In the 21st century, there’s more to financial literacy than personal finance and money management. Money works on multiple levels. An equally important aspect of financial literacy is knowing how money works in the world. Knowledge of commerce, business, innovation, and entrepreneurship goes a long way toward building career and employment skills, and the ability to recognize economic opportunity. Students explore commerce and the origins of money and capitalism, the traits of innovators and entrepreneurs, the R&D process, market sectors and industries, securities, currency around the globe, virtual currency, the gold standard, fiat money, and much more. Students examine the roles of such powerful institutions as the SEC, USPTO, Federal Reserve Bank, IMF, World Bank, World Trade Organization, G7, G20, and Eurozone, mastering over 250 financial literacy terms and concepts. Available in print, digital and as an online course (2019).
INSTRUCTOR’S GUIDE
THE 21ST CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
SUSAN MULCAIRE
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INSTRUCTOR’S GUIDE GOING GL BAL PRODUCT PREVIEW
www.financialliteracylessons.com
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The 21st Century Student’s Guide to Financial Literacy, Instructor’s Guide v.1 This document is copyrighted. Reproducing or sharing this document with other users is a violation of copyright and intellectual property laws. All rights reserved. The content of this book is protected by intellectual property laws. c21Student Resources grants permission to noncommercial users to provide instruction based on the content of this book, however no part of this publication may be reproduced in whole or in part, stored in a retrieval system or transmitted in any form, by any means, electronic, mechanical, photocopying, recording or otherwise, for any commercial or noncommercial use whatsoever without the express written permission of the publisher. PRODUCT PREVIEW Copyright © Susan Mulcaire 2015
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Message to Educators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Annotated Lesson Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi Lesson 1: Look Out, You’re Surrounded! . . . . . . . . . . . . . . . . . . . . . . . . . 2 Introduction to financial literacy; commerce vs. business; inflation; economic indicators; consumers and consumerism; exploring the Consumer Price Index. Lesson 2: Cave Man Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 The history of commerce; connecting barter to modern commerce; the deficiencies of barter; negotiation skills; exploring MBTI personality types. Lesson 3: Show Me the Medium of Exchange . . . . . . . . . . . . . . . . . . . . . . 36 The origins, functions, and characteristics of money; detecting counterfeit currency; exploring careers in cybersecurity. Lesson 4: The Money Morph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 The evolution of money; the gold standard; fiat money; central banks; the Fed and the money supply; Bitcoin and virtual currency; exploring the Federal Reserve Bank. Lesson 5: Crazy for Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 The history of currency; currency around the globe; currency conversion; purchasing power; the euro; exploring the Eurozone. Are You Financially Literate? Chapters 1-5 . . . . . . . . . . . . . . . . . . . . . . . . . 84 Lesson 6: Crusaders, Unpleasant Peasants & Mobsters . . . . . . . . . . . . . . . . . . 90 The impact of money; the medieval revival of commerce; the origins of modern banking; wealth disparity in America; exploring investment banks and commercial banks. Lesson 7: Commerce Capitalism . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 The features of capitalism; property rights and profit; capitalism’s critics; socially conscious capitalism; the language of SoCap; exploring the Chamber of Commerce. Lesson 8: Commerce = the Sum of Many Parts . . . . . . . . . . . . . . . . . . . . . . 126 Sectors and industries of global commerce; innovation clusters; cluster mapping; tuning into career opportunities around the world; exploring the World Economic Forum. Are You Financially Literate? Chapters 6-8 . . . . . . . . . . . . . . . . . . . . . . . . . 148 PRODUCT PREVIEW
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Lesson 9: The Trait to Innovate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Innovation and invention; the traits of innovators; 10 young American innovators; your personal R&D; exploring associational thinking skills. Lesson 10: A Garage is for More Than Parking a Car . . . . . . . . . . . . . . . . . . . 170 Startups and entrepreneurs; intellectual property; patent, trademark, and copyright; business ethics blunders; exploring the United States Patent and Trademark Office. Lesson 11: You’re the Entrepreneur . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 R&D and the path to production; balance of business and government; exploring trade secrets and industrial espionage; innovation team challenge – part 1. Are You Financially Literate? Chapters 9-11 . . . . . . . . . . . . . . . . . . . . . . . . . 214 Lesson 12: Business Blast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 The benefits of forming a corporation; corporate officers, executives and directors; other business entities; parliamentary rules of procedure; exploring CEO leadership skills; innovation team challenge – part 2. Lesson 13: The Quest for Capital! . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 Venture capital; loans; seed money; angel investors; crowdfunding; public vs. private equity; 4P marketing; exploring the pitch deck; innovation team challenge – part 3. Lesson 14: Who Put the Wall in Wall Street? . . . . . . . . . . . . . . . . . . . . . . . 