismarck Unites Germany: Audio
Prussian legislators waited restlessly for Otto von Bismarck to speak. He wanted them to vote for more money to build up the army. Liberal members opposed the move. Bismarck rose and dismissed their concerns:

“Germany does not look to Prussia’s liberalism, but to her power. . . . The great questions of the day are not to be decided by speeches and majority resolutions—that was the mistake of 1848 and 1849—but by blood and iron!”

—Otto von Bismarck, 1862

Map

Unification of Germany, 1865–1871

Go Online
For: Audio guided tour
Visit: PHSchool.com
Web Code: nap-2211

1. Locate

To the East? West? Near what countries? Bodies of water, etc.

a) Prussia; b) Silesia; c) Bavaria; d) Schleswig

2. Region

What are did Prussia add to its territory in 1866?

3. Analyzing Information

Why do you think Austrian influence was greater among the southern German states than among the northern ones?

This map is titled “Unification of Germany, 1865 to 1871.” A circular image below the title to the right gives a global view of the map area.

The map extends north-south from Denmark and Sweden to the Mediterranean Sea. The map extends east-west from Russia to central France. A Key at the right shows the following shading and symbols: yellow shading; Prussia, 1865; light green shading, Added to Prussia, 1866; dark green shading, Added to form North German Confederation, 1867; orange shading, Added to form German empire, 1871; red line, Boundary of German empire, 1871;

red explosion symbol, Battle sites; orange arrow, Route of Prussian armies in Austro-Prussian War; and green arrow, Route of German armies in Franco-Prussian War.

The boundary of the German empire in 1871, indicated by a red line, borders the North Sea, Denmark, and the Baltic Sea in the north, Russia and Austria-Hungary in the east, Switzerland in the south, and France, Luxembourg, Belgium, and the Netherlands in the west. Prussia in 1865, shaded in yellow, includes the western province of Westphalia. Another large yellow-shaded area appears in the north and east. Brandenburg, including the city of Berlin, is in the center. The provinces of Pomerania, West Prussia, and East Prussia are in the northeast. Posen is in the East, and Silesia is in the southeast. Two other small yellow areas appear in the center. Another small yellow area, labeled Hohenzollern, appears in the south. The area added to Prussia in 1866, shaded in light green, includes the northwest area bordering the Netherlands and Denmark.

The province of Schleswig is in today’s southern Denmark. Holstein is south of Schleswig. The city of Hamburg and the province of Hanover are south of Holstein. Another light green area appears in the center. The cities of Ems, east of the Rhine River, and Frankfurt to the southeast are in this area. The area added to form the North German Confederation in 1867, shaded in dark green, appears in the north between the light green and yellow areas. It is labeled Mecklenburg. Another dark green area appears in the center on the Austria-Hungary border. The provinces of Thuringia and Saxony are in this area. Other green areas are scattered throughout the center. The area added to form the German empire in 1871, shaded in orange, includes southern Germany. Lorraine, including the city of Metz, and Alsace are in the west, bordering France. W├╝rttemberg is in the center, Baden is in the south, and Bavaria, including the city of Munich, is in the east. Orange arrows extend from the Saxony and Silesia regions across the Austria-Hungary border to Sadowa. A red battle symbol appears here. Green arrows extend from Lorraine, through Metz, across the French border to Sedan. A battle symbol appears here. The arrows extend westward toward Paris.

Learn

Focus Question

How did Otto von Bismarck, the Chancellor of Prussia, lead the drive for German unity?

Master of Realpolitik

Bismarck’s success was due in part to his strong will. He was a master of Realpolitik (ray ahl poh lee teek), or realistic politics based on the needs of the state. In the case of Realpolitik, power was more important than principles.

Although Bismarck was the architect of German unity, he was not really a German nationalist. His primary loyalty was to the Hohenzollerns (hoh un tsawl urnz), the ruling dynasty of Prussia, who represented a powerful, traditional monarchy. Through unification, he hoped to bring more power to the Hohenzollerns.

Royal house medal of the Hohenzollerns




Strengthening the Army

As Prussia’s prime minister, Bismarck first moved to build up the Prussian army. Despite his “blood and iron” speech, the liberal legislature refused to vote for funds for the military. In response, Bismarck strengthened the army with money that had been collected for other purposes. With a powerful, well-equipped military, he was then ready to pursue an aggressive foreign policy. Over the next decade, Bismarck led Prussia into three wars. Each war increased Prussian prestige and power and paved the way for German unity.

