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BENCHMARKS 

Content Standard 1

At the completion of Grade 4, students will know that:

1. People make choices because they cannot have everything they want.
2. Economic wants are desires that can be satisfied by consuming a good, service, or leisure activity.
3. Goods are objects that can satisfy people's wants.
4. Services are actions that can satisfy people's wants.
5. People's choices about what goods and services to buy and consume determine how resources will be used.
6. Whenever a choice is made, something is given up.
7. The opportunity cost of a choice is the value of the best alternative given up.
8. People whose wants are satisfied by using goods and services are called consumers.
9. Productive resources are the natural resources, human resources, and capital goods available to make goods and services.
10. Natural resources, such as land, are "gifts of nature"; they are present without human intervention.
11. Human resources are the quantity and quality of human effort directed toward producing goods and services.
12. Capital goods are goods produced and used to make other goods and services.
13. Human capital refers to the quality of labor resources, which can be improved through investments in education, training, and health.
14. Entrepreneurs are people who organize other productive resources to make goods and services.
15. People who make goods and provide services are called producers.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. Scarcity is the condition of not being able to have all of the goods and services one wants. It exists because human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources.
2. Like individuals, governments and societies experience scarcity because human wants exceed what can be made from all available resources.
3. Choices involve trading off the expected value of one opportunity against expected value of its best alternative.
4. The choices people make have both present and future consequences.
5. The evaluation of choices and opportunity costs is subjective; such evaluations differ across individuals and societies.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. Choices made by individuals, firms, or government officials often have long-run unintended consequences that can partially or entirely offset the initial effects of their decisions.

 

BENCHMARKS for Content Standard 2

At the completion of Grade 4, students will know that:

1. Few choices are all-or-nothing decisions; they usually involve getting a little more of one thing by giving up a little of something else.
2. A cost is what you give up when you decide to do something.
3. A benefit is something that satisfies your wants.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. To determine the best level of consumption of a product, people must compare the additional benefits with the additional costs of consuming a little more or a little less.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. Marginal benefit is the change in total benefit resulting from an action. Marginal cost is the change in total cost resulting from an action.
2. As long as the marginal benefit of an activity exceeds the marginal cost, people are better off doing more of it; when the marginal cost exceeds the marginal benefit, they are better off doing less of it.
3. To produce the profit-maximizing level of output and hire the optimal number of workers and other resources, producers must compare the marginal benefits and marginal costs of producing a little more with the marginal benefits and marginal costs of producing a little less.
4. To determine the optimal level of a public policy program, voters and government officials must compare the marginal benefits and marginal costs of providing a little more or a little less of the program's services.

 

BENCHMARKS for Content Standard 3

At the completion of Grade 4, students will know that:

1. No method of distributing goods and services can satisfy all wants.
2. There are different ways to distribute goods and services (by prices, command, majority rule, contests, force, first-come-first-served, sharing equally, lottery, personal characteristics, and others), and there are advantages and disadvantages to each.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. Scarcity requires the use of some distribution method, whether the method is selected explicitly or not.
2. There are essential differences between a market economy, in which allocations result from individuals making decisions as buyers and sellers, and a command economy, in which resources are allocated according to central authority.
3. People in all economies must answer three basic questions: What goods and services will be produced? How will these goods and services be produced? Who will consume them?
4. National economies vary in the extent to which they rely on government directives (central planning) and signals from private markets to allocate scarce goods, services, and productive resources.
5. As consumers, people use resources in different ways to satisfy different wants. Productive resources can be used in different ways to produce different goods and services.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. Comparing the benefits and costs of different allocation methods in order to choose the method that is most appropriate for some specific problem can result in more effective allocations and a more effective overall allocation system.

 

BENCHMARKS for Content Standard 4

At the completion of Grade 4, students will know that:

1. Rewards are positive incentives that make people better off.
2. Penalties are negative incentives that make people worse off.
3. Both positive and negative incentives affect people's choices and behavior.
4. People's views of rewards and penalties differ because people have different values. Therefore, an incentive can influence different individuals in different ways.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. Responses to incentives are predictable because people usually pursue their self-interest.
2. Changes in incentives cause people to change their behavior in predictable ways.
3. Incentives can be monetary or non-monetary.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. Acting as consumers, producers, workers, savers, investors, and citizens, people respond to incentives in order to allocate their scarce resources in ways that provide the highest possible returns to them.
2. Small and large firms, labor unions, and educational and other not-for-profit organizations have different goals and face different rules and constraints. These goals, rules, and constraints influence the benefits and costs of those who work with or for those organizations and, therefore, their behavior.