258 Debt vs. equity; the origin of stock; bonds; treasuries; ratings; the history of Wall Street; securities exchanges around the world; the IPO; exploring the Securities and Exchange Commission. Are You Financially Literate? Chapters 12-14 . . . . . . . . . . . . . . . . . . . . . . . . 278 Lesson 15: Walk’n on Wall Street . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282 How to interpret a stock quote; stock fundamentals; dividends; yield; PE ratios; market capitalization; exploring the G8 and G20; (optional) stock market challenge. Lesson 16: Bulls and Bears and Boats, Oh My! . . . . . . . . . . . . . . . . . . . . . . 300 Major market indexes around the world; DJIA, S&P 500; bull and bear markets; exploring the International Monetary Fund and World Bank. Lesson 17: Breaking Down Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . 314 GATT and the WTO; benefits and barriers to free trade; key regional free trade agreements; TTP; TTIP; exploring the World Trade Organization. Are You Financially Literate? Chapters 15-17 . . . . . . . . . . . . . . . . . . . . . . . . 330 PRODUCT PREVIEW
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M E S S A G E T O E D U C A T O R S
Dear Educator,
Your students’ futures are global. Will they thrive in a global economy? Where will they fit into this new order? How will they prepare for college and career? The answers to these questions depend very much on whether they are financially literate . There are many aspects of financial literacy, including personal finances and money management. In this complex and increasingly globalized world, however, financial literacy also requires knowledge about global commerce, business, entrepreneurship, and innovation. Financial literacy is critical for college and career readiness. Over the course of the next 17 lessons your students will become proficient in “big picture” financial literacy topics including the evolution of money, the rise of capitalism, currency, venture capital, startups, intellectual property, securities and stock markets, wealth disparity, and global free trade agreements. They will understand the roles of such powerful institutions as the SEC, USPTO, Federal Reserve Bank, IMF, World Bank, World Trade Organization, G7, G20, and the Eurozone. They will build an extensive vocabulary of over 200 key terms and concepts, gaining context for what they will learn in high school and college, and insight into world events. This course is among the most relevant you can offer your students and will take their college and career readiness to new heights. Rest assured, we are already at work on volume 2, which will focus on money management and personal finance. Students will benefit from completing this course first because it provides perspective and context for many of those topics. Make financial literacy a part of your school’s culture. Follow and discuss financial news and events. Post global financial terms and topics posters in classrooms and hallways. Invite guest speakers – securities brokers, entrepreneurs, innovators, small business owners, marketing experts, investment bankers, CEO’s, intellectual property experts, and design engineers – into the classroom in person or by video chat to tell your students about their education and experiences. Take field trips to the Chamber of Commerce, SBA office, district reserve bank, securities brokerage, business incubator, U.S. Mint, or other organization of commerce, innovation, and entrepreneurship. Please review the annotated lesson plan on the following pages. Each lesson in this Instructor’s Guide follows this format and includes in-class practice, an at-home learning activity, and exploration of an issue or institution of global commerce. PRODUCT PREVIEW
Sincerely, c21 Student Resources
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A N N O T A T E D L E S S O N P L A N
TIME TO TEACH These lessons can be taught in about one hour. Consider segmenting into shorter sessions over several days, and including recommended videos and additional resources in instruction. LESSON TITLE SLIDE Instructional slides corresponding to the lesson segment and additional teaching aids can be accessed at www.c21student.com WORKBOOK References the corresponding chapter in The 21st Century Student's Guide to Financial Literacy (the “workbook”) MATERIALS LIST Lists materials and information needed to prepare the lesson. For short informative videos about lesson strategies go to www.c21student.com SUGGESTED VIDEOS & ADDITIONAL RESOURCES Identifies supplemental videos and resources. indicates that the video or resource is highly recommended. Videos can be accessed at www.c21student.com WHAT DOES THAT MEAN? Each lesson begins with a term/vocabulary segment introducing students to the terms used in the lesson. Slides and vocabulary flashcards can be accessed at www.c21student.com
L E S S O N 3 Show Me the Medium of Exchange
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SLIDE 3A
Workbook This lesson corresponds to The 21st Century Student's Guide to Financial Literacy, student workbook, Chapter 3.
Materials List Computer/smartboard Webslides (www.c21student.com)
Suggested Videos and Additional Resources Watchmojo.com, 10 Cybersecurity Facts (YoutTube) (8:52) • Cybersecurity 101 (Nova/YouTube) (3:52) • The Secret Lives of Hackers (Nova/YouTube); National Geographic (3:08) For an interesting good graphic presentation of hacking data see World’s Biggest Data Breaches (www.informationisbeautiful.net) Note: Cybersecurity is an evolving field. It’s a good idea to periodically update these supplemental videos.
unit of account PRODUCT PREVIEW store of value purchasing power wealth Lesson 3 | ShowMe theMediumofExchange 36 What Does That Mean? Term Definition economist commodity any marketable item.
