Tuesday, April 06, 2010

WH II Honors: 7 April 2010

Current Events:

Incoming Iraqi prime minister calls on U.S. to suspend withdrawal until new government is in place.

Be sure to consider the Ch. 16 Test Study Prep Page before Thursday.

Chapter 17 The West Between the Wars 1919-1939

The Rise of Dictators
Note Taking

Reading and Listening Skill: Identify Main Ideas

Find the main points of the Mussolini section under the first two headings and record them in a flowchart like the one below.

Mussolini and the People

An excited crowd of women and children greets the Italian leader in 1940.

“I hated politics and politicians,” said Italo Balbo. Like many Italian veterans of World War I, he had come home to a land of economic chaos and political corruption. Italy’s constitutional government, he felt, “had betrayed the hopes of soldiers, reducing Italy to a shameful peace.” Disgusted and angry, Balbo rallied behind a fiercely nationalist leader, Benito Mussolini. Mussolini’s rise to power in the 1920s served as a model for ambitious strongmen elsewhere in Europe.

Reading Check


What is the goal of a totalitarian state?

Fascism in Italy

Rise of Fascism

When Italy agreed to join the Allies in 1915, France and Britain secretly promised to give Italy certain Austro-Hungarian territories. When the Allies won, Italy received some of the promised territories, but others became part of the new Yugoslavia. The broken promises outraged Italian nationalists.

Disorders within Italy multiplied. Inspired in part by the revolution in Russia, peasants seized land, and workers went on strike or seized factories. Amid the chaos, returning veterans faced unemployment. Trade declined and taxes rose. The government, split into feuding factions, seemed powerless to end the crisis.

Into this turmoil stepped Benito Mussolini. The son of a socialist blacksmith and a teacher, Mussolini had been a socialist in his youth. During the war, however, he rejected socialism for intense nationalism. In 1919, he organized veterans and other discontented Italians into the Fascist party. They took the name from the Latin fasces, a bundle of sticks wrapped around an ax. In ancient Rome, the fasces symbolized unity and authority.

The fasces is an ancient symbol of authority and power derived from the Romans. A Roman official called a lictor carried the fasces. The elm whips could be removed from the bundle and used to punish and the ax could be used to execute thus the symbolism should be clear from the illustration.

The association with Rome was deliberately chosen by Mussolini to identify himself with the glory of ancient Rome.

Nonetheless, the fasces symbol appears also in some unexpected places.

Mussolini was a fiery and charismatic speaker. He promised to end corruption and replace turmoil with order. He also spoke of reviving Roman greatness, pledging to turn the Mediterranean into a “Roman lake” once again.

Mussolini organized his supporters into “combat squads.” The squads wore black shirts to emulate an earlier nationalist revolt. These Black Shirts, or party militants, rejected the democratic process in favor of violent action. They broke up socialist rallies, smashed leftist presses, and attacked farmers’ cooperatives. Fascist gangs used intimidation and terror to oust elected officials in northern Italy. Many Italians accepted these actions because they, too, had lost faith in constitutional government.

In 1922, the Fascists made a bid for power. At a rally in Naples, they announced their intention to go to Rome to demand that the government make changes. In the March on Rome, tens of thousands of Fascists swarmed towards the capital. Fearing civil war, King Victor Emmanuel III asked Mussolini to form a government as prime minister. Mussolini entered the city triumphantly on October 30, 1922. He thus obtained a nominally legal, constitutional appointment from the king to lead Italy.

People in History

Benito Mussolini

Benito Mussolini — History.com Video, (2:36)

For a quarter of a century, Italy is controlled by the Fascist dictator known as "I1 Duce."

Warning: some of these scenes may make some people uncomfortable; please feel free to excuse yourself from the room if need be.


Benito Mussolini — History.com Video


“Benito Mussolini,” The History Channel website, http://www.history.com/videos/benito-mussolini (accessed Apr 5, 2010).

