In this activity, students will simulate an ideal market and discover the effects of demand-pull, cost-push, and government inflation.

Understanding Inflation

Does not involve much intense political discussion. Topics include social, corporate, or non-governmental problems.

Very Light

We use hundreds of products every day, from checking social media on our phones to driving in our cars to opening up the refrigerator for a snack.Every one of those products relies on small chips known as

. Tech companies like Apple and Nvidia design their own semiconductors but outsource the manufacturing to other companies which can produce them for cheaper. The world’s largest producer of semiconductors – Taiwan Semiconductor Manufacturing Co. (TSMC) – accounted for

 of global semiconductor manufacturing revenue in 2020. With so many of the world’s semiconductors coming from one place, any complication could spell disaster for the global market.

The pandemic in 2020 firmly qualified as that complication. Consumer behavior

 as people stayed home. Demand for personal electronics rose, and demand for vehicles fell. Semiconductor manufacturers like TSMC adjusted their production to reflect this shift in demand. But as the world emerged from the pandemic and demand rapidly increased, the semiconductor manufacturing industry was slow to catch up. The auto industry, which was unable to get the semiconductors it needs to meet its production needs, lost

 reliant on semiconductors to call on the Biden administration to subsidize American semiconductor manufacturing plants. However, at the time, these plants would take years to become operational, far too late to address the shortage. In addition to the mismatch between global demand and supply, Taiwan

, further hampering the supply of semiconductors: the industry uses

 to ensure its products remain sterilized. Entrusting so much of the global semiconductor production to a specific company and region is sure to draw criticism in the aftermath of the supply shortage. This, coupled with looming threats of Chinese influence in Taiwan, prompted the United States to pass the

 to bring the production of semiconductors to the United States and away from Asia.

Right

To what extent do you believe this current supply issue could create military conflict?

What does this article show you about how closely related economic and military issues are?

Semiconductors 101: Computer Chips Shortages Lead to National Security Concerns

Fox News

Fox News takes a look at the national security implications of the current chip shortage. Specifically, it focuses on how it translates into issues in U.S.-China relations.

Leans Left

How does this article highlight how vulnerable the auto industry is to supply chain disruptions?

A Tiny Part’s Big Ripple: Global Chip Shortage Hobbles the Auto Industry

New York Times (News)

This article examines the current semiconductor shortage’s impact on the auto industry.

Left

How helpful is building new factories to produce semiconductors when it is so expensive and time-consuming?

Why the Chip Shortage Hasn’t Been Fixed Yet

Slate

Slate examines the variety of causes for the current chip shortage, and when it is expected to be resolved.

Center

The video says that the pandemic isn’t the only reason for the current shortage. What other events have contributed to the lack of semiconductors?

Why the Global Chip Shortage Is Hard to Overcome

Wall Street Journal

Semiconductors are produced in fabrication plants, most of which are outside the U.S. The WSJ visits a fabrication plant to explore how the chips are made and how the shortage contributes to global supply chain issues.

How were the supply bottlenecks that currently exist in the semiconductor market created?

Do you think the Covid pandemic is responsible for the chip shortage, or did it just amplify existing problems with the supply chain?

How the Global Computer Chip Shortage Happened

CNBC

This video covers what semiconductors are, why they are so important to the global economy, and how their current shortage came to be. It also addresses American and Chinese efforts to become more independent in their manufacturing of semiconductors.

 with Taiwan and established official diplomatic ties with the People’s Republic of China (PRC) in 1979, many Taiwanese felt betrayed by the American government. As a response, Congress overwhelmingly passed the bipartisan 

 (TRA) just a few months later, effectively allowing the United States to treat Taiwan as a 

 from mainland China, albeit unofficially. Notably, the Act also requires the U.S. to provide Taiwan with the capabilities to defend itself. Under this agreement, the United States regularly provides 

Since Congress passed the TRA, U.S.-Taiwan relations have 

, particularly as the island has democratized. In 2018, Congress passed the 

 without any opposition, updating the TRA by loosening some of its restrictions on high-level meetings between American officials and their Taiwanese counterparts. China has 

 both laws, considering them violations of Chinese sovereignty.

Many foreign policy experts note the delicate balancing act between the TRA and the “One China” policy — U.S. recognition of the PRC as “the sole legal government of China.” While the United States abides by the policy, it 

 Chinese claims of sovereignty over Taiwan. Instead, it only 

 the Chinese position that Taiwan is part of China. While this difference may seem to have little meaning, this wording has served as the basis of the United States’ stance on the issue of Taiwan for decades, allowing it to adopt seemingly conflicting positions. The U.S. 

 to any violent attempts to change the status quo — the existing state of affairs — and advocates for a peaceful resolution to the dispute.

Although China has always maintained that Taiwan must reunite with the mainland at some point, the PRC has exerted increasing military and political pressure on the island, especially under Chinese President Xi Jinping. With growing frequency, the Chinese Air Force launches incursions into Taiwan’s 

 (ADIZ), a security buffer zone that extends beyond the island’s airspace. In 2021, Xi vowed to achieve “peaceful reunification,” yet Beijing has 

 using force to accomplish its goal. Taiwan, however, has 

 that only its people should decide their future and pledged to defend itself.

While the TRA mandates that the United States provide Taiwan with defense capabilities, the U.S. currently has no official position on if it would get militarily involved if China attempted to invade Taiwan — a policy known as “

.” Adopted after the U.S. established formal diplomatic ties with the PRC, American officials aim to simultaneously discourage a Chinese invasion through the threat of potential U.S. military involvement while also dissuading Taiwan from taking provocative steps like formally declaring independence. These policies, combined with the Three Communiqués and Six Assurances, represent the cornerstone of the American position on the issue of Taiwan.

Taiwan Relations Act

After the U.S. severed diplomatic ties with Taiwan, Congress passed the Taiwan Relations Act to maintain a robust unofficial relationship with the island.

Taiwan is an island in the western Pacific Ocean, roughly 

 off the coast of mainland China. While it has an extensive early history — including its times as a colony of various foreign powers such as the 

 — its 20th-century history is most relevant when discussing the modern geopolitical landscape.

After losing World War II in 1945, Japan turned control of Taiwan over to Nationalist China. However, China quickly devolved into 

, and in 1949, Communist forces under Mao Zedong ousted the Nationalist government and formed the People’s Republic of China (PRC). Most of the remaining Nationalists 

, including their leader Chiang Kai-shek, and established the Republic of China (ROC) in Taipei — the capital city of Taiwan.

Over the next few years, Taiwan claimed to be the 

 of both mainland China and the island — though they dropped their claims over the mainland in the early 1990s. Although its initial government was more democratic in form than in practice, the Taiwanese government made great strides toward becoming a truly republican system over its decades in exile. Today, it operates as a healthy 

While many nations initially continued to recognize the ROC as the rightful government of China, that changed as the PRC’s dominance over the mainland solidified. Beijing — the seat of the PRC’s government — 

 in the United Nations in 1971, and the United States 

 formal diplomatic ties with the PRC in 1979. Although it ended official relations with the ROC, the U.S. has continued its involvement with the Taiwanese since that time, mainly under the guise of the Taiwan Relations Act.

” policy, requiring nations to “recognize the government of the PRC as the sole legitimate government representing the whole of China” — a position 

 dispute. However, Taiwan has operated as a relatively autonomous state for decades, and there has never been an agreement on if or how these entities will reunite.

Birth of Taiwan

The roots of the China-Taiwan dispute lie in the island’s lengthy history, from the Chinese Civil War to the modern day.

Inflation & Supply Chains