3.1- US Economic History/3.2- The Business Cycle

inflation rate

% by which the average level of prices in an economy rises

unemployment rate

% of the unemployed workforce looking for work

Deflation

A general decrease in the cost of goods and services

Inflation

A general increase in the cost of goods and services

Budget Surplus

A situation in which a government's revenue exceeds its expidentures during a one-year period

Why might deflation be a bad thing?

Deflation can be a bad thing because as a result, people have less money to buy goods, so the demand continues to go down.

Explain how individuals and the government influence the economy.

Individuals have an enormous role in the market for goods and services. The Federal Reserve informally called "the Fed" is a government agency that guides the economy by regulating the amount of money in circulation, controlling interest rates and controlling the amount of money loaned. State and local governments may also take steps to influence their local economies.

Why is inflation especially difficult for retired people?

Inflation can be caused by increases in the costs of raw materials, expenses, and salaries. It can occur after a war because scarce resources were transferred to the war effort. Inflation can also occur when the government allows too much money to circulate in the economy.

Would the cars made in this country by a foreign-owned economy be included in GDP? Why or why not?

The cars made in this country by a foreign-owned economy would not be included in GDP for the US, but for the foreign country.

Standard of Living

The level of material comfort as measured by the goods and services that are available

Describe the four stages of the business cycle.

The rise and fall of economic activity over time is called the business cycle. There are four stages of the business cycle- prosperity, recession, depression, and recovery. Prosperity is a peak of economic activity. During a recession, economic activity slows down. A depression is a deep recession that affects the entire economy and lasts for several years. A recovery is a rise in business activity after a recession or depression.

National Debt

The total amount of money a government owes

Gross Domestic Product (GDP)

The total value of the goods and services produced in a country in a given year

Describe what is shown by GDP, unemployment rate, the rate of inflation, and national debt.

The total value of the goods and services produced in a country in a given year is called its gross domestic product (GDP). GDP is one of the most important indicators of the status of an economy. To calculate the GDP, economists compute the sum of goods and services sold to businesses, consumers, the government, and other countries. Inflation is a general increase in the price of goods and services. The rate of inflation is the % by which the average level of prices in an economy. With inflation, one's buying power decreases because it costs more to buy goods and services. The unemployment rate measures the number of people who are able and willing to work but can't find work during a given period. The total amount of money a government owes is its national debt.

Why are people who are unemployed but not looking for work not included in the unemployment figures?

They could be dealing with a number of issues- family problems, laid off, retirement- not a part of the active workforce, someone unemployed might be expecting a baby or be on medical leave.

Budget Deficit

When the government spends more on programs than it collects in taxes

Which would be included in GDP: babysitting at home or working at a day-care center?

Working at a day-care center would be included in GDP because it is a service provided for people who need their kids looked after for profit funded by the government.

policy

a definite course or method

Federal Reserve

a government agency that guides the economy by regulating the amount of money in circulation, interest rate and money

Period

a portion of time determined by some recurring phenomenon

peak

highest level of economic activity in a cycle

economic indicators

important statistics in regard to economy

Depression

is a deep recession that affects the entire economy and lasts for several years

Recovery

is a rise in business activity after recession or depression

Recession

is a slowdown in economic activity

Prosperity

is the peak of economic activity

trough

lowest level of business in a cycle

enormous

marked by extraordinarily great size, number or degree

contraction

noticeable drop in the level of activity

Describe the four types of economic shifts the United States has experienced.

prosperity, recession, depression, and recovery

Four stages of economic cycle

prosperity, recession, depression, and recovery

expansion

rise in business activity

Emphasis

special importance or significance

Sum

the result of adding numbers

Business Cycle

the rise and fall of economic activity over time

Shift

to change the place, position, or direction of

economic fluctuations

ups and down of economic activity