The Fascist State

At first, Fascists held only a few cabinet posts in the new government. By 1925, though, Mussolini had assumed more power and taken the title Il Duce (eel doo chay), “The Leader.” He suppressed rival parties, muzzled the press, rigged elections, and replaced elected officials with Fascist supporters. In 1929, Mussolini received support from Pope Pius XI in return for recognizing Vatican City as an independent state, although the pope continued to disagree with some of Mussolini’s goals. In theory, Italy remained a parliamentary monarchy. In fact, it was a dictatorship upheld by terror. Critics were thrown into prison, forced into exile, or murdered. Secret police and propaganda bolstered the regime.

To encourage economic growth and end conflicts between owners and workers, Mussolini brought the economy under state control. However, he preserved capitalism. Under Mussolini’s corporate state, representatives of business, labor, government, and the Fascist party controlled industry, agriculture, and trade. Mussolini’s system favored the upper classes and industrial leaders. Although production increased, success came at the expense of workers. They were forbidden to strike, and their wages were kept low.

In Mussolini’s new system, loyalty to the state replaced conflicting individual goals. To Fascists, the glorious state was all-important, and the individual was unimportant except as a member of the state. Men, women, and children were bombarded with slogans glorifying the state and Mussolini. “Believe! Obey! Fight!” loudspeakers blared and posters proclaimed. Men were urged to be ruthless, selfless warriors fighting for the glory of Italy. Women were pushed out of paying jobs. Instead, Mussolini called on women to “win the battle of motherhood.” Those who bore more than 14 children were given a medal by Il Duce himself.

Shaping the young was a major Fascist goal. Fascist youth groups toughened children and taught them to obey strict military discipline. Boys and girls learned about the glories of ancient Rome. Young Fascists marched in torchlight parades, singing patriotic hymns and chanting, “Mussolini is always right.” By the 1930s, a generation of young soldiers stood ready to back Il Duce’s drive to expand Italian power.

The Makings of a Totalitarian State


Reading Check


How did Mussolini gain power in Italy?

Rare Mussolini's Speech in English! (1929 Fox Movietone Newsreel), 1:24

A New Era in the Soviet Union

Lenin's New Economic Policy

Soviet animated propaganda 1924 (Lenin's Kino Pravda), 4:54

Two short early Soviet propaganda films.
#1- Our answer to the gloating capitalist world
About the continued growth of the Communist Party and the accomplishments of the USSR.
#2- Collectivization
Short advocating the formation of collective farms and discouraging patronage of private shops. This film must have certainly appeared during the NEP era and signaled that its continuation was certain.

The Rise of Stalin

Josef Stalin and Vladimir Lenin, 1:57

People in History

Joseph Stalin

Stalin (trailer), 1:29

Stalin's rise from obscure revolutionary to feared leader of Russia is documented in vivid detail in this outstanding, critically acclaimed docudrama.

Five-Year Plans

Costs of Stalin's Programs

Reading Check


What was Lenin's New Economic Policy

Authoritarian States in the West

Eastern Europe


Reading Check


How did Czechoslovakia maintain its political democracy?

Ch. 17 References

The Great Depression

Photo Essay on the Great Depression

Cf. http://www.pbs.org/wnet/historyofus/tools/browser12.html

Diaries of people who lived during the Depression

Cf. http://teacher.scholastic.com/activities/our_america/great_depression/

People and events of the Dust Bowl

Cf. http://www.pbs.org/wgbh/americanexperience/films/dustbowl/

Original photographs from the times

Cf. http://memory.loc.gov/ammem/fsahtml/fatop1.html

Cf. Click on links to view original documents from Mussolini's life and times.

Cf. http://www.nationalarchives.gov.uk/education/heroesvillains/g3/

Click on "Germany Image Gallery" for the slideshow.