Prussia Declares War With Denmark and Austria

Bismarck’s first maneuver was to form an alliance in 1864 with Austria. Prussia and Austria then seized the provinces of Schleswig and Holstein from Denmark. After a brief war, Prussia and Austria “liberated” the two provinces and divided up the spoils. Austria was to administer Holstein and Prussia was to administer Schleswig.

In 1866, Bismarck invented an excuse to attack Austria. The Austro-Prussian War lasted just seven weeks and ended in a decisive Prussian victory. Prussia then annexed, or took control of, several other north German states.

Bismarck dissolved the Austrian-led German Confederation and created a new confederation dominated by Prussia. He allowed Austria and four other southern German states to remain independent. Bismarck’s motives, as always, were strictly practical. “We had to avoid leaving behind any desire for revenge,” he later wrote.

Primary Source

War and Power

In 1866, Field Marshal Helmuth von Moltke analyzed the importance of Prussia’s war against Austria. Why, according to von Moltke, did Prussia go to war against Austria?

Primary Source

“The war of 1866 was entered on not because the existence of Prussia was threatened, nor was it caused by public opinion and the voice of the people; it was a struggle, long foreseen and calmly prepared for, recognized as a necessity by the Cabinet, not for territorial expansion, for an extension of our domain, or for material advantage, but for an ideal end—the establishment of power. Not a foot of land was exacted from Austria. . . . Its center of gravity lay out of Germany; Prussia’s lay within it. Prussia felt itself called upon and strong enough to assume the leadership of the German races.”

France Declares War on Prussia

In France, the Prussian victory over Austria angered Napoleon III. A growing rivalry between the two nations led to the Franco-Prussian War of 1870.
Franco-Prussian War (1870)



The causes of the Franco-Prussian War are rooted in the shifting balance of power in Europe after the Napoleonic wars. France and Prussia had fought against each other, with France beating Prussia in 1806, then losing in 1813-1815. In the following decades, Prussia was generally considered by the French as a modern, enlightened country. Republicans particularly favoured the prospect of seeing the German nation unite under Prussian leadership, displacing the old, catholic Austrian empire. Prussia hold similar views, but cultivated an image of France as the hereditary enemy: Prussia was to replace Austria as the head of Germany, and to replace France as the leader in continental Europe.

Napoleon III became emperor in France thanks to a coup in 1851. He initially supported the German unification policy of Otto von Bismarck, chancellor of Prussia under king Wilhelm I. It was only after the Austro-Prussian war of 1866 that France began to worry about the fast-rising Prussian power. To be able to face the Prussian conscription-based army, military reform was debated in the French parliament, but refused by the Left which considered there was no danger of war.

In July 1870, a diplomatic crisis broke, Bismarck managed to provoke the French into declaring war to Prussia — and French diplomacy fell in the trap.

Germans recalled only too well the invasions of Napoleon I some 60 years earlier. Bismarck played up the image of the French menace to spur German nationalism. For his part, Napoleon III did little to avoid war, hoping to mask problems at home with military glory.

Bismarck furthered the crisis by rewriting and then releasing to the press a telegram that reported on a meeting between King William I and the French ambassador. Bismarck’s editing of the “Ems dispatch” made it seem that William I had insulted the Frenchman. Furious, Napoleon III declared war on Prussia, as Bismarck had hoped.

Vocabulary Builder

edit—(ed it) v. to make additions, deletions, or other changes to a piece of writing

A superior Prussian force, supported by troops from other German states, smashed the badly organized and poorly supplied French soldiers. Napoleon III, old and ill, surrendered within a few weeks. France had to accept a humiliating peace.

France had a good professional army, which was indeed able to face the Prussians. But a decisive strategic surprise came when all German states took side with Prussia: The French were overwhelmed, outmaneuvered and, in spite of ferocious combats, finally beaten. After Sept. 4th, the new Republic refused to sign an armistice, managed to hastily improvise "armies" out of civilian volunteers, but these were no match for the well-trained Prussians. The war ended when Parisians, besieged, bombarded and starved, surrendered.

