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USA National Standards for Concept "Human Capital"

NATIONAL STANDARD 1 - SCARCITY: Productive resources are limited. Therefore, people can not have all the goods and services they want; as a result, they must choose some things and give up others.

Students will be able to use this knowledge to: Identify what they gain and what they give up when they make choices.

Students face many choices every day. Is playing video games the best use of their time? Is working at a fast-food restaurant better than the best alternative job or some other use of their time? Identifying and systematically comparing alternatives enables people to make more informed decisions and to recognize often overlooked relevant consequences of choices they or others make.

Some students believe that they can have all the goods and services they want from their family or from the government because goods provided by family or by governments are free. But this view is mistaken. Resources have alternative uses, even if parents or governments own them. For example, if a city uses land to build a football stadium, the best alternative use of that land must be given up. If additional funds are budgeted for police patrols, less money is available to hire more teachers. Explicitly comparing the value of alternative opportunities that are sacrificed in any choice enables citizens and their political representatives to weigh the alternatives in order to make better economic decisions. This analysis also makes people aware of the consequences of their actions for themselves and others, and could lead to a heightened sense of responsibility and accountability.

You can find additional online lessons on US Standard 1 from the Council for Economic Education Website.

INTEREST RATES: Students will understand that: Interest rates, adjusted for inflation, rise and fall to balance the amount saved with the amount borrowed, which affects the allocation of scarce resources between present and future uses.

Students will be able to use this knowledge to: Explain situations in which they pay or receive interest, and explain how they would react to changes in interest rates if they were making or receiving interest payments.

Interest rates influence the borrowing and saving of business investors, consumers, and government agencies. Most people are unfamiliar with interest rates until they wish to borrow money for a major purchase such as an automobile, college education, or a house. When they enter the market for credit they encounter an unfamiliar price (the interest rate) offered by an unfamiliar business (a financial institution). It is necessary for students to understand that interest rates are determined by market forces that balance savings and borrowing. For many people, interest rates can represent significant financial costs and significant financial benefits over a lifetime.

It is also important for students to understand the incentive effects of interest rates. Interest payments compensate savers for postponing current consumption; they compensate lenders for the risk that borrowers might default on their loans; and they cover the cost of expected inflation over the term of the loan.