Cf. http://www.worldwar2database.com/cgi-bin/slideviewer.cgi?list=preludegermany.slides

Read a detailed account of the life of Hitler

Cf. http://library.thinkquest.org/19092/hitler.html

Test yourself on how Hitler came to power

Cf. http://www.schoolhistory.co.uk/lessons/riseofhitler/index.htm

Nazi propaganda posters: Election, Sower of peace, 'One People, One Nation, One Leader,' Saving for a Volkswagen, Jews, Anti-Bolshevism.

Cf. http://www.bbc.co.uk/history/worldwars/wwtwo/nazi_propaganda_gallery.shtml

Soviet Russia

Stalin and Industrialization of the USSR
See original documents and learn more about Stalin's methods.

Cf. http://www.nationalarchives.gov.uk/education/heroesvillains/g4/

View Soviet posters

Cf. http://www.internationalposter.com/country-primers/soviet-posters.aspx

Review Stalin's takeover of power

Cf. http://www.bbc.co.uk/schools/gcsebitesize/history/mwh/russia/stalinsact.shtml

Find out more about jazz

Cf. http://www.smithsonianjazz.org/class/whatsjazz/wij_start.asp

How To Take Effective Notes

Be sure to consider the Ch. 16 Test Study Prep Page before Thursday.

Email to gmsmith@shanahan.org

Wednesday: What did John Maynard Keynes think would resolve the Great Depression?

What is the goal of a totalitarian state?

Geography Skills, p. 541, #1

How did Mussolini gain power in Italy?

Thursday: Geography Skills, p. 544, #1-2

What was Lenin's New Economic Policy

Friday: How did Czechoslovakia maintain its political democracy?

p. 546, #2

AP Economics: 7 April 2010

Current Events:
Prestowitz Believes U.S., China Are Working on Yuan Deal, Discusses India as well

Bloomberg — April 06, 2010 — April 7 (Bloomberg) -- Clyde Prestowitz, president of the Washington-based Economic Strategy Institute and a former Commerce Department international trade official, talks with Bloomberg's Susan Li about U.S. relations with China and the outlook for the appreciation of the yuan. Prestowitz, speaking in Washington, also discusses U.S. relations with India. U.S. Treasury Secretary Timothy Geithner is in India for talks with government and business leaders. (Source: Bloomberg)

Mar 24 10 Hearing on China's Exchange Rate Policy, Clyde Prestowitz Opening Statement, 6:35

March 25, 2010 — Clyde Prestowitz, President, The Economic Strategy Institute, delivers his opening statement at a Ways & Means Committee hearing on China's Exchange Rate Policy. March 24, 2010

Clyde Prestowitz - U.S. Trade Deficit and our Relationship with China, December 05, 2008, 4:20

We will pick up where we began in Chapter 24.

Chapter 24

Chapter Overview
This chapter begins with a consideration of the Phillips curve in both the short run and the long run, and then discusses rational expectations and its influence on policy formation. Critiques of rational expectations are also covered. The chapter concludes with a section on jobless recoveries.

Chapter Outline
Unemployment and Inflation: Phillips Curves

Phillips Curve, 9:51

The Phillips curve, and its long run application considers the apparent trade-off between inflation and unemployment.

Phillips Curve explained

Phillips Curve, 2:56

The video shows plotted unemployment and inflation data from the 1960s and the negative relationship between the two. The author briefly explains the wage-price spiral that could develop if workers underestimate the inflation rate and policymakers use Fiscal and Monetary policy to keep the unemployment below its natural rate.

