Transcript Slide 1
Key Terms • Gross Domestic Product (GDP)- Total value of the goods and services produced in a country in a given year • Standard of Living- Amount of goods and services the average citizen can buy. • Inflation- A general increase in the cost of goods and services. • Deflation-General Decrease in the cost of goods and services. Key terms continue • Budget deficit- difference between when the government spends more on programs than it collects taxes. • National Debt-total amount of money a government owes • Budge Surplus-government’s revenue exceeds its expenditures during a one year period • Business Cycle- A rise and fall of economic activity over time Key terms continue again • Prosperity- A peak of economic activity • Recession- Economic activity slows down • Depression- A deep recession that affects the entire economy and lasts several years • Recovery- A rise in business activity after a recession or depression Historical Basis of Economic Systems • 4 types of economy in the entire Us is agriculture, service, and information. During the Colonial era, people lived off the land which is the basis of the agricultural economy today. Service economy is rooted in colonial era too, with early colonist working together and often bartering for necessary services. • The industrial economy is rooted in mid 1800’s, when society relied more on machinery to produce goods. The info economy has boomed, as the internet became an integral part of doing business. Influences on Economics • In the realm of economics, the wealth of nations rises and falls through periods of war, recession, prosperity. Measuring an economic system's activity greatly impacts everyone. Measuring Economic Activity • Figures are used to measure economic performance. These figures are called economic indicators. • They measure things like how much a country is producing, whether its economy is growing, and how it compares to other countries. GDP • An important measure of a country’s economic health is its level of prosperity, or how much it produces. The us has a very high GDP compared to other countries. • The us produces so much more than other countries that it has a higher standard of living. In 1990’s, the GDP of the Us grew from, 5.5 trillion to almost 9 trillion. Unemployment Rate • Unemployment rate measures the number of people who are able to work but don’t have a job. Changes in unemployment rate show whether an economy is picking up or slowing down. • For example in 2003, the employment rates in Japan and the us were 5.2 and 5.9 percent. 1990-1999, the rate in the us remained at the same level while Japan it almost doubled. Rate of Inflation • Important economic strength is inflation. Like when wages go up, producers raise prices to pay for higher wages, and so on. Which may lead to hyperinflation. • However, Deflation can occur, like when an economy produces more goods than people want, it has to lower prices and cut production. The us tries to maintain a slow but steady rate of economic growth. National Debt • Main source of income for a government is taxes. They use it for programs like defense, education, and social security. When debt gets too high though, a nation can become dependent on other nations. • The government will probably use a surplus to cut taxes, reduce the national debt, or increase spending for certain programs. The Business Cycle • One entering the workforce, you could experience many ups and downs like making a lot of money, getting laid off, or having a temp job. Some changes happen cause of changes in the economy such as when wars begin, foreign competition, and changes in technology. • Over long periods of time these changes seem to form patterns. Like the us went through slumps during the 1930’s, 50’s, and 70’s.Sumps were always followed by a new wave productivity. Prosperity • Unemployment is low, production of goods and services is high, new businesses is open. That spreads throughout the economy. The 1990’s was a record period of prosperity. • Much was due to the low rate of inflation and the internet creating new business opportunities. Although, it doesn’t last. Recession • Spending decreases and so does the demand for products. A recession can actually affect only one industry, related industries, or spread to the entire economy. Depression • There is high unemployment during depression along with low production of goods and services which the state is affected by large numbers of people out of work. • Depressions are rare though but do happen like in 1929 when the stock market crash began and the beginning of the Great Depression. Recovery • During recovery, production starts to increase. Although a recovery can take a long time or it can happen quickly. Like in 1939 the us was only beginning to recover from the depression when WW2 began. • During the war, the us recovered much faster because of the demand for war production. When businesses recover, it gains and edge of competition. Profits increase, and economic activity soars.