 

BENCHMARKS for Content Standard 5

At the completion of Grade 4, students will know that:

1. Exchange is trading goods and services with people for other goods and services or for money.
2. The oldest form of exchange is barter-the direct trading of goods and services between people.
3. People voluntarily exchange goods and services because they expect to be better off after the exchange.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. When people buy something, they value it more than whatever it costs them; when people sell something, they value it less than the payment they receive.
2. Free trade increases worldwide material standards of living.
3. Despite the mutual benefits from trade among people in different countries, many nations employ trade barriers to restrict free trade for national defense reasons or because some companies and workers are hurt by free trade.
4. Imports are foreign goods and services purchased from sellers in other nations.
5. Exports are domestic goods and services sold to buyers in other nations.
6. Voluntary exchange among people or organizations in different countries gives people a broader range of choices in buying goods and services.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. A nation pays for its imports with its exports.
2. When imports are restricted by public policies, consumers pay higher prices and job opportunities and profits in exporting firms decrease.

 

BENCHMARKS for Content Standard 6

At the completion of Grade 4, students will know that:

1. Economic specialization occurs when people concentrate their production on fewer kinds of goods and services than they consume.
2. Division of labor occurs when the production of a good is broken down into numerous separate tasks, with different workers performing each task.
3. Specialization and division of labor usually increase the productivity of workers.
4. Greater specialization leads to increased interdependence among producers and consumers.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. Labor productivity is output per worker.
2. Like trade among individuals within one country, international trade promotes specialization and division of labor and increases output and consumption.
3. As a result of growing international economic interdependence, economic conditions and policies in one nation increasingly affect economic conditions and policies in other nations.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. Two factors that prompt international trade are international differences in the availability of productive resources and differences in relative prices.
2. Transaction costs are costs (other than price) that are associated with the purchase of a good or service. When transaction costs decrease, trade increases.
3. Individuals and nations have a comparative advantage in the production of goods or services if they can produce a product at a lower opportunity cost than other individuals or nations.
4. Comparative advantages change over time because of changes in factor endowments, resource prices, and events that occur in other nations.

 

BENCHMARKS for Content Standard 7

At the completion of Grade 4, students will know that:

1. A price is what people pay when they buy a good or service, and what they receive when they sell a good or service.
2. A market exists whenever buyers and sellers exchange goods and services.
3. Most people both produce and consume. As producers they make goods and services; as consumers they use goods and services.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. Market prices are determined through the buying and selling decisions made by buyers and sellers.
2. Relative price refers to the price of one good or service compared to the prices of other goods and services. Relative prices are the basic measures of the relative scarcity of products when prices are set by market forces (supply and demand).
3. The market clearing or equilibrium price for a good or service is the one price at which quantity supplied equals quantity demanded.
4. If a price is above the market clearing price, it will fall, causing sellers to produce less and buyers to purchase more; if it is below the market clearing price, it will rise, causing sellers to produce more and buyers to buy less.
5. An exchange rate is the price of one nation's currency in terms of another nation's currency. Like other prices, exchange rates are determined by the forces of supply and demand. Foreign exchange markets allocate international currencies.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. A shortage occurs when buyers want to purchase more than producers want to sell at the prevailing price.
2. A surplus occurs when producers want to sell more than buyers want to purchase at the prevailing price.
3. Shortages of a product usually result in price increases in a market economy; surpluses usually result in price decreases.
4. When the exchange rate between two currencies changes, the relative prices of the goods and services traded among countries using those currencies change; as a result, some groups gain and others lose.

