Measuring the Economy

Bell RingerWrite Out Question + Answer

• Which of these best explains why state government leaders must carefully evaluate costs and benefits when developing budgets?

A. Taxes can usually be increased to meet needs.

B. Demand for services often exceeds tax revenues.

C. Demand for services is usually satisfied by federal spending.

D. State tax revenues are often matched by federal funds.

• Which of these best reflects how the federal government manages the economy through fiscal policy?

A. taxing and spendingB. buying and selling

securitiesC. controlling the money

supplyD. controlling interest rates

Objectives

1. Students will examine the business cycle.

2. Students will examine the different tools used to measure the United States economy.

Measuring the Economy

• What makes a baseball card valuable?– Fame/Popularity of

the Player– Scarcity (small supply)

Frank Thomas

Measuring the Economy

• Mint Condition Topps Mickey Mantle Rookie Card• $72,000!• If Topps had printed an

extra 30,000 and pulled them out of a vault today, what would happen to the value of the one’s already out there? – Their value would decrease

The Business Cycle

Lots of jobs and money

Hard to find a job and money is tight

How do we know if the economy is prosperous or in a depression?

Consumers spend their money to

buy products then production increases Spending slows and

jobs begin to decreaseIncrease in jobs and spending

3 Economic Goals of Government

1) Full Employment– Everyone has a job

2) Price Stability–Prices do not go up

or down dramatically

3) Economic Growth–Production and

Consumption increases

2 Conditions the Government Monitors• Both of these are BAD:

1.Inflation• The increase in the cost of goods

and services• Why should you care?

– The value of your $$$ goes down and it takes more $$$ to buy things.

2.Recession• A slowdown in the economy

– Government addresses this problem through fiscal policy

– Fiscal Policy is government taxing and spending

3 Ways to Measure the Economy1) Gross Domestic Product (GDP)

-Measures the goods and services produced in the countryGDP = Consumer Spending + Gov. Spending + Investments + Net Exports (Exports – Imports)

2) Unemployment Rate-% of people who want a job but can’t find one

3) Consumer Price Index-Measures the change in prices (3% average increase each

year)