SLIDE 3B-D
an expert in economics which is a social science concerned with the processes and systems by which goods and services are produced, sold, and bought.
currency money in any form when used as a medium of exchange. medium of exchange intermediary instrument used to facilitate the purchase or sale of goods; a function of money. money the agreed medium of exchange for a society.
unit which can be used to define and compare the value of something; a function of money. the ability to be reliably saved, stored, and retrieved over time; a function of money. the amount of goods or services that a unit of money, such as one dollar, can buy.
an abundance of valuable possessions or money; property; riches.
counterfeit currency imitation currency produced without the legal sanction of the state or government. Federal Reserve Bank the Fed; the central bank for the U.S. which manages U.S. currency, money supply, interest rates, and monetary policy. data breach theft or loss or secure digital media often by hack.
Lesson Objectives By the end of this lesson the student will be able to: 1. Describe the advantages of money over barter.
SLIDE 3C
2. State the functions of money. 3. List the characteristics of money 4. Analyze whether a thing used as a medium of exchange is money . 5. Tell about careers in cybersecurity.
Gaining Attention Address students: I have some shocking news. There’s been a revolt at UB Smart School. It’s not the tiny tots. It’s the high school students. Direct students to “Barters a Bust” in Chapter 2 of the workbook. Read aloud.
Barter’s a Bust at U.B. Smart School There’s been a revolt at UB Smart School! An entire class has declared itself to be an independent country. They call their country Classtopia. It operates under a barter system where students trade for needs and wants, such as pencils for paper, markers and highlighters for peer tutoring or homework help, etc. Insiders report serious problems with the Classtopain economy. Recently, a student was in need of math peer-tutor services from a fellow Classtopian. Unfortunately, the needy student had nothing of interest or use to the peer tutor, so he got no help. Sadly, he bombed the quiz. Another student hasn’t turned in homework for several days because she’s out of binder paper. She has nothing to trade – at least nothing that's wanted by the student who has the excess supply of binder paper. Now she has a D in homework. Another student needs a calculator, but he hasn’t been able to save the 35 pencils needed to make the trade. He’s had to count on his fingers and toes. The removal of his shoes and socks during math has caused several evacuations of the classroom.
LESSON OBJECTIVES Identifies the skills students will learn in the lesson.
GAINING ATTENTION Begin with a brief review of the previous lesson, and an informal discussion related to the topic of the lesson.
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COMMUNICATING OBJECTIVES Students are told their learning goals for the lesson.
This week, the citizens of Classtopia gathered to discuss the crisis. They agreed that the barter system limits their ability to meet their needs and grow as a society. They voted to discontinue it. They agreed that in place of barter, they would identify an item – a commodity – that all Classtopians will use as a medium of exchange for buying and selling goods and services. They decided to use paper clips. The Classtopians set values for the paper clips. Red clips have a fixed value, green are worth twice the value of red. Yellows are worth five reds. The government of Classtopia issues a limited supply of the paper clips which they call Classybucks. They are marked with the Classtopia insignia, which cannot be easily copied – not even by the best classroom artist. Classtopians have begun paying for goods and services with Classybucks. The math-challenged student was able to buy the tutoring he needed with two red Classybucks. The binder paper-deficient student paid one green Classybuck for 100 sheets of paper and now has an A in homework. Much to the relief of his classmates, stinky-feet calculator boy helped a student repair their laptop for six yellow Classybucks, which was enough to pay for a calculator. We are happy to report that order has been restored to Classtopia. Communicating Objectives At the conclusion of this lesson, you will be able to explain the advantages of money over barter, state the functions and characteristics of money, and analyze whether Classybucks are money. You will also be able to tell about careers in the important field of cybersecurity. Presentation of Content In the last lesson, students learned that barter is a direct trade of goods and services without the use of money . Barter is as old as humanity. It began with simple direct trade and evolved into to sophisticated multiparty trades, with a wide range of goods. As you’ll recall, barter has serious limitations. Engage students in a discussion: Can anyone recall the limitations of barter? Answer: It requires finding a trading partner with a mutual need (double coincidence of wants), and equal value of goods or services traded. Barter limits economic growth because it does not allow for saving of value to accumulate purchasing power. Overall, barter is limited and inefficient. The Functions of Money No one is sure of the exact date money was first used. Some experts believe it was about 3000 BC, others earlier. Gradually, however, it became apparent to civilization that trade would be a heck of a lot easier if there were a standardized way to state the price of something , as well as a designated commodity that would be accepted by everyone as payment for goods. The answer was money . SLIDE 3D SLIDE 3F The Big Picture Money can be almost any thing . Money has three essential functions: it is commonly accepted as the medium of exchange; it has a standard numerical measurement; and it is a store of value. There are many characteristics of money. One of the most important characteristics of money and concepts of financial literacy is that money is issued by governments in limited quantities to maintain stability of value. Unstable values impact the purchasing power of money. In the U.S., the institution charged with the responsibility of regulating the money supply is the Federal Reserve Bank. Let’s Practice! The practice activities for this lesson are: Let's Practice: Classybucks Conundrum. Read the instructions aloud and complete as an in-class activity. Let's Practice: Detecting Counterfeit Bills (This is a fun whole-class activity, but it requires students to bring a post-1996 $5 bill to class.) Exploring 21st Century Skills and Issues: Careers in Cybersecurity Ponder and Predict Money can be represented (“expressed”) by just about any thing. Many things have been used as money and, like civilization, money has evolved over time. How? Write your prediction here and in the next lesson, find out if you are right! Assign • Blog, debate, discuss: Have you ever made a particularly bad (or good) barter? How was it negotiated? Tell about it. Non-counterfeitable: Money cannot be easily duplicated. Governments use many means to thwart counterfeiters: special ink and paper, watermarks, microscopic printing, and magnetic strips. Counterfeiting has serious implications for the public. The dumping of counterfeit money into circulation falsely increases the money supply, which impacts value stability. Unstable money values can impact purchasing power .