 

BENCHMARKS for Content Standard 8

At the completion of Grade 4, students will know that:

1. Higher prices for a good or service provide incentives for buyers to purchase less of that good or service and for producers to make or sell more of it. Lower prices for a good or service provide incentives for buyers to purchase more of that good or service and for producers to make or sell less of it.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. An increase in the price of a good or service encourages people to look for substitutes, causing the quantity demanded to decrease, and vice versa. This relationship between price and quantity demanded, known as the law of demand, exists as long as other factors influencing demand do not change.
2. An increase in the price of a good or service enables producers to cover higher per-unit costs and earn profits, causing the quantity supplied to increase, and vice versa. This relationship between price and quantity supplied is normally true as long as other factors influencing costs of production and supply do not change.
3. Markets are interrelated; changes in the price of one good or service can lead to changes in prices of many other goods and services.
4. Scarce goods and services are allocated in a market economy through the influence of prices on production and consumption decisions.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. Demand for a product changes when there is a change in consumers' incomes or preferences, or in the prices of related goods or services, or in the number of consumers in a market.
2. Supply of a product changes when there are changes in the prices of the productive resources used to make the good or service, the technology used to make the good or service, the profit opportunities available to producers by selling other goods or services, or the number of sellers in a market.
3. Changes in supply or demand cause relative prices to change; in turn, buyers and sellers adjust their purchase and sales decisions.
4. Government-enforced price ceilings set below the market clearing price and government-enforced price floors set above the market clearing price distort price signals and incentives to producers and consumers. The price ceilings cause persistent shortages, while the price floors cause persistent surpluses.

 

BENCHMARKS for Content Standard 9

At the completion of Grade 4, students will know that:

1. Competition takes place when there are many buyers and sellers of similar products.
2. Competition among sellers results in lower costs and prices, higher product quality, and better customer service.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. Sellers compete on the basis of price, product quality, customer service, product design and variety, and advertising.
2. Competition among buyers of a product results in higher product prices.
3. The level of competition in a market is influenced by the number of buyers and sellers.

 

At the completion of Grade12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. The pursuit of self-interest in competitive markets generally leads to choices and behavior that also promote the national level of economic well-being.
2. The level of competition in an industry is affected by the ease with which new producers can enter the industry and by consumers' information about the availability, price, and quantity of substitute goods and services.
3. Collusion among buyers or sellers reduces the level of competition in a market. Collusion is more difficult in markets with large numbers of buyers and sellers.
4. The introduction of new products and production methods by entrepreneurs is an important form of competition, and is a source of technological progress and economic growth.

 

BENCHMARKS for Content Standard 10

At the completion of Grade 4, students will know that:

1. Banks are institutions where people save money and earn interest, and where other people borrow money and pay interest.
2. Saving is the part of income not spent on taxes or consumption.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. Banks and other financial institutions channel funds from savers to borrowers and investors.
2. Through the process of collective bargaining with employers, labor unions represent some workers in negotiations involving wages, fringe benefits, and work rules.
3. Not-for-profit organizations are established primarily for religious, health, educational, civic, or social purposes, and they are exempt from certain taxes.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. Property rights, contract enforcement, standards for weights and measures, and liability rules affect incentives for people to produce and exchange goods and services.
2. Incorporation allows firms to accumulate sufficient financial capital to make large-scale investments and achieve economies of scale. Incorporation also reduces the risk to investors by limiting stockholders' liability to their share of ownership of the corporation.

 

BENCHMARKS for Content Standard 11

At the completion of Grade 4, students will know that:

1. Money is anything widely accepted as final payment for goods and services.
2. Money makes trading easier by replacing barter with transactions involving currency, coins, or checks.
3. People consume goods and services, not money; money is useful primarily because it can be used to buy goods and services.
4. Producers use natural resources, human resources, and capital goods (not money) to make goods and services.
5. Most countries create their own currency for use as money.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. As a store of value, money makes it easier for people to save and defer consumption until the future.
2. As a unit of account, money is used to compare the market value of different goods and services.
3. Money encourages specialization by decreasing the costs of exchange.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. The basic money supply in the United States consists of currency, coins, and checking account deposits.
2. In many economies, when banks make loans, the money supply increases; when loans are paid off, the money supply decreases.

 

BENCHMARKS for Content Standard 12

At the completion of Grade 12, students will know that:

1. An interest rate is a price of money that is borrowed or saved.
2. Like other prices, interest rates are determined by the forces of supply and demand.
3. The real interest rate is the nominal or current market interest rate minus expected rate of inflation.
4. Higher real interest rates provide incentives for people to save more and to borrow less. Lower real interest rates provide incentives for people to save less and to borrow more.
5. Real interest rates normally are positive because people must be compensated for deferring the use of resources from the present into the future.
6. Riskier loans command higher interest rates than safer loans because of the greater chance of default on the repayment of risky loans.
7. Higher interest rates reduce business investment spending and consumer spending on housing, cars, and other major purchases. Policies that raise interest rates can be used to reduce these kinds of spending, while policies that decrease interest rates can be used to increase these kinds of spending.

