1 / 15

US GOVERNMENT TEST # 10

MACROECONOMICS. US GOVERNMENT TEST # 10. MACROECONOMICS. Analyzes interrelationships among sectors of the economy. MEASURING THE ECONOMY. Gross Domestic Product – dollar value of all goods and services produced by a nation in a given year. GDP=C+I+G+F C – personal consumption expenditures

metta
Download Presentation

US GOVERNMENT TEST # 10

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. MACROECONOMICS US GOVERNMENT TEST #10

  2. MACROECONOMICS • Analyzes interrelationships among sectors of the economy

  3. MEASURING THE ECONOMY • Gross Domestic Product – dollar value of all goods and services produced by a nation in a given year. • GDP=C+I+G+F • C – personal consumption expenditures • I – private domestic investment • G – government purchases and investments • F – next exports

  4. CONSUMER PRICE INDEX • Used to compare prices from different years • Indicators of the economy – rapid growth will cause inflation • Leading – business activities that tend to rise or fall before a change in economic activity – ex. New business, employment &construction • Coincident – business activities that change at the same time as economic activity –industrial production, industrial sales, & payrolls • Lagging – those activities that change after the initial changes in economic activity ex. – interest rates

  5. BUSINESS CYCLES • Graph showing the growth and decline of GDP over time • Expansion - Period of economic growth – high employment & business activities • Peak - Highest point of economic activities • Contraction - Period of economic decline – increasing unemployment & weak business activity • Trough - Economy “bottoms out” with bank failures, major reduction in goods & services, high unemployment • Recession – a brief period of economic inactivity -2 consecutive quarters with a decline in GDP • Depression - an extended period of economic inactivity

  6. EMPLOYMENT • Employment –those who have job & are working • Underemployment –those who have a job for which they are over qualified • Unemployment–those who want a job but don’t have one • Unemployment rate -% of the labor force unemployed that are actively seeking employment

  7. TYPES OF UNEMPLOYMENT • Frictional – “between jobs” • Cyclical – caused by the contraction of the business cycle. • Seasonal – annual changes in certain industries • Structural – changes in the economy that makes workers skills obsolete or useless

  8. INFLATION • Demand-Pull – prices rise due to an increase in demand • Cost-Push – prices rise because of an increase in production costs • Stagflation – high inflation & high unemployment at the same time

  9. ROLE OF THE GOVERNMENT • Spends • Invests • Employs • Settles disputes – National Labor Relations Board • Regulates businesses to preserve competition • Protects the consumer

  10. FISCAL POLICY • Taxes and Spending • Types of taxes – Source of Revenue • Progressive – income taxes • Recessive – sales tax • Proportional – takes in the same % of a person’s income • Expenditures • Deficit – spend more than is taken in • National debt – the amount that accumulates over time due to deficits • Crowding out effect – as the government borrows to cover its deficit, it reduces the amount that private individuals could borrow

  11. MONEY • Things used in exchange for goods and services, a store of value and a standard of value. • Barter – trading of goods for goods • Forms of money • Currency – paper and coins • Demand deposits – checking accounts • Time deposits – savings accounts • Near money – credit cards • Legal tender – things that have to be accepted by law for goods and services

  12. MONETARY POLICY • Controlling the money supply • Ex. - $10,000 deposit with a 10% required reserve will end with $10,ooo in reserves and $90,000 in loans • Federal Reserve System • 12 regional banks created by the Federal Reserve Act of 1913 • 7 member board appointed by the President and confirmed by the Senate to 14 year terms • Chairman is chosen by the same method • Decisions are not subject to government approval

  13. TOOLS OF THE FEDERAL RESERVE • Reserve Requirement -% banks must keep in reserve and not loaned out • Discount rate – interest rate banks must pay to borrow money from the FED • Buying and Selling of Government bonds • Too rapid growth causes inflation • Slow growth causes unemployment

  14. Easy money policy – promotes expansion of the money supply • Lower the reserve requirement • Reduce the discount rate • FED buys government bonds • Tight money policy – restricts the growth of the money supply • Raise the reserve requirement • Raise the discount rate • FED sells government bonds

More Related