Unit 3 Government involvement in the Economy

Recession

A decline in GDP for 6 consecutive months.

Consumer Price Index (CPI)

A measure of price changes in consumer good/services. Sometimes called cost of living index. Main measure of inflation.

Per Capita Gross Domestic Product

A nation's real GDP divided by its population. A good measure of society's standard of living.

Inflation

An increase in the overall price levels of goods/services produced in an economy.

Seasonal

Employment depends on the time of year (holidays, summer, etc.).

Oligopoly

Few producers High barriers Similar products Some control over prices (because there are few firms in the market) Example: Airline, Soda

Tax and Spend

Fiscal policy uses the government's power to _____________ to stabilize and regulate the economy.

Demand-pull inflation

Inflation caused by a "pull" on prices- consumers demand more goods/services than an economy can produce, driving prices up.

Cost-push inflation

Inflation caused by a "push" on prices- rise cost of production causes prices to rise.

Cyclical

Laid off because the economy is doing poorly.

Frictional

Looking for the right job or first job.

Perfect Competition

Many Producers Few barriers, easy to get in Identical products No control of prices (Supply and Demand control prices) Example: Produce

Monopoly Competition

Many producers Few barriers, low start-up cost Differentiated products, distinguish themselves Some control over price, because they control brands/quality Example: Grocery store, Bank, Nike

Regulate money supply and interest rates

Monetary policy uses the Fed's power to ________________ to stabilize and regulate the economy.

Monopoly

One producer controls the industry or market High barriers that limit or prevent other producers from entering Unique product, no substitutes, nothing similar Substantial control over prices, price setters. Example: Natural, Resource, Legal

Structural

Replaced by technological advancement.

Peak

The high point of the business cycle at which GDP is at its highest but the economy begins slowing down is called the _______.

Trough

The low point of the business cycle is called the _______________.

Gross Domestic Product (GDP)

The market value of all final goods and services produced within a country during a given period of time.

Unemployment

The percentage of the labor force that is not employed, but is actively seeking work.

Contractionary

This fiscal policy increases taxes and cuts spending to slow economic growth.

Tight money

This monetary policy decreases the amount of money in the money supply and raises interest groups.

Fiscal

This policy is controlled by congress and the federal government, state legislatures and the state government, and/or the city council and the city government.

Monetary

This policy is controlled by the Federal Reserve.

Fiscal Policy

Uses government's power to tax and spend, to get an economy moving again or address inflation.

Monetary Policy

Uses the Federal Reserve's power to regulate the money supply and interest rates to dampen inflation or to stimulate growth.

Contraction

When GDP is failing and unemployment is rising, the economy is in the __________ stage.

Expansion

When the economy starts recovering, GDP goes back up and unemployment begins decreasing the economy is in the ____________ stage.

Gross Domestic Product (GDP)

Which economic indicator is a measure of the market value of all final goods and services produced within a country within a time period?

Unemployment

Which economic indicator measures only individuals out of work and actively looking for work?

Per capita GDP

Which economic indicator measures the market value of all final goods and services produced within a country within a time period and then divides that by the country's population?

Consumer Price Index (CPI)

Which economic indicator uses changes in price of consumer goods to track inflation?