 

BENCHMARKS for Content Standard 13

At the completion of Grade 4, students will know that:

1. Labor is a human resource used to produce goods and services.
2. People can earn income by exchanging their human resources (physical or mental work) for wages or salaries.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. Employers are willing to pay wages and salaries to workers because they expect to sell the goods and services those workers produce at prices high enough to cover the wages and salaries and all other costs of production.
2. To earn income, people sell productive resources. These include their labor, capital, natural resources, and entrepreneurial talents.
3. A wage or salary is the price of labor; it usually is determined by the supply of and demand for labor.
4. More productive workers are likely to be of greater value to employers and earn higher wages than less productive workers.
5. People's incomes, in part, reflect choices they have made about education, training, skill development, and careers. People with few skills are more likely to be poor.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. Changes in the structure of the economy, the level of gross domestic product, technology, government policies, and discrimination can influence personal income.
2. In a labor market, in the absence of other changes, if wage or salary payments increase, workers will increase the quantity of labor they supply and firms will decrease the quantity of labor they demand.
3. Changes in the prices for productive resources affect the incomes of the owners of those productive resources and the combination of those resources used by firms.
4. Changes in demand for specific goods and services often affect the incomes of the workers who make those goods and services.
5. Two methods for classifying how income is distributed in a nation-the personal distribution of income and the functional distribution-reflect, respectively, the distribution of income among different groups of households and the distribution of income among different businesses and occupations in the economy.

 

BENCHMARKS for Content Standard 14

At the completion of Grade 4, students will know that:

1. Entrepreneurs are individuals who are willing to take risks in order to develop new products and start new businesses. They recognize opportunities, enjoy working for themselves, and accept challenges.
2. An invention is a new product. Innovation is the introduction of an invention into a use that has economic value.
3. Entrepreneurs often are innovative. They attempt to solve problems by developing and marketing new or improved products.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. Entrepreneurs compare the expected benefits of entering a new enterprise with the expected costs.
2. Entrepreneurs accept the risks in organizing resources to produce goods and services, and they hope to earn profits.
3. Entrepreneurs and other sellers earn profits when buyers purchase the products they sell at prices high enough to cover the costs of production.
4. Entrepreneurs and other sellers incur losses when buyers do not purchase to products they sell at prices high enough to cover the costs of production.
5. In addition to profits, entrepreneurs respond to other incentives including the opportunity to be their own boss, the chance to achieve recognition, and the satisfaction of creating new products or improving existing ones. In addition to financial losses, other disincentives to which entrepreneurs respond include the responsibility, long hours, and stress of running a business.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. Entrepreneurial decisions affect job opportunities for other workers.
2. Entrepreneurial decisions are influenced by government tax and regulatory policies.

 

BENCHMARKS for Content Standard 15

At the completion of Grade 4, students will know that:

1. When workers learn and practice new skills they are improving their human capital.
2. Workers can improve their productivity by improving their human capital.
3. Workers can improve their productivity by using physical capital such as tools and machinery.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. Standards of living increase as the productivity of labor improves.
2. Productivity is measured by dividing output (goods and services) by the number of inputs used to produce the output. A change in productivity is a change in output relative to input.
3. Technological change is an advance in knowledge leading to new and improved goods and services and better ways of producing them.
4. Increases in productivity result from advances in technology and other sources.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. Economic growth is a sustained rise in a nation's production of goods and services. It results from investments in human and physical capital, research and development, technological change, and improved institutional arrangements and incentives.
2. Historically, economic growth has been the primary vehicle for alleviating poverty and raising standards of living.
3. Economic growth creates new employment and profit opportunities in some industries, but growth reduces opportunities in others.
4. Investments in physical and human capital can increase productivity, but such investments entail opportunity costs and economic risks.
5. Investing in new physical or human capital involves a trade-off of lower current consumption in anticipation of greater future production and consumption.
6. Higher interest rates discourage investment.
7. The rate of productivity increase in an economy is strongly affected by the incentives that reward successful innovation and investments (in research and development, and in physical and human capital).

