Transcript Chapter 3
Chapter 3 Section 2: Promising Growth & Stability Tracking Business Cycles • Macroeconomics- study of the behavior & decision making of entire economies –Examines major trends for the economy as a whole • Microeconomics- study of behavior & decision making of small units such as individuals, families, households, & businesses • One way economies measure economic well being is by calculating the nation’s Gross Domestic Product (GDP) –Total value of all final goods & services provided in an economy –Economics follows a country’s GDP & other key stats to predict business cycles • Period of macroeconomic expansion followed by a period of contraction –Cycles are major fluctuations –May last less than a year or continue for many years –Government plays a role in attempting to prevent wild swings in economic behavior Promoting Economic Strength • Government creates public policies that aim to stabilize the economy • Policy makers pursue 3 main outcomes as they seek to stabilize the economy –1. High employment –2. Steady growth –3. Stable prices • Employment –Aim to provide jobs for everyone who is able to work –4-6% is the desirable unemployment rate • Growth –Each generation should enjoy a higher standard of living than that of the previous generation –Economies must grow to provide additional goods & services –GDP is a measure of such growth • Stability –Gives consumers, producers, & investors confidence in the economy & in our financial institutions, promoting economic freedom & growth –One indicator is general price levels • Government aim is to help prevent sudden, drastic shifts in prices • A surge in overall prices puts a strain on consumers –In either direction, major fluctuations in price levels can cause a macroeconomics chain reaction that policymakers seek to avoid • Another sign is the health of the nation’s financial institutions –Federal government monitors & regulates American banks & other financial institutions –Produces hundreds of regulations & has the power to enforce them • Protect bank deposits & retirees’ pensions • Investigate fraud & manage interest rates & the flow of money through the economy Economic Citizenship • Through the way it spends money & influences other macroeconomics factors, the government helps to compensate for the typical swings of the business cycle • As a voter, your elective choices will help guide government policy Technology & Productivity • Increase productivity through work ethic Technological Progress • Improvements allow the U.S. economy to produce more output from the same or a smaller quantity of inputs or resources • Allows the U.S. economy to operate more efficiently & productively increasing GDP & giving U.S. businesses a competitive advantage in the world • Innovation makes some production processes & workers obsolete, these resources can be used in other ways The Government’s Role • Provides incentives for innovation • Federal agencies fund scores of research & development projects at universities • Governments own research institutions, also produces a steady stream of new technology that makes their way into the marketplace • EX: NASA –Created spin off producers with commercial users • Muscle stimulators, scanners that see invisible flames • Offers inventors the possibility of making huge profits in the free market –Grants, patents, & copyrights