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Chapter 3
Economic Activity in a Changing World
Vocabulary
Gross domestic product (GDP) –
Standard of Living –
Inflation –
Deflation –
Budget Deficit –
National Debt –
Budget Surplus –
Business Cycle –
Prosperity –
Recession –
Depression –
Recovery –
Learning Objectives
1. IDENTIFY how economic activity is measured.
2. EXPLAIN how inflation and deflation work.
3. DISCUSS the four phases of the business cycle.
Why Is This Important?
Economic activity affects everyday life. The history of the economy affects
industries and people today and tomorrow.
A
major purpose of an economic system is
________________________________________________________________
__________________________________
Figures
are used to measure economic performance.
Theses
figures are called ____________. They measure:
1.
2.
3.
Goods & Services that satisfy your wants and needs are the
_________output of an economy. They’re the ________of all the activity in the
country.
Measuring Economic Activity-Ways to Tell How an Economy is Doing
1.
2.
3.
4.
GDP
An important measure of a country’s economic health is its
_____________ ___________, or _________________ The total value of the
goods and services produced in a country in a given year is called its gross
domestic product.
The United States has a very ______ GDP.
Calculating GDP (4 main areas)
1.
2.
3.
4. Goods and services sold to other countries.
Unemployment Rate
The unemployment rate measures
________________________________________________________________
________________. Changes in the unemployment rate show whether an
economy is _______________________
Types of Unemployment
1.
2.
3.
4.
Rate of Inflation
 Inflation is a general _________________________________________
Inflation CAN happen when an economy is actually too ______________.
The ______ people are employed, the ________ people spend.
As demand goes ____ producers raise their prices.
To pay the higher prices, workers demand _________ wages.
When wages go up, producers ______________again to pay for the higher
wages.
Deflation –is a general _________________________.
When an economy produces more goods than people want, it has to lower
prices and cut production. As a result, people have less money to buy goods so
the demand continues to go down.
SUPPLY __ demand = deflation
National Debt
The main source of government income is __________. Tax money is used to
pay for ___________ like ______________.
The total amount of money a government owes is its ______________
Government Revenue __ Expenditures = surplus
Government Expenditure __Income = budget deficit.
The Business Cycle
Economies go through ups and downs as a result of _______ foreign
competition, and _______
Slumps in the economic activity were always followed by a new wave of
productivity. This rise and fall of economic activity over time is called the
business cycle.
Four Phases of the Business Cycle
1.
2.
3.
4.
Business Cycle Model Characteristics:
Prosperity
•
•
•
Low unemployment
Production is high
New businesses open
Recovery
•
•
•
Production starts to increase
People go back to work
Spending increases
Recession
•
•
•
Spending decreases
Demand increases
Unemployment rate increases
Depression
•
•
High unemployment
Low productivity
 Every phase of the business cycle affects the ________, industries and
__________.
 The economic ups and downs of one country ___________ too.
 Depressions are rare (one example of a depression in the United States
history is __________________