 

BENCHMARKS for Content Standard 16

At the completion of Grade 4, students will know that:

1. Governments provide certain kinds of goods and services in a market economy.
2. Governments pay for the goods and services they use or provide by taxing or borrowing from people.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. Public goods and services provide benefits to more than one person at the same time, and their use cannot be restricted only to those people who have paid to use them.
2. If a good or service cannot be withheld from those who do not pay for it, providers expect to be unable to sell it and therefore will not produce it. In market economies, governments provide some of these goods and services.
3. In the United States, the federal government enforces antitrust laws and regulations to try to maintain effective levels of competition in as many markets as possible; frequently, however, laws and regulations also have unintended effects-for example, reducing competition.
4. Most federal tax revenue comes from personal income and payroll taxes. Payments to social security recipients, the costs of national defense, medical expenditures, and interest payments on the national debt constitute the bulk of federal government spending.
5. Most state and local government revenues come from sales taxes, grants from the federal government, personal income taxes, and property taxes. The bulk of state and local government revenue is spent for education, public welfare, road construction and repair, and public safety.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. Markets do not allocate resources effectively if (1) property rights are not clearly defined or enforced, (2) externalities (spillover effects) affecting large numbers of people are associated with the production or consumption of a product, or (3) markets are not competitive.
2. An important role for government in the economy is to define, establish, and enforce property rights. A property right to a good or service includes the right to exclude others from using the good or service and the right to transfer the ownership or use of the resource to others.
3. Property rights provide incentives for the owners of resources to weigh the value of present uses against the value of conserving the resources for future use.
4. Externalities exist when some of the costs and benefits associated with production and consumption fall on someone other than the producers or consumers of the product.
5. When a price fails to reflect all the benefits of a product, too little of the product is produced and consumed. When a price fails to reflect all the costs of a product, too much of it is produced and consumed. Government can use subsidies to help correct for insufficient output; it can use taxes to help correct for excessive output; or it can regulate output directly to correct for over- or under-production or consumption of a product.
6. When one producer can supply total output in a market at a cost that is lower than the cost incurred when two or more producers divide production, competition may be impossible. In the absence of competition, government regulations may then be used to try to control price, output, and quality.
7. Governments often redistribute income directly when individuals or interest groups are not satisfied with the income distribution resulting from markets; governments also redistribute income indirectly as side-effects of other government actions that affect prices or output levels for various goods and services.
8. Governments provide an alternative method to markets for supplying goods and services when it appears that the benefits to society of doing so outweigh the costs to society. Not all individuals will bear the same costs or share the same benefits of those policies.
9. A government policy to correct a market imperfection is not justified economically if its expected costs exceed its expected benefits.

 

BENCHMARKS for Content Standard 17

At the completion of Grade 12, students will know that:

1. Citizens, government employees, and elected officials do not always directly bear the costs of their political decisions. This often leads to policies whose costs outweigh their benefits for society.
2. Incentives exist for political leaders to implement policies that disperse costs widely over large groups of people and benefit relatively small, politically powerful groups of people.
3. Incentives exist for political leaders to favor programs that entail immediate benefits and deferred costs; few incentives favor programs promising immediate costs and deferred benefits, even though the latter programs are sometimes economically more effective than the former programs.
4. Although barriers to international trade usually impose more costs than benefits, they are often advocated by people and groups who expect to gain substantially from them. Because the costs of these barriers are typically spread over a large number of people who each pay only a little and may not recognize the cost, policies supporting trade barriers are often adopted through the political process.
5. Price controls are often advocated by special interest groups. Price controls reduce the quantity of goods and services consumed, thus depriving consumers of some goods and services whose value would exceed their cost.

 

BENCHMARKS for Content Standard 18

At the completion of Grade 8, students will know that:

1. Gross Domestic Product (GDP) is a basic measure of a nation's economic output and income. It is the total market value, measured in dollars, of all final goods and services produced in the economy in one year.
2. Per capita GDP is GDP divided by the number of people living in a country.
3. When consumers make purchases, goods and services are transferred from businesses to households in exchange for money payments. That money is used in turn by businesses to pay for productive resources (natural, human, and capital) and to pay taxes.

