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