Productivity, Prices, and Wages
The Importance of Inflationary Expectations
Natural Rate of Unemployment

Natural Rate of Unemployment Lecture, at your leisure, 4:58

The Long-Run Phillips Curve
Accelerating Inflation
Phillips Curves and Disinflation
Checkpoint: Unemployment and Inflation: Phillips Curves
Rational Expectations and Policy Formation
Defining Rational Expectations
Policy Implications of Rational Expectations
A Critique of Rational Expectations
Checkpoint: Rational Expectations and Policy Formation
Are Recoveries Becoming "Jobless" Recoveries?
Ideas for Capturing Your Classroom Audience
What is the Fed's view of the economy at present and going forward? Read the latest press release from the FOMC. Visit its Web site at: http://www.federalreserve.gov/FOMC/#calendars and click on the "Statement" link for the most recent date on the calendar. For earlier dates you can also read the more detailed "Minutes."
Talk about how much students expect tuition to go up next year and how they
intend to deal with the increase. Use that as a lead-in to discuss inflationary
expectations as a whole.
Chapter Checkpoints
Unemployment and Inflation: Phillips Curves

Question: In the last decade, productivity growth has been unusually high, arguably because of technical advances in microcomputers, cellular phones, and Internet service. Have these advances made it easier for the Federal Reserve to contain inflationary pressures?

The point is to check that students can: apply their knowledge of the relationship
between productivity and inflation.

Rational Expectations and Policy Formation
Question: If efficiency wages are widespread throughout the economy but most
workers feel they are significantly underpaid, does paying workers more prevent
them from striking?
The point is to check that students can: apply the concept of efficiency wages to
the scenario presented.
Extended Example in the Chapter
Are Recoveries Becoming "Jobless" Recoveries?
Globalization, new technologies, and improved business methods are making the
jobs of policymakers much more difficult and may even be changing the nature of
the business cycle. The two most recent recessions have deviated significantly from what has happened in past business cycles; they were minor, but more important, during the recoveries that followed the expected gains in employment did not materialize.
Such jobless recoveries could be the result of rapid increases in productivity,
a change in employment patterns, and outsourcing. The latest recession and
subsequent slow job growth may have something to do with the overinvestment
that occurred during the previous boom, which has stifled investment in this subsequent recovery. The biggest difficulty is trying to know whether what is observed is peculiar to these particular circumstances or indicative of what the business cycle will look like going forward.
Examples Used in the End-of-Chapter Questions
Questions 1, 10, and 14 reference the importance of inflationary expectations. To
learn more about expectations and Federal Reserve Chairman Ben Bernanke’s
views see this April 3, 2006 story from Business Week titled “Inflation: What You
Foresee Is What You Get,” available on the Web at: http://www.businessweek.com/
magazine/content/06_14/b3978035.htm. The article refers to the importance of central bank “credibility.”
Question 11 discusses the slope of the Phillips curve. This article from The
Economist suggests that the Phillips curve may be getting more attention. See the
story titled “Economics Focus: Curve Ball: A Link Between Unemployment and
Inflation is Fashionable Again,” available on the Web at: http://www.economist.
For Further Analysis
What Difference Does It Make if the Fed Has Credibility?
This example can be used as an in-class small group exercise or as an individual inclass exercise. It is designed to complement the text’s material by employing the graphical analysis of the AS/AD model to illustrate the importance of central bank credibility in the face of a supply shock.
Students are asked to compare the likely results of a supply shock when the central bank has credibility in terms of its inflation goals and when it does not. The issue of inflation targeting and the Fed’s dual mandate is also considered.
The format of the exercise provides an opportunity for students to demonstrate
their mastery of the text material by considering a scenario that differs from that given in the text but for which the reasoning and the analysis are parallel.
You may want to supplement this assignment with student research on credibility and the current discussions about having the Fed set an inflation-rate target (thereby letting unemployment adjust accordingly). The assignment provides a framework in which to evaluate rational expectations (theory or ideology?) and is a chance for students to explore and to discuss the political nature of economic theory.
Web-Based Exercise
The example below can be used as a small group exercise or as an individual exercise.
The exercise provides an opportunity for students to apply the material in the
chapter to an actual conversation between Federal Reserve Chairman Ben
Bernanke and House Financial Services Committee Chairman Barney Frank
(Democrat from Massachusetts).
In a story by Nell Henderson titled “Bernanke Rebuffs Frank on Rate Cut:
Congressman Questions Inflation Concern” (The Washington Post, February 16,
2007, page D02) the Fed Chairman explains the forecasts for the economy and why
interest rate increases are more likely than decreases.
The exercise asks students to “translate” Bernanke’s statements based on their
knowledge of the terms and concepts from the chapter. You may choose to extend
this assignment by having students read more of the testimony given. The story and
links to more information are provided on the page at: http://www.washingtonpost.
Politicians and Policymakers
In a story from The Washington Post (February 16, 2007, page D02), Nell Henderson
quotes Federal Reserve Chairman Ben Bernanke’s responses to questions posed by
the House Financial Services Committee Chairman Barney Frank (Democrat
from Massachusetts). The story and links to more information are available on
the Web at: http://www.washingtonpost.com/wp-dyn/content/article/2007/02/15/
Read the story and explain the following excerpts from Bernanke’s remarks using
the terms and concepts from the chapter:
1) Nell Henderson writes, “There is no specific level of unemployment that
automatically triggers inflation, Bernanke, a former chairman of the
Princeton University economics department, said in response to several lawmakers’
2) According to Henderson, “Bernanke also said rising wages are not necessarily
inflationary, as was widely believed in the 1970s when high inflation was
blamed partly on unions’ salary demands.”
1) This means that Bernanke does not believe there is a specific value for the
NAIRU, the natural rate of unemployment, meaning the unemployment
rate when inflationary pressures are nonexistent. If there were a specific
value for the NAIRU then once the economy got to that low level or even
went below it inflation would necessarily set in. The story goes on to mention
that at the time the unemployment rate was forecast to stay below 5%
and that Federal Reserve policymakers were “comfortable with joblessness
so low.”
2) We can interpret this remark in terms of the equation p = w – q, where p
represents inflation, w stands for wages, and q represents productivity.
As we have seen in the text, if q is high, wage (w) increases can be high
without any real pressures on inflation (p).
Tips from a Colleague
You may wish to review the basics of the business cycle before covering the last section of this chapter as the material on “jobless recoveries” is really a question as to whether or not the business cycle is changing.