 

At the completion of Grade 12, students will know the Grade 8 benchmarks for this standard and also that:

1. Nominal GDP is measured in current dollars; thus, an increase in GDP may reflect not only increases in the production of goods and services, but also increases in prices. GDP adjusted for price changes is called real GDP. Real GDP per capita is a measure that permits comparisons of material living standards over time and among people in different nations.
2. The potential level of real GDP for a nation is determined by the quantity and quality of its natural resources, the size and skills of its labor force, and the size and quality of its stock of capital resources.
3. One person's spending is other people's income. Consequently, an initial change in spending (consumption, investment, government, or net exports) usually results in a larger change in national levels of income, spending, and output.
4. When desired expenditures for consumption, investment, government spending, and net exports are greater than the value of a nation's output of final goods and services, GDP rises and inflation occurs and/or employment rises.
5. When desired expenditures for consumption, investment, government spending, and net exports are less than the value of a nation's output of final goods and services, GDP decreases and inflation and/or employment decreases.

 

BENCHMARKS for Content Standard 19

At the completion of Grade 4, students will know that:

1. Inflation is an increase in most prices; deflation is a decrease in most prices.
2. Unemployment exists when people who are actively looking for work do not have jobs.

 

At the completion of Grade 8, students will know the Grade 4 benchmarks for this standard and also that:

1. When unemployment exists, an economy's production is less than potential GDP and some labor resources are not used.
2. The labor force consists of people aged 16 and over who are employed or actively seeking work.
3. Inflation reduces the value of money.
4. When people's incomes increase more slowly than the inflation rate, their purchasing power declines.

 

At the completion of Grade 12, students will know the Grade 4 and 8 benchmarks for this standard and also that:

1. The unemployment rate is the percentage of the labor force that is willing and able to work, does not currently have a job, and is actively looking for work.
2. The unemployment rate is an imperfect measure of unemployment because it does not (1) include workers whose job prospects are so poor that they are discouraged from seeking jobs, or (2) reflect part-time workers who are looking for full-time work.
3. Unemployment rates differ for people of different ages, races, and sexes. This reflects differences in work experience, education, training, and skills, as well as discrimination.
4. Unemployment can be caused by people changing jobs, by seasonal fluctuations in demand, by changes in the skills needed by employers, or by cyclical fluctuations in the level of national spending.
5. Full employment means that the only unemployed people in the economy are those who are changing jobs.
6. The consumer price index (CPI) is the most commonly used measure of price level changes. It can be used to compare the price level in one year with price levels in earlier or later periods.
7. Expectations of increased inflation may lead to higher interest rates.
8. The costs of inflation are different for different groups of people. Unexpected inflation hurts savers and people on fixed incomes; it helps people who have borrowed money at a fixed rate of interest.
9. Inflation imposes costs on people beyond its effects on wealth distribution because people devote resources to protect themselves from expected inflation.

 

BENCHMARKS for Content Standard 20

At the completion of Grade 12, students will know that:

1. Fiscal policies are decisions to change spending and tax levels by the federal government. These decisions are adopted to influence national levels of output, employment, and prices.
2. In the short run, increasing federal spending and/or reducing taxes can promote more employment and output, but these policies also put upward pressure on the price level and interest rates. Decreased federal spending and/or increased taxes tend to lower price levels and interest rates, but they reduce employment and output levels in the short run.
3. In the long run, the interest-rate effects of fiscal policies lead to changes in private investment spending by businesses and individuals that partially, if not entirely, offset the output and employment effects of fiscal policy.
4. The federal government's annual budget is balanced when its revenues from taxes and user fees equal its expenditures. The government runs a budget deficit when its expenditures exceed its revenues. The government runs a surplus when its revenues exceed its expenditures.
5. When the government runs a budget deficit, it must borrow from individuals, corporations, or financial institutions to finance that deficit.
6. The national debt is the total amount of money the federal government owes. This is the accumulated net sum of its annual deficits and surpluses. The government pays interest on the money it borrows to finance the national debt.
7. In the long run, inflation results from increases in a nation's money supply that exceed increases in its output of goods and services.
8. Monetary policies are decisions by the Federal Reserve System that lead to changes in the supply of money and the availability of credit. Changes in the money supply can influence overall levels of spending, employment, and prices in the economy by inducing changes in interest rates charged for credit and by affecting the levels of personal and business investment spending.
9. The major monetary policy tool that the Federal Reserve System uses is open market purchases or sales of government securities. Other policy tools used by the Federal Reserve System include increasing or decreasing the discount rate charged on loans it makes to commercial banks and raising or lowering reserve requirements for commercial banks.