Measuring the Economy23.2

Rate yourself!• You will rate yourself according to the homework

rubric for EACHEACH poster!

• At the end you will give yourself and OVERALL OVERALL rating for the assignment. – Do this on the back in a blank box next to your Do this on the back in a blank box next to your

name!name!

• Remember:Remember: in order to get a 4 it must be ALLALL the same information I have and in your own words. If you missed something you have to If you missed something you have to rate yourself a 2! rate yourself a 2!

Economic Growth

• Growth is good for everyone! • When the economy is growing more

people have jobs, businesses produce more, we have more goods and service and money to purchase them with.

Real GDP

• Real GDP shows an economy’s production by taking out prices. This helps to see if we really made more.

• When Real GDP goes up the economy is growing!

• When Real GDP goes down the economy is declining (getting worse)!

2008 2009

20 cars x $1,000 =

GDP $20,000 20 cars x $2,000 =

GDP $40,000

Business Cycle

• The economy grows over time, but not at a constant rate.

• The ups and downs of the economy are called the business cycle.

• Goods time and bad times won’t last forever so plan!

Expansions• This is when Real GDP

goes up. The economy is getting better!

• This is a time when the economy is growing by a little or a lot it doesn’t matter.

• An expansion is longer than a recession. Thank goodness!

Recession• This is when Real GDP

goes down for 6 months or more. The economy is getting worse!

• A recession is shorter than expansion.

• If it becomes severe then it is a depression.

Unemployment• Civilian labor force is everyone

over the age of 16 that is working or looking for work.

• Unemployment Rate is the percent of people who are not working but are looking for work.

• When unemployment rate drops the economy grows! We want LOW unemployment.

• High unemployment=recession

• Low unemployment=expansion

Fiscal Policy• Fiscal policy are the changes in taxes and government spending.

• Political differences often prevent effective use of fiscal policy.

• What if they increase taxes? – We have less money to spend

might might equal recession• What if the decrease

taxes? – We have more money to spend

mightmight equal expansion?

Price Stability• Inflation is the constant increase in the prices of goods and services.

• As inflation increases, your money will buy you less. What you could buy for $1 last month is now $1.50!

• Consumer Price Index is a popular measure of the price levels of 400 commonly used products. (like toilet paper!)

• Stable prices/no inflation=expansion

• Unstable prices/inflation= recession

Overall GrowthEVERYONE write this in one of your BLANK EVERYONE write this in one of your BLANK

boxes!!!boxes!!!

• To experience growth we needwe need:– Real GDP to increase– Lower unemployment rates– Stable prices without inflation– Government fiscal policy to help the market

continue to grow – Confidence in the market

– If these happen we will reach a If these happen we will reach a period of expansionperiod of expansion

NOW WORK ON TEST NOW WORK ON TEST REVIEW AND VOCAB!!!REVIEW AND VOCAB!!!

• Vocab 23.1, 23.2, 26.1, 26.2 • Test study guide