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Chapter 19: Section 1

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

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Chapter 19: Section 1

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  1. Chapter 19: Section 1 Measuring the ECONOMY

  2. The Business cycle

  3. Phase 1 • General prosperity – economy going up • People buying more goods and services • Businesses producing more goods and services and hiring more employees

  4. Phase 2 • Boom period – economic activity at peak • Businesses working and selling at full capacity

  5. 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

  6. 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

  7. Phase 4.oh no (DEPRESSION) 1930s FDR and the NEW DEAL

  8. 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

  9. 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

  10. 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

  11. 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 moneyand 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

  12. 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

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