The Prussian Army held a brief victory parade in Paris on 17 February, 1871, and Bismarck honoured the armistice by sending trainloads of food into Paris and moving Prussian forces to the east of the city. Prussian armies would occupy parts of France until the French completed the payment of a five-billion francs war indemnity. Then, they would withdraw to Alsace and Lorraine. An exodus occurred from Paris as some 200,000 people, predominantly middle-class, left the city for the countryside. Paris was quickly re-supplied with free food and fuel by the United Kingdom and several accounts recall life in the city settling back to normal.

The war ended up with a complete triumph for Prussia, whose king was proclaimed emperor of Germany in the palace of Versailles — a supreme humiliation of the French and a Prussian revenge on Napoleon's victorious march in Berlin.
The Treaty of Frankfurt gave Germany Alsace and the northern portion of Lorraine (Moselle), where Germanic dialects were spoken by parts of the population. Most importantly, Germany now possessed Metz, a key fortified stronghold between the two countries. Part of the Alsacians refused to live under German rule and emigrated to "inner France".

The loss of this territory was a source of resentment in France for years to come, and revanchism even inspired an attempted coup in Paris in the 1880s. Yet, by 1900, new generations tended to consider it old history, while Alsacians adapted more or less reluctantly to German rule [see Barr├Ęs "Au service de l'Allemagne"]. No French political party put forward a reconquest of Alsace-Lorraine in its program. Compensations were found in colonization abroad. When World War I broke out, the French mobilized with the idea to defend their territory as it was, not to take back Alsace-Lorraine, as soldiers' diaries and letters indicate.

Had Germany not taken the option of war in 1914, its successful path paved by the 1870 triumph would have led it to become peacefully the uncontested leader in Europe.



Checkpoint

What techniques did Bismarck use to unify the German states?

Birth of the German Empire: Audio

Delighted by the victory over France, princes from the southern German states and the North German Confederation persuaded William I of Prussia to take the title kaiser (ky zur), or emperor. In January 1871, German nationalists celebrated the birth of the Second Reich, or empire. They called it that because they considered it heir to the Holy Roman Empire.

A constitution drafted by Bismarck set up a two-house legislature. The Bundesrat (boon dus raht), or upper house, was appointed by the rulers of the German states. The Reichstag (ryks tahg), or lower house, was elected by universal male suffrage. Because the Bundesrat could veto any decisions of the Reichstag, real power remained in the hands of the emperor and his chancellor.

Checkpoint

How was the new German government, drafted by Bismarck, structured?

The New German Empire

Audio

In 1870, German historian Heinrich von Treitschke (vawn trych kuh) wrote a newspaper article demanding the annexation of Alsace and Lorraine from France. A year later, annexation became a condition of the peace settlement in the Franco-­Prussian War:

“The sense of justice to Germany demands the lessening of France. . . . These territories are ours by the right of the sword, and . . . [by] virtue of a higher right—the right of the German nation, which will not permit its lost children to remain strangers to the German Empire.”

Learn

Focus Question

How did Germany increase its power after unifying in 1871?

In January 1871, German princes gathered in the glittering Hall of Mirrors at the French palace of Versailles. They had just defeated Napoleon III in the Franco-Prussian War. Once home to French kings, the palace seemed the perfect place to proclaim the new German empire. To the winners as well as to the losers, the symbolism was clear: French domination of Europe had ended. Germany was now the dominant power in Europe.

Reading Check

Summarizing

What events led to German unification?

A Political Game of Chess

This political cartoon shows Otto von Bismarck and Pope Pius IX trying to checkmate each other in a game of chess.

1. How does this cartoon reflect the relationship between Bismarck and the Catholic Church?

2. How did the conflict between church and state affect German politics in the 1870s?

On the domestic front, Bismarck applied the same ruthless methods he had used to achieve unification. The Iron Chancellor, as he was called, sought to erase local loyalties and crush all opposition to the imperial state. He targeted two groups—the Catholic Church and the Socialists. In his view, both posed a threat to the new German state.


Nationalism and Reform in Europe

Great Britain

France

The Austrian Empire

Russia
Although serfdom had almost disappeared in Western Europe by the 1700s, it survived in Russia. Masters exercised almost total power over their serfs. A noble turned revolutionary described the treatment of the serfs:

“I heard . . . stories of men and women torn from their families and their villages, and sold, or lost in gambling, or exchanged for a couple of hunting dogs, and then transported to some remote part of Russia to create a [master’s] new estate; of children taken from their parents and sold to cruel . . . masters.”

