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Chapter 3
Economic
Activity in a
Changing World
Section 3.1
U.S. Economic
History
Read to Learn
Describe the four types of economy that the
United States has experienced.
Describe what is shown by GDP, the
unemployment rate, rate of inflation, and the
national debt.
The Main Idea
Throughout the years, the U.S. economic system
has changed. Each change affected what was
produced and how people were employed. To
gauge the health of our economic system, we use
a variety of economic indicators.
Key Concepts
The Changing U.S. Economy
Measuring Economic Activity
Key Terms
gross domestic
product (GDP)
the total value of the goods and
services produced in a country
in a given year
standard of
living
the level of material comfort as
measured by the goods and
services that are available
Key Terms
inflation
a general increase in the price of
goods and services
deflation
a general decrease in the price of
goods and services
Key Terms
budget
deficit
when the government spends more on
programs that it collects in taxes
national
debt
the total amount of money a
government owes
Key Terms
budget
surplus
when a government’s revenue
exceeds its expenditures during a
one-year period
The Changing U.S. Economy
Sometimes major shifts in certain growth
areas can change the emphasis of the U.S.
economy.
The United States has experienced four major
economic shifts.
Graphic Organizer
Farming created
our agriculturebased economy
1600s
Bartering
and trading
created our
service-based
economy
1700s
The invention of computers
created the informationbased economy
1850s
The Industrial
Revolution started
the industrybased economy
1900s
Present
We live in the
information age,
but still rely upon
the other types of
economies
Unsung Heroes
Each nation’s economy has had its unsung
heroes and heroines.
One hero of the Industrial Revolution might
have been French-born Joseph Jacquard, who
conceived the Jacquard loom, a system for the
mass production of woven fabrics.
Measuring Economic Activity
Economic indicators measure things such as:
how much a country is producing
whether the economy is growing
how the economy compares to other
countries
Gross Domestic Product
Measuring gross
domestic product (GDP),
involves computing the
sum of goods and services
sold to businesses,
consumers, the
government, and other
countries.
gross domestic product
(GDP)
the total value of goods
and services produced in
a country in a given year
Standard of Living
The United States has
a high standard of
living because of its
productive workforce.
standard of living
the level of material
comfort as measured by
the goods and services
that are available
Graphic Organizer
Free Enterprise System
Wealth is
created by
businesses
Benefits to the Community
Businesses
pay taxes
Businesses
provide jobs
Unemployment Rate
The unemployment rate measures the number
of people who are able and willing to work but
cannot find work during a given period.
Rate of Inflation
With inflation,
one’s buying power
decreases.
inflation
a general increase in the
price of goods and
services
Rate of Inflation
Causes of Inflation
War
Increase in the price of raw materials
Increase in expenses
Increase in salaries
Too much money circulating in the economy
Rate of Inflation
Deflation can occur
when the supply of
goods is greater than
the demand.
deflation
a general decrease in
the price of goods and
services
Graphic Organizer
Deflation
Economy produces more goods than people want.
Sellers lower prices.
Sellers cut production.
People have less money to buy goods.
Demand continues to go down.
National Debt
To pay for a budget
deficit, governments
borrow money from
the public, banks, and
other countries.
budget deficit
when the government
spends more on programs
than it collects in taxes
National Debt
If the national debt
gets too large, a
nation can become
dependent on other
nations or unable to
borrow money.
national debt
the total amount of money
a government owes
National Debt
In the late 1990s,
the United States
experienced a
budget surplus.
budget surplus
when a government’s
revenue exceeds its
expenditures during a oneyear period
You are a purchasing agent for a large furniture
manufacturer. You have received several bids from
lumber companies for a supply of teak, a very
dense and decay-resistant type of wood. The
lowest bid comes from a lumber company that has
been known to abuse the environment.
Decision Making How does the lumber company’s
reputation affect your decision? Explain your
answer.
Answer
Students might suggest that all aspects of the
company’s reputation should be considered before
making a decision to buy from the company.
1. When did the service-based economy begin?
The service economy started in colonial times,
when colonists traded among themselves for
services.
2. What do economic indicators measure?
Economic indicators measure the economic
health of the nation.
3. What is the difference between a budget
surplus and a budget deficit?
A budget surplus occurs when revenue is more
than expenses whereas a budget deficit occurs
when expenses are more than revenue.
End of
Chapter 3
Economic
Activity in a
Changing World
Section 3.1
U.S. Economic
History