Transcript Lesson 25 - TeacherWeb

Developing Fiscal Policy
Key Questions:
• How is the performance of the economy measured?
• How do inflation and recession affect the economy?
Student Objectives:
• explain how the Consumer Price Index (CPI), the unemployment rate
and the Gross Domestic Product (GDP) measure economic
performance (4.1.4h)
• explain how economic instability, including periods of growth and
recession is a part of the free enterprise system (4.1.4i)
• explain how inflation reduces buying power and may contribute to
a slow down in the economy (4.1.4j)
• CPI (Consumer Price Index) - A measure of the
overall price level in the economy.
• recession A slowdown in economic activity.
• GDP (Gross Domestic Product) - the total dollar
value of all final goods and services produced within
a country's borders in a given time period.
• business cycle - A measure of the level of activity of
a nation's economy including periods of economic
growth and decline.
• unemployment rate Measures the percentage of
people who want a job, but cannot find one.
• Please pick up all the handouts on the
front desk.
• Complete the HSA Warm-Up.
• Get out your homework (Lesson 25 Key
Term definitions).
• Study for Assessment #8
• Use study guide and notes on Google Classroom.
• Complete the Vocabulary.com Assignment for
Unit 4
• Check Google Classroom for the code to join (if
you have not done so already).
• The economy is constantly changing. Sometimes, our economy is
prosperous with a lot of jobs and money to go around. Other
times it is hard to find a job and money is tight.
• As a result of fluctuations in the economy, prices, the value of
goods and services and unemployment can increase or
decrease. The government monitors these changes.
This lesson explores the three economic indicators of economic
performance and how inflation and economic instability affect the
economy.
• The economy is the system of production
(making things), distribution (selling things),
and consumption (buying things).
• supply
• the amount of a commodity, product, or
service available
• demand
• the desire of buyers for it, considered as
factors regulating its price
• The demand for trading cards of famous baseball
players is very high. If this is coupled with a small
supply, then the cards have a higher value. For
example, a 1990 Topps Frank Thomas baseball
trading card was printed without his name on the front.
The error was quickly realized and fixed. The original
cards (in short supply) sell for more than $600 a piece.
The corrected card sold for $2 in 1990. Mickey Mantle
baseball cards are among the most collectable.
• If the trading card company decided to print more
Mickey Mantle cards, would the value of the originals
be as high?
• If the trading card company decided to print more Mickey
Mantle cards, would the value of the originals be as high?
Answer:
• No. If more cards were printed (increasing the supply), the
cards would not be worth as much.
• Therefore, supply and demand are inversely related.
• Gross Domestic Product (GDP) measures the value of all goods
and services produced in the country.
• The government uses information from GDP to measure the
productivity of the economy.
• The economy is always changing. It follows an up and down pattern
called the business cycle.
• Definition: A measure of the level of activity of a nation's
economy including periods of economic growth and decline.
• The business cycle is like a roller coaster.
• The economy can improve and reach a high point (peak):
• economic prosperity, a lot of jobs and money to go around
• The economy can also reach a low point (trough):
• economic depression, it is hard to find a job and money is
tight
To ensure the health of our economy, the government
wants:
• full employment - everyone has a job
• price stability - prices that do not fluctuate up or down
drastically
• economic growth - production and consumption
increases
• The government’s use of taxation and spending to influence and help
stabilize the economy
• It involves the ways in which the government adjusts its spending levels
and tax rates to monitor and influence the nation's economy
• Fiscal policy: always connected to spending and taxing!!
TAXATION
• The government would raise taxes if it wanted
the people to spend less. This would REDUCE
the money supply.
SPENDING
• The government spends money when it wants to
INCREASE the money supply and decrease the
unemployment rate. This is done when a
country is in a recession or depression.
• Inflation and recession are two conditions that the
government attempts to monitor and avoid.
• inflation: the increase in the cost of goods and services
• When inflation occurs, the value of your money is goes
down and it takes more money to buy things.
• recession: a slowdown in the economy
The condition of the economy is determined by looking at
three economic indicators.
• CPI (Consumer Price Index)- A measure of the overall price level in
the economy.
• GDP (Gross Domestic Product)- The total dollar value of all final
goods and services produced within a country's borders in a given
time period.
• Unemployment rate- Measures the percentage of people who want
a job, but cannot find one.
• The Consumer Price Index (CPI) is the average price level of a
fixed basket of goods and services purchased by consumers.
• Used by the government to monitor the rate of inflation
• A degree of inflation happens every year. Prices generally increase by
about 3%.
Through the CPI, the government monitors the price of:
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Housing
Medical Care
Food
Entertainment
Transportation
Clothing
• Gross Domestic Product (GDP) measures the value of all goods
and services produced in the country.
• The government uses information from GDP to measure the
productivity of the economy.
ECONOMIC EXPANSION
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Unemployment rate is low- people have jobs
People have more money
The CPI is rising
The GDP is rising
Expansion: economic upturn
ECONOMIC DECLINE
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Unemployment rate is high
People have less money
The CPI is falling
The GDP is falling
Recession- economic downturn