PRESENTATION OF CONTENT Instructional content. Most lessons are based on a direct instruction model.
THE BIG PICTURE Summarizes key points at the conclusion of the lesson.
LET’S PRACTICE! Each lesson includes an in-class activity which can be completed as whole-class review or in teams. Worksheets are contained in the student workbook. PONDER AND PREDICT Poses questions or problems related to the next lesson to engage students in higher order thinking. ASSIGN References the workbook pages students read to prepare for the next lesson. Suggested blog, debate, discuss topics relate to some aspect of financial literacy, development of personal leadership skills, or expression of opinion on a social issue. Some topics include surveys which may be accessed at www.c21student.com BUSINESS AND FINANCIAL NEWS Daily exposure to the financial news helps students develop their fin lit vocabulary. Bloomberg West has an excellent video archive with interviews and features of particular interest to students. Schedule into instructional time, if possible. LESSON SOURCES Books, papers, articles, and website sources used for lesson preparation are cited at the end of the lesson.
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• To prepare for the next lesson: read Chapter 4 of the student workbook. • Watch business or financial news at least 15 minutes per day: Bloomberg West (www.bloomberg.com/video/bloomberg-west)
The Street Business News (www.thestreet.com) Reuters (www.reuters.com/video/technology)
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L E S S O N 1 Look Out, You're Surrounded!
Time to Teach
SLIDE 1A
Workbook This lesson corresponds to The 21st Century Student's Guide to Financial Literacy, student workbook, Chapter 1. Materials List Computer/smartboard Webslides (www.c21student.com) Suggested Videos and Additional Resources Commerce News (www.youtube.com/user/commercenews) The Department of Commerce regularly posts short informative videos on YouTube about a variety of topics • Learning Markets; Why Consumer Confidence Reports Matter (www.learningmarkets.com/why-consumer- confidence-reports-matter) (3:25) Investopedia “The Consumer Price Index” (www.youtube.com/watch?v=vtx3UAEm3O0) (1:48) • Investopedia “What is Inflation?” (www.youtube.com/watch?v=Vi3Q1ypNw3M) Link to highly recommended videos organized by lesson at www.c21student.com/ you-tube-lesson-links/ PRODUCT PREVIEW
What Does That Mean? Term
SLIDE 1B-E
Definition
financial literacy
the ability to understand how money works in the world.
commerce economics
activities that relate to the buying and selling of goods and services. a social science concerned with the processes and systems by which goods and services are produced, sold, and bought. the system of businesses, government agencies, organizations and consumers that interact to enable business to operate, and money and goods to flow. a firm or enterprise that engages in the activity of making, buying, or selling goods or providing services in exchange for money.
system of commerce
business
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consumer
a person or group of people, who acquire goods or services as the final user of those products or services.
local commerce
interacting businesses and governments of a local or regional area. commerce carried on within the borders of a single country.
domestic commerce global commerce
the worldwide system of businesses, government agencies, and organizations which interact to enable businesses to operate, and goods, money, and services to flow between nations.