Ch. 23
Chapter Checkpoints
Financing the Federal Government
Question: Is the absolute size of the national debt or the national debt as a percent of gross domestic product the best measure of its importance to our economy? Why?

The point is to check that students can: comprehend that the amount a country
owes should be viewed in terms of its national output or income, GDP.

Financing Debt and Deficits
Question: Assume the federal government decided to increase spending and lower
tax rates.running ever larger deficits.and got the Federal Reserve to agree to buy
all of the new bonds that the Treasury issued. What would be the impact on our

The point is to check that students can: integrate the material in the chapter with the effect on the economy when the Fed buys bonds (from previous chapters).

The Burden of the Public Debt
Question: Is crowding-out an inevitable result of deficit spending if the Federal
Reserve does not buy back an equivalent amount from the market?

The point is to check that students can: understand the different impacts of deficit spending when the economy is slack as opposed to when it is at or close to full employment.

Extended Example in the Chapter

How Much Debt Can We Carry?

Alan Greenspan, former Chairman of the Federal Reserve Board, cautioned about
the future threat from growing budget deficits, and at other times backed away from that position. The reason seems to be that his views changed as to how much debt the government can comfortably take on. The higher level of that “danger point” may in part be due to lower interest rates and improved financial markets.

This section references an article by Edmund Andrews titled “Greenspan Shifts
View on Deficits,” from The New York Times (March 16, 2004, pages A1 and C2).