—Peter Kropotkin, Memoirs of a Revolutionist


Learn

Focus Question

Why did industrialization and reform come more slowly to Russia than to Western Europe?
Reading Check

Examining

How was Great Britain able to avoid a revolution in 1848?

Nationalism in the United States



Graphic Notes: "Downfall of Mother Bank," depicting President Andrew Jackson holding up an "Order of the Removal of the Public Money" during the fight over the Bank of the United States, 1833. E.W. Clay lithograph.

Citation: American Antiquarian Society, 185 Salisbury St, Worcester, MA 01609-1634 and the Library of Congress.

Nicholas Biddle was the president of the Bank of the United States during the Bank War of 1832. Biddle held a great deal of unwarranted power over the nation’s finances, which President Jackson resented. When Jackson vetoed a bill to renew the Bank’s charter, Biddle agreed with Senator Henry Clay that this would hurt him in the upcoming presidential election of 1832, but both of them were proven wrong. When Jackson tried to end the bank by withdrawing deposits, Biddle caused a financial panic to try and prevent Jackson from attaining the presidency which failed when Jackson was re-elected.
The Bank War began with Senators Noah Webster and Clay with their Recharter Bill: Clay and Webster presented Congress with a Recharter Bill for the Bank of the United States in 1832. Although four years before the charter would expire, Clay hoped to make the Bank an issue in the upcoming presidential election, which he hoped to win. Clay hoped to quickly pass the Bill in Congress, then send it to the White House to be signed by Jackson. Clay knew Jackson would most likely veto the bill, alienating the elite in the upcoming election, therefore favoring Clay. Jackson did veto the bill, but contrary to Clay’s expectation, gained popular public support for his statement.

The “Pet” banks where surplus federal funds were placed after the closing of the Bank of the United States. The banks were chosen for their support of president Jackson and soon flooded the country with paper money as there was no longer a central, federal finance institution. As a result of the massive amounts of paper money, inflation skyrocketed, and Jackson was forced to try to slow inflation with his Specie Circular.

The Specie Circular (1836) was decreed by Jackson which stated that all public lands had to be purchased with “hard” money, gold or silver. Jackson took this measure to slow the runaway inflation caused by his closure of the Bank of the United States.

Reading Check

Explaining

How did the election of Andrew Jackson influence American politics?
The divisions between Americans eventually led to fighting in the Civil War.

You can learn more about music from the period by listening to:
"When Johnny Comes Marching Home." In this exercise you can 1) view the exhibit; 2) read the lyrics; 3) learn more; and, 4) rewrite the song.

The Emergence of a Canadian Nation

Reading Check

Describing

How did the British North American Act change the government of Canada?

Map: The Dominion of Canada in the Nineteenth Century

A novel about the Crimean War:

Master George by Beryl Bainbridge

Visit an interactive exhibit about the gold rush.

The American Civil War.

Everyday life of a Civil War soldier

Civil War diary accounts

The Civil War: A Film by Ken Burns

Short animated movie about the American Civil War


New holiday feature: keep Christ in Christmas

I´ll be home for Christmas-Fats Domino



HW email to gmsmith@shanahan.org
Wednesday HW

Unification of Germany, 1865–1871

Go Online
For: Audio guided tour
Visit: PHSchool.com
Web Code: nap-2211

1. Locate

To the East? West? Near what countries? Bodies of water, etc.

a) Prussia; b) Silesia; c) Bavaria; d) Schleswig

2. Region

What are did Prussia add to its territory in 1866?

3. Analyzing Information

Why do you think Austrian influence was greater among the southern German states than among the northern ones?

Thursday HW
1. How did Otto von Bismarck, the Chancellor of Prussia, lead the drive for German unity?

2. What techniques did Bismarck use to unify the German states?

3. How was the new German government, drafted by Bismarck, structured?

4. How did Germany increase its power after unifying in 1871?

5. What events led to German unification?

Friday HW



A Political Game of Chess

This political cartoon shows Otto von Bismarck and Pope Pius IX trying to checkmate each other in a game of chess.

