chapter 19: section 1
DESCRIPTION
Chapter 19: Section 1. Measuring the ECONOMY. The Business cycle. Phase 1. General prosperity – economy going up People buying more goods and services Businesses producing more goods and services and hiring more employees. Phase 2. Boom period – economic activity at peak - PowerPoint PPT PresentationTRANSCRIPT
CHAPTER 19: SECTION 1
Measuring the ECONOMY
The Business cyclePhase 2
Boom Period – economic activity
at peak
Phase 3Economy starting
to slow down
Phase 4Recession –
production at lowest point
Phase 1General prosperity – economy going
up
Phase 1
General prosperity – economy going up People buying more goods and services Businesses producing more goods and
services and hiring more employees
Phase 2
Boom period – economic activity at peak Businesses working and selling at full
capacity
Phase 3
Economy starting to slow down People buying fewer goods and services Businesses cutting back production and
laying off workers; some forced out of business
Phase 4
RECESSION Production at lowest point High unemployment Reduced spending on goods and
services “A recession is when your neighbor
loses your job. A depression is when YOU lose your job. A recovery is when Jimmy Carter loses his job.” – Ronald Reagan
Phase 4.oh no (DEPRESSION)
1930s
FDR and the NEW DEAL
Fiscal Policy
The way the government taxes citizens and spends money
EXAMPLE: Government may spend money to try to keep the economy and businesses going. Bail out plans under OBAMA Goal: get demand up so businesses hire
people EXAMPLE: Government may cut taxes
Bush tax cuts Goal: stimulates production by giving people
more money to SPEND on goods and services
Monetary Policy
The way government regulates the amount of money in circulation
Controlled by the Federal Reserve System (the Fed) Acts as a bank for the banks Can raise and lower interest rates
http://www.frbsf.org/education/activities/chairman/
WARNING: printing too much money makes our money worth less and prices go up
Gross Domestic Product (GDP)
Total value, in dollars, of all the final goods and services produced within the nation each year
Does not include goods or services produced by American citizens or American-owned companies outside the United States
Inflation General rise in the prices of goods and services Prices go UP = Standard of Living goes DOWN We hope if this happens wages also go up. BUT
that is not always the case CONTROLLING INFLATION:
Higher interest rates makes it more expensive to borrow money and puts a damper on activity
Gov’t may reduce the money in circulation by raising taxes and cutting its own spending
Businesses can increase productivity (produce more goods an services) so that demand/prices goes down
Consumers can save more money and spend less PROBLEMS w/ CONTROLLING INFLATION
May increase unemployment Less people buy things
GOVERNMENT BUDGET GAMES
http://www.marketplace.org/topics/economy/budget-hero
http://crfb.org/stabilizethedebt/
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html