SME small to medium sized business enterprise. multinational company a company that operates in several countries but is managed from its home country. trade balance the value difference between a nation's imports and exports. economic indicators collections of data which enable analysis of economic performance and predictions of future performance. Gross Domestic Product GDP; the total dollar value of all goods and services produced within a country’s borders annually; an indicator of the health of a nation’s economy. inflation a sustained increase in the general prices of goods and services over a period of time which erodes the value of money. e-commerce the buying and selling of goods or services transacted over the internet. PRODUCT PREVIEW Lesson Objectives By the end of this lesson the student will be able to: 1. Compare business and commerce . 2. Identify examples of commercial activity as local, domestic, or global. 3. List the elements of global commerce. 4. Explain the relationship of the consumer to commerce. 5. Summarize economic indicators GDP, CCI and CPI. “Love makes the world go ‘round.” Love is great. We love love! But do you know what really makes the world go round? (Cross out “love” and write “money”.) Money, or to be more precise, the pursuit of wealth and prosperity drives almost everything people and societies do. What do you know about money? Do you know how it works in the world? What do you know about pursuing wealth and prosperity? The answers to these questions depend very much on whether you are financially literate . SLIDE 1F SLIDE 1G Gaining Attention Write this sentence on the board:
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Communicating Course Objectives Financial literacy is the ability to understand how money works in the world . There are many aspects to financial literacy, including understanding personal finance and money management, like how to get a car loan or balance a checking account. However, being 21st century financially literate increasingly requires a level of knowledge about global commerce, business, and innovation. The 21st Century Student’s Guide to Financial Literacy is decidedly global, focusing on “big picture” financial literacy topics. In this course you will learn about the evolution of commerce and money, the rise of capitalism, entrepreneurship, and innovation. In the next 17 chapters you will journey through barter and trade, currency, venture capital, startups, intellectual property, securities and stock markets, and global free trade agreements. Along the way, you’ll take side trips to such key institutions of global commerce as the SEC, USPTO, Federal Reserve Bank, IMF, World Bank, World Trade Organization, Eurozone, G7, G20, and World Economic Forum. Here’s our promise: When you finish this course you will have a working vocabulary of over 200 financial terms and have a basic knowledge of many of the key systems and institutions of global commerce. No, we can’t cover everything – after all it’s a big world, but we will cover topics which build context for much of what you’ll learn in high school and college, help prepare you for a career, and provide insight into the meaning and significance of many global events. Communicating Lesson Objectives By the conclusion of this lesson, you will recognize that the pursuit of wealth and prosperity is expressed as commerce, and that business and commerce are not the same. In this 21st century world, you are surrounded by commercial activity 24/7. You will be able to identify commerce as local, domestic, or global. You will be able to list components of global commerce, explain the vital role of the consumer in commerce, and summarize three important economic indicators. PRODUCT PREVIEW Presentation of Content SLIDE 1H
What is Commerce?
com•merce [kom-ers] noun: activities that relate to the buying and selling of goods and services.
Pretty simple, huh? But think about that for a minute. Doesn’t almost everyone, everywhere in the world, every day , engage in some activity relating to the buying and selling of goods or services? In every corner of the world, people buy and consume food and other goods, drive a car or take another mode of transportation to a job. People everywhere make, sell, or buy products and services, or work for a company that makes, sells, or buys products and services. Products are manufactured and shipped all over the globe. Commerce is the expression of the pursuit of wealth, and people everywhere are engaged in it. Don’t be fooled by
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the simplicity of its definition. 21st century commerce is not a simple concept. It’s huge and complex. You are surrounded by, and participate in commerce every day. Commerce drives the world’s economies, dominates politics and political dialogue, and defines global relations.
Business vs. Commerce The terms business and commerce are often used interchangeably, but they are not really the same things. A business is a firm or enterprise that engages in the activity of making, buying, or selling goods or providing services in exchange for money . That can be a small mom and pop store, or a company as big and global as Google or Boeing. The system of commerce includes businesses, government agencies, and organizations which interact to enable businesses to operate, goods and money to flow locally and around the world. Successful and expanding business enterprises is the primary goal of commerce. Commerce and business have kind of a symbiotic relationship. Without the buying and selling of goods and services by businesses, there would be no commerce; without a system of commerce, buying and selling goods and services and growing a successful business would be difficult indeed. Businesses operate within the wide and complex system of commerce. Local Commerce Local commerce refers to the interacting network of businesses, government agencies, and organizations of a local or regional area . The cafes, stores, factories, and farms in your town or county are engaged in local commercial activities. Local commerce is made up of many small businesses. The designation of a business as small , means it employs between 10-500 people, although the designation can change from country to country, and if the business has very high earnings. A microbusiness is a very small, often family-owned business, employing just a few people. Small and microbusinesses are key components of local commerce. When you stop for a burger at a local cafe, see your dentist for a check up, or fill up at the gas station on the corner, you are participating in local commerce. Local commerce is very important to the economic vitality of a region. Local commerce is so important to the economic health of a region that most towns in America have a Chamber of Commerce . It is an association of local businesses that network and organize to support, promote, and advocate for their businesses and products. There is also a U.S. Chamber of Commerce which is a powerful nationwide association of local chambers of commerce and businesses . They use their strength-in- numbers to advocate (lobby) for pro-business U.S. government policies and laws benefiting SMEs (small-to- medium size business enterprises.) Domestic Commerce Domestic commerce refers to the sale and exchange of goods and services within the borders of a country . It includes interstate and intrastate commerce. Interstate commerce is the sale and exchange of goods or services between different states , such as when California oranges are bought by a Utah-based grocery store PRODUCT PREVIEW
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chain for sale in its Wyoming stores, or auto parts manufactured by a company in Georgia are bought by a South Carolina company. Intrastate commerce refers to the sale or exchange of goods within the boundaries of the same state , such as when a business in Texas buys a product or service from another business in Texas.