1. How does this cartoon reflect the relationship between Bismarck and the Catholic Church?

2. How did the conflict between church and state affect German politics in the 1870s?

3. Why did industrialization and reform come more slowly to Russia than to Western Europe?

4. How was Great Britain able to avoid a revolution in 1848?

5. How did the election of Andrew Jackson influence American politics?

6. How did the British North American Act change the government of Canada?

AP Economics: 16 December 2009

Prayer (alphabetical)

Current Events:

Steve Forbes weighs in on the reform bill and its impact on the economy.


Make-Up Ch. 6 T/F Quiz.

We will pick up where we left off: Ch. 15, Introduction to Macroeconomics, PowerPoint presentation and Handout Ch. 15 questions.

Chapter Overview

As an introduction to macroeconomics, this chapter begins with an overview of macroeconomics, discussing its origins and presenting material on the business cycle. The National Income and Product Accounts are then covered, as well as the two approaches to measuring GDP and the connection between GDP and the standard of living. The chapter concludes with a section on the work of Joseph Schumpeter and creative destruction.

Chapter Outline

Gross Domestic Product

Real GDP

The difference between GDP (Gross Domestic Product) and GNP (Gross National Product)


Dr. Richard Ebeling, Clemson capitalism, answers a student question about GDP and its usefulness as a measure of economic health.


Cf. http://www.informedtrades.com/ A lesson on what traders of the stock, futures, and forex markets look for when the Gross Domestic Product (GDP) Number is released: http://www.informedtrades.com/

A lesson on what traders of the stock, futures, and forex (foreign exchange) markets look for when the Gross Domestic Product (GDP) Number is released.

There are many components of the US Economy which can affect overall economic growth and inflation expectations. Some of the major examples here are how many people are employed in the economy vs. unemployed, how much the housing market is growing in different parts of the country, and at what rate the prices for different products in the economy are seeing increases.

As all of these things are so important to the economy and therefore to the markets, there are no shortage of economic reports which are released to try and help people gauge how things are going with different pieces of the economy. It is important for us as traders to understand the major reports here as even if we are trading off of technicals, understanding what is happening in the market from a fundamental standpoint can help establish a longer term bias for trading. In the short term an understanding of these numbers will also help to assess the erratic and sometimes extreme movements which can occur after economic releases.

The granddaddy of all economic reports is the release of the Gross Domestic Product (GDP) number for the economy. The Gross Domestic Product for the US or any other country is the final value of all the goods and services produced in that economy. Essentially what you get after calculating GDP by adding up the value of all goods and services produced in the economy is a measure of the size of the overall economy. It is for this reason that market participants will watch the GDP number closely as the rate of growth in this number represents the rate of growth in the overall economy.

As a side note here, GDP also allows a comparison to be made of the sizes of different economies from around the world, as well as their growth rates. To give you an idea of just how large the US Economy is, 2007 GDP for the United States was estimated at 13.7 Trillion dollars. This is in comparison to the next largest economy in the world, Japan which has a GDP of under 5 Trillion Dollars.

Quarterly estimates of GDP are released each month with Advance Estimates which are incomplete and subject to further revision being released near the end of the first month after the end of the quarter being reported. In the second month after the end of the quarter being reported preliminary numbers (which basically means more accurate than advanced) normally are released and then finally the final GDP number is released at the end of the 3rd month after the end of the quarter being reported on.

Traders are going to focus heavily on the growth rate released in the Advanced number and markets will also move on any significant revisions made in the preliminary and final GDP numbers.


The Expenditures Approach to Calculating GDP
Personal Consumption Expenditures
Gross Private Domestic Investment
Government Purchases
Net Exports of Goods and Services
Summing Aggregate Expenditures
The Income Approach to Calculating GDP
Compensation of Employees
Proprietor’s Income
Rental Income
Corporate Profits
Net Interest
Taxes, Foreign Income, and Miscellaneous Adjustments
National Income
From National Income to GDP
Net Domestic Product
Personal Income and Disposable Personal Income


GDP and Our Standard of Living
Checkpoint: National Income Accounting
Technology and Schumpeter’s Creative Destruction

We can review:

Chapter Checkpoints

The Scope of Macroeconomics
Question: Do you think the business cycle has a bigger impact on automobile and
capital goods manufacturers or grocery stores? Why or why not?

