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Key Terms
• Gross Domestic Product (GDP)- Total
value of the goods and services produced
in a country in a given year
• Standard of Living- Amount of goods and
services the average citizen can buy.
• Inflation- A general increase in the cost of
goods and services.
• Deflation-General Decrease in the cost of
goods and services.
Key terms continue
• Budget deficit- difference between when
the government spends more on
programs than it collects taxes.
• National Debt-total amount of money a
government owes
• Budge Surplus-government’s revenue
exceeds its expenditures during a one
year period
• Business Cycle- A rise and fall of
economic activity over time
Key terms continue again
• Prosperity- A peak of economic activity
• Recession- Economic activity slows down
• Depression- A deep recession that affects
the entire economy and lasts several
years
• Recovery- A rise in business activity after
a recession or depression
Historical Basis of Economic
Systems
• 4 types of economy in the entire Us is
agriculture, service, and information. During the
Colonial era, people lived off the land which is
the basis of the agricultural economy today.
Service economy is rooted in colonial era too,
with early colonist working together and often
bartering for necessary services.
• The industrial economy is rooted in mid 1800’s,
when society relied more on machinery to
produce goods. The info economy has boomed,
as the internet became an integral part of doing
business.
Influences on Economics
• In the realm of economics, the wealth of
nations rises and falls through periods of
war, recession, prosperity. Measuring an
economic system's activity greatly impacts
everyone.
Measuring Economic Activity
• Figures are used to measure economic
performance. These figures are called
economic indicators.
• They measure things like how much a
country is producing, whether its economy
is growing, and how it compares to other
countries.
GDP
• An important measure of a country’s
economic health is its level of prosperity,
or how much it produces. The us has a
very high GDP compared to other
countries.
• The us produces so much more than other
countries that it has a higher standard of
living. In 1990’s, the GDP of the Us grew
from, 5.5 trillion to almost 9 trillion.
Unemployment Rate
• Unemployment rate measures the number of
people who are able to work but don’t have a
job. Changes in unemployment rate