Examples Used in the End-of-Chapter Questions
Question 3 refers to the Laffer curve. You may wish to review the material from the chapter on fiscal policy.
Question 5 references the history of the U.S. government’s budget position, noting
that it has been in surplus on average about one year in every decade. You can illustrate the history of the deficit with the graph from the Web at:
Question 11 references an open letter from Ben Stein to Henry Paulson after
Paulson was appointed as U.S. Treasury Secretary. The piece is titled “Everybody’s
Business: Note to the New Treasury Secretary: It’s Time to Raise Taxes,” and it
appeared in The New York Times on June 15, 2006. For more on Secretary Paulson,
see the Web site of the U.S. Department of Treasury at: http://www.ustreas.gov/.
Question 14 refers to the roles of Congress and the Executive Branch in managing
the budget. For more about the agencies involved, visit the sites of the Office of
Management and Budget at: http://www.whitehouse.gov/omb/ and the Congressional
Budget Office at: http://www.cbo.gov/.
For Further Analysis
Understanding Crowding-Out
This example can be used as an in-class small group exercise or as an individual inclass exercise. It is designed to complement the text’s material on crowding-out by examining the effect of the deficit on interest rates through the workings of the money market and the bond market. This treatment ties the topic back to the analysis used in Chapter 21, and you may wish to expand the assignment by delving more deeply into the effects in the money market.

Web-Based Exercise
This example can be used as a small group exercise or as an individual exercise.
The exercise provides an opportunity for students to apply the material in the chapter about the Federal Reserve and the government’s budget deficit to an analysis of comments by the current Fed Chairman, Ben Bernanke. The third question provides an opportunity to reinforce students’ understanding of the role of the Fed with regard to Congress and the Executive Branch.
Boomers and the Budget Deficit
In an AP story from January 18, 2007, titled “Bernanke Warns of ‘Vicious Cycle’ in
Deficits: Wave of Retiring Boomers Will Put Growing Strain on Budget, Fed Chief
Says” (available on the MSNBC site at http://www.msnbc.msn.com/id/16688089/)
the Fed Chairman outlines his concerns about future deficits. (Note that he was testifying to the Senate Budget Committee.)
After reading the article, answer the following:
1) Why is the retirement of the baby boomers a problem for the budget deficit?

2) What is the “vicious cycle” about which Bernanke is concerned?

3) What suggestions, if any, does Bernanke make about what Congress and the
administration should do?

Tips from a Colleague
Students are often unclear about the relationship between an annual budget deficit
and the accumulated debt. Using data to illustrate the changes that have occurred
over time helps clarify this. Also, students are not likely to grasp how much they
hear about the deficit at any point in time is based on projections. Comparing the
information on the Web sites of the Office of Management and Budget and the
Congressional Budget Office can point out the differing assumptions being made.
Finally, be sure that students understand the process. The media give presidents too much credit and too much blame.

Email HW to gmsmith@shanahan.org

1. Be sure to review Chapters 20-23 (we will have Tests on this material as well, TBA). Some students have asked to be tested as close as possible after covering the material.

2. Ch. 23
Chapter Checkpoints
Financing the Federal Government
Question: Is the absolute size of the national debt or the national debt as a percent of gross domestic product the best measure of its importance to our economy? Why?

The point is to check that students can: comprehend that the amount a country
owes should be viewed in terms of its national output or income, GDP.

3. As review for HW, typical questions that you may encounter on the actual AP Economics Macro Test are included daily:

Open Economy: International Trade and Finance, Review Questions

9. Exchange rates that are determined by the unregulated forces of supply and demand are

a) fixed exchange rates
b) pegged exchange rates
c) managed exchange rates
d) trade exchange rates
e) floating exchange rates

10. If the dollar appreciates relative to the yen, then

a) U.S. goods sold in Japan would become more expensive
b) U.S. goods sold in Japan would become cheaper
c) U.S. goods sold domestically would become cheaper
d) Japanese goods sold domestically would become more expensive
e) there would be no change in the price of U.S. or Japanese goods

Free-Response Question

Assume that interest rates in the United States are currently higher than interest rates in the European Union. Explain how this situation affects:

a) The international value of the dollar
b) The international value of the euro
c) U.S. exports to the member countries of the European Union
d) European Union exports to the United States