National Income Accounting
Question: People have individual senses of how the macroeconomy is doing. Is it a
mistake to extrapolate from one’s own experience what may be happening in the
aggregate? How might individual experiences lead one astray in thinking about the
macroeconomy? How might it help?

Extended Examples in the Chapter

Technology and Schumpeter’s Creative Destruction

Were computer technology and the Internet a Schumpeter innovation wave or not?
Schumpeter focused on the power of major innovations to form waves of growth
throughout the macroeconomy. So the real question is whether or not the change in
technology affected most parts of the economy in a very significant way (some definitions of creative destruction use the term “transformation” in its description). The background information provided by Wikipedia also relates creative destruction to layoffs (Cf. Creative destruction).

Also, this is the HW assignment for Wednesday:

Examples Used in the End-of-Chapter Questions
Questions 3 and 6 reference the National Income and Product Accounts (NIPA).
Visit the Web site at BEA National Economic Accounts to view the latest press release on GDP. Links to other data are also available.

For Further Analysis

How Can You Tell if It’s a Recession?
The example in the student handout will be used as a small group exercise. It is designed to complement the text’s material on the business cycle and also to provide a lead-in to the measurements of inflation and employment that will be covered in the next chapter. It requires students to find and begin to assess actual data on the economy.

Web-Based Exercise
This example below can be used as an individual or small group research project. It requires students to evaluate “well-being” in terms of GDP and other criteria.

Can GDP Buy You Happiness?

About 35 years ago, the king of Bhutan decided that the well-being of his country
was not best measured by its GDP, but rather by something he called its “Gross
National Happiness.”

1) Learn more about GHI and compare it to GDP.
2) Assess both as measures of “well-being.” To do so, define your own criteria
for well-being. You may agree or disagree with what is included in these
measures and add your own indicators if you wish. In all cases provide a
rationale for your choices.

A very useful source is the article by Andrew C. Revkin in The New York
Times (October 4, 2005) titled “A New Measure of Well-Being from a Happy
Little Kingdom,” available on the Web at: "A New Measure of Well-Being From a Happy Little Kingdom. Cf. http://www.nytimes.com/2005/10/
04/science/04happ.html?ei=5088&en=a4c0250cf8730dca&ex=
1286078400&partner=rssnyt&emc=rss&pagewanted=all

How Can You Tell if It’s a Recession?
Visit the Web site of the National Bureau of Economic Research (NBER) (Cf. http://www.nber.org/) to
answer the following:
1) Does the NBER define a recession as two successive quarters in which there is negative growth in GDP? Why or why not?
2) What problem does the NBER face in using data from the Bureau of Economic Analysis of the U.S. Department of Commerce?
3) Besides GDP, what other important economic data does the NBER review for its reports?

Just for historical background, consider the history of business cycles.


Outlining briefly the people and discoveries relating to economic cycles. Beginning with Sir William Herschel who around 1800 found a connection between the Sunspot cycle and wheat prices, mention is made of Clement Juglar 1860s, William Stanley Jevons 1870s, The Rothschild family 1890s and Rockerfeller family, W D Gann 1900s, Joseph Kitchin 1920, Kondratief (who I accidentally left out of this video) and his 54 year cycle in the 1920s, Alexander Chizhevsky and Raymond Wheeler around the 1930s being interisciplinary cycles researchers, R N Elliott, Joseph Schumpeter and Simon Kuznets (later to receive a Nobel Prize) and the formation of the Foundation for the Study of Cycles by Edward R Dewey and others in 1942. The age of computers arrived in cycles research with J M Hurst about 1970.

For more information about cycles research:
http://www.cyclesresearchinstitute.org/
http://foundationforthestudyofcycles....
http://ray.tomes.biz/

There is an interdisciplinary cycles discussion forum open to all people to search and read, and people can join to participate, at http://tech.groups.yahoo.com/group/cy...

For more on the history of economic cycles:
http://www.datacomm.ch/dbesomi/Links/...
http://www.timesizing.com/1kondrat.htm

Email HW to gmsmith@shanahan.org.

1. Examples Used in the End-of-Chapter Questions

Answer Ch. 15 Questions 3 & 6.

Questions 3 and 6 reference the National Income and Product Accounts (NIPA).
Visit the Web site at BEA National Economic Accounts to view the latest press release on GDP. Links to other data are also available.