Global Commerce When you think about global commerce, think big, really big. Global commerce is the worldwide system of businesses, governments, government agencies, and organizations that interact to enable businesses to operate, goods, money, and services to flow between countries . 21st century commerce is highly globalized. The commercial and economic systems of countries are interdependent. For example, a factory fire in a remote province in China can have a significant impact on a business in Australia; a political crisis in Russia can have an impact on software sales in South America; a financial crisis in Japan can effect oil production in the Middle East. That would not have been the case 100 or so years ago, when commerce was primarily local or domestic. These days, many companies are multinational which means that they are headquartered in one country, with employees, operations, and facilities in several countries. E-Commerce and M-Commerce E-commerce is the buying and selling of goods or services over the internet . Within the larger category of e-commerce, purchases made with a mobile device such as a cell phone or tablet are referred to as m-commerce . It would be an understatement to say that e-commerce is booming. According to forecasts, worldwide e-commerce sales will hit $2.357 trillion by 2017. That’s right, $2,357,000,000,000. China has the world’s largest e-commerce market. E-commerce sales are referred to as b2c (business-to-consumer) or b2b (business-to-business.) Where Does Government Fit In? Local government is an essential part of local commerce. It provides business licenses, establishes and enforces local business laws, and maintains municipal services like fire and police departments. It also enforces the safety and quality standards of local businesses, and the reliable delivery of utilities like water and power. State governments are involved in commerce on many levels, from collecting sales and income taxes, to keeping infrastructure like roads and highways in good condition for moving and distributing goods, to enforcing laws and regulations protecting the purchasers and users of goods and services. Public education is a service provided by states designed to assure the continued availability of an educated population capable of sustaining the workforce. At the federal level , the job of monitoring and promoting commerce at home and abroad goes to the Department of Commerce . Its stated mission is to "promote job creation and improved living standards for all Americans by creating an infrastructure that promotes economic growth, technological competitiveness, and SLIDE 1J SLIDE 1I PRODUCT PREVIEW
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THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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sustainable development". Through the Commerce Department, the federal government pursues many activities and policies for promoting prosperity, including making trade agreements with other countries to enable the export of American-made goods overseas. Vibrant commerce is critical to the economic health of a nation. Governments constantly strive to develop and maintain a high level of domestic commerce and to open foreign markets to their country’s exports. Data, data and more data… The federal government closely monitors all aspects of commerce. Every day, the Department of Commerce, and other government bureaus and agencies, collect and sort through loads data related to domestic and international commerce. Just some of the things the government tracks are the number of new home sales, how many construction projects have started, the availability of jobs, employment rates, factory orders, monthly retail sales for all kinds of products – electronics, food, clothing, cars, medical supplies, fuel, etc. The government also tracks personal income and spending, manufacturing statistics, shipments and inventories. How much is imported into the U.S. from other countries and exported from the U.S. overseas is tracked, measured, and compared to determine the trade balance , which is the difference in value between what a nation exports (sells to other countries) and what a nation imports (buys from other countries). Data about commerce is published in reports called economic indicators . These are used by government and private sector analysts to make economic forecasts about commerce and the economy, and make or adjust current policies or practices. The government also keeps a close eye on Gross Domestic Product (GDP) which is the total value of all goods and services produced within a country each year . GDP is often mentioned in the financial news because it is a key indicator of the economic health of the nation . Ideally, people should be busily working at jobs, producing all sorts of goods and services. Weak and economically unhealthy nations are not very productive. A falling GDP is a concern because it signals that the economy is not growing, which can cause businesses to fail and jobs to be lost. A GDP that is rising too quickly may be a sign of inflation, an upward trend in the price of goods and services . Inflation “inflates” the price of goods and services, which reduces the value of money . Experts like to see steady, even GDP growth with low unemployment and low inflation. The Almighty Consumer What is produced must be consumed. Products and services ultimately make their way to their final destination: the consumer . A consumer can be one person, like you, who buys a smoothie at the local juice shop, or gets a cut and color at a local salon, a business that buys a ream of paper for the office, or a large multinational corporation that purchases a service or product from another business. Consumers are generally considered to be the last stop for a product or service , hence the name consume-r . Consumers are an uber-important part of commerce. Commerce simply would not exist without consumers to spend money and “consume” the products and services of businesses. When consumers consume, commerce thrives. SLIDE 1K PRODUCT PREVIEW
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Lesson 1 | Look Out, You’re Surrounded!
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Like Bugs Under a Microscope Consumers are so important to commerce, their collective behavior is constantly tracked and scrutinized. Government agencies and private companies study consumers like bugs under a microscope. Are consumers buying stuff? What are they buying? How much are they spending? Consumer activity is tracked monthly by the U.S. Bureau of Labor Statistics through an economic indicator called the Consumer Price Index (CPI) . The CPI tracks how much consumers paid for an imaginary sample variety of goods and services referred to as a “basket.” Information about consumer spending enables the government and businesses to make all sorts of decisions and predictions about product sales, prices, wages, and whether to hire or layoff workers. The CPI also tracks whether the economy is showing signs of inflation. The Consumer Confidence Index (CCI) is another important economic indicator produced each month by a private research organization called The Conference Board . The CCI measures how optimistic or pessimistic consumers are about the economy . When consumers are feeling good about things like job security, savings, earnings, and their financial outlook, they tend to buy more stuff. That gives a boost to commerce and the economy, and tells businesses and government agencies that they are on the right track with policies, products, services, and prices. When the CCI indicates that consumer confidence is down, businesses and government agencies try to figure out why, so they can make adjustments to policies, products, and prices to improve the consumers‘ outlook and keep the economy growing. The CPI, CCI and GDP are frequently mentioned in the financial news, so you should have a basic idea of what they are. The Big Picture Financial literacy is the ability to understand how money works in the world. There are many aspects to financial literacy, but the focus of this course is on big picture, global financial literacy because this knowledge is critical to your college and career readiness. The pursuit of wealth and prosperity is expressed as commerce. Vibrant local, domestic and international commerce is key to the economic health of a nation. 21st century commerce is highly globalized, with multinational companies, interdependent economies and businesses. E-commerce is a thriving and rapidly expanding area of commerce. Economic indicators like the Consumer Price Index, Consumer Confidence Index and Gross Domestic Product provide data enabling government and businesses to make decisions and predictions about the economy, and make or adjust economic polices or practices. GDP is an indicator of the economic health of a nation. The consumer is an essential component of commerce. SLIDE 1L PRODUCT PREVIEW
Let’s Practice! Select from the following practice activities for this lesson: I Spy Commerce in Action (whole class exercise)
Direct students to the I Spy Commerce illustration in chapter 1 of the student workbook. This activity is a practical application of the lesson objectives as well as an introduction to the course. Read aloud: This is a “snapshot” of a pretty typical city, buzzing with commercial activity. Study the picture. You have 10 minutes to identify all of the ways you observe commerce in action .
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THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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Identify the commerce-related activity and answer these questions: Does the activity indicate local, domestic, or global commerce? How does the activity relate to commerce? (Is it a sale/exchange of money for goods and services? Does it promote or support the functioning or operation of business, such as a government-provided service?) Hint: There are at least 18 examples of commerce in this picture! Students may work in teams. Correct aloud from IG or Slide 1M. This exercise is both a review of the objectives of Lesson 1 and a preview of the course. Let's Practice: My Daily Consumer Diary (Collect, discuss, and graph students’ consumer patterns.) Exploring 21st Century Skills and Issues: The Consumer Price Index Ponder and Predict When did commerce begin? What was early commerce like? Early commerce was surprisingly similar to 21st century commerce in some important ways. How? Write your predictions here and in the next lesson, find out if you’re right! Assign • Blog, debate, discuss: Consumerism is a social and economic ideology which encourages the acquisition of goods and services in ever-greater amounts. Anti-consumerism is a movement opposed to consumerism, and discourages the ever-growing purchasing and consumption of material possessions. On a scale of 1-5 (5 being “They’re naming a mall after me.” and 1 being “I am Mr./Ms. Anti-consumer”) rate your consumerist tendencies. How can society promote a healthy balance? SLIDE 1N SLIDE 1M PRODUCT PREVIEW • To prepare for the next lesson: read Chapter 2 of the workbook. • Watch business or financial news at least 15 minutes per day: Bloomberg West (www.bloomberg.com/video/bloomberg-west)
The Street Business News (www.thestreet.com) Reuters (www.reuters.com/video/technology)
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Lesson 1 | Look Out, You’re Surrounded!
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LET'S PRACTICE
Name: _____________________________________________________________________________
My Daily Consumer Diary The 21st century world is teeming with commercial activity. Hundreds of millions of businesses, government agencies and organizations, and billions of consumers interact to support business and promote the sale and exchange of goods and services locally, nationally, and around the world. Commerce includes supportive services like fire and police protection, and road construction and maintenance. Manufacturing, advertising, banking, shipping, utilities, telecommunications (broadband/Internet), transportation are all essential elements of commerce. E-commerce is the buying and selling of products or services over the internet. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ Keep a diary of your activities for a day. Note how often you consume a product or service purchased by you or your family. Record transactions you personally engage in, and activities you observe which support the functioning of commerce and business. Be aware of commerce in action all around you. 7:00 a.m. – 8:00 a.m. _ _______________________________________________________________ 8:00 a.m. – 9:00 a.m. _ _______________________________________________________________ 9:00 a.m. – 10:00 a.m. _ _______________________________________________________________ 10:00 a.m. – 11:00 a.m. _ _______________________________________________________________ 11:00 a.m. – noon _ _______________________________________________________________ Noon – 1:00 p.m. _ _______________________________________________________________ 1:00 p.m. – 2:00 p.m. _ _______________________________________________________________ 2:00 p.m. – 3:00 p.m. _ _______________________________________________________________ 3:00 p.m. – 4:00 p.m. _ _______________________________________________________________ 4:00 p.m. – 5:00 p.m. _ _______________________________________________________________ 6:00 p.m. – 7:00 p.m. _ _______________________________________________________________ 7:00 p.m. – 8:00 p.m. _ _______________________________________________________________ 8:00 p.m. – 9:00 p.m. _ _______________________________________________________________ 9:00 p.m. – 10:00 p.m. _ _______________________________________________________________ 10: 00 p.m. – 11:00 p.m. _ _______________________________________________________________ PRODUCT PREVIEW
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THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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LET'S PRACTICE
Answer the questions below, including details of what you purchased, observed etc.: Did you consume food purchased by you or your family? __________________________________________________________________________________ Did you travel by car, bus or other vehicle on a roadway? Was it a local, state or interstate roadway? __________________________________________________________________________________ Did you observe any commercial vehicles, such as delivery trucks, vans, or utility vehicles? Name two. __________________________________________________________________________________ Did you observe road construction, or improvement of local or interstate transportation? Describe. __________________________________________________________________________________ Did you make any purchases of goods or services? Did you engage in the sale of any local goods or services? Explain. __________________________________________________________________________________ At any point in the day did you observe a billboard, print or digital marketing, or other advertising enticing you to consume a good or service? Describe one. __________________________________________________________________________________ Did you engage in e-commerce or m-commerce? (Did you use a computer, tablet, or mobile device to purchase or sell something?) __________________________________________________________________________________ Estimate how long you were online/using the Internet. __________________________________________________________________________________ Did you use water, gas, or electricity? What companies provide these services to you? __________________________________________________________________________________ Were any of the goods or services you consumed, manufactured in a country outside of the U.S.? What, and which country? __________________________________________________________________________________ Did you engage in any banking activities, use an ATM or credit card? Describe. __________________________________________________________________________________ __________________________________________________________________________________ OPINION: On a scale of 1-5 (5 being “They’re naming a mall after me.” and 1 being “Mr./Mrs. Anti-consumer”) what are your consumer tendencies? 5 4 3 2 1 PRODUCT PREVIEW
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Lesson 1 | Look Out, You’re Surrounded!
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EXPLORING 21st CENTURY SKILLS AND ISSUES
Name: _____________________________________________________________________________
The Consumer Price Index Data about commerce is published in reports called economic indicators . In the U.S., information about consumer spending is published in the Consumer Price Index (CPI) . This important report enables the government and private businesses to make all sorts of policy decisions and predictions about product sales, prices, wages, hiring or reducing the workforce, inflation, and other matters related to commerce. Your job: Go to the Bureau of Labor Statistics CPI FAQs (stats.bls.gov/cpi/cpifaq. htm#Question_1) See also Investopedia, “The Consumer Price Index” (www.youtube.com/watch?v=vtx3UAEm3O0) (1:48). (Note: You can link to videos through www.c21student.com) 1. What is the CPI? _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ 2. What U.S. government agency produces the CPI? _ ______________________________________________________________________________ 3. How often is the CPI produced? _ ______________________________________________________________________________ 4. The CPI represents changes in prices of what? _ ______________________________________________________________________________ 5. Who’s buying habits are tracked in the CPI? _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ 6. How is the CPI market basket determined? _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The CPI reflects spending patterns for two population groups: all urban consumers and urban wage earners and clerical workes. The CPI market basket is developed from detailed expenditure information provided by 7000 families and individuals on what they actually bought. Bureau of Labor Statistics monthly Consumer goods PRODUCT PREVIEW
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THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
COPYRIGHTED MATERIAL
EXPLORING 21st CENTURY SKILLS AND ISSUES
7. List the consumer goods and services the CPI covers in its “basket.” _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ 8. How does the Department of Labor define inflation? _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ 9. The CPI used as an economic indicator of what, specifically? (Click on: As an economic indicator; More.) _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ 10. What does the Consumer Confidence Index (CCI) measure? Why does it matter how the consumer feels? _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ BONUS: What is inflation and why are signs of inflation worrisome? (Investopedia “What is Inflation?” www.youtube.com/watch?v=Vi3Q1ypNw3M) A process of continuously rising prices or equivalent, of a continuously falling value of money. The CPI is the most widely used measure of inflation and is sometimes viewed as an indicator of the effectiveness of government economic policy. The CCI measures consumer sentiment about job security, savings, the economy and their overall financial outlook . How the consumer feels is important because it indicates whether and at what level they are consuming products and services. Consumer sentiment impacts business, government, and economic policies. If consumers are not confident about things like jobs, savings or other matters affecting their future , they will not spend money. That can cause the economy to stagnate and the GDP to fall . food and beverages, housing, apparel , transportation , medical care , recreation , education and communication other goods and services. PRODUCT PREVIEW
______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ Inflation is a sustianed increase in the prices of goods or services which erodes the value of money, reducing purchasing power.
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Lesson 1 | Look Out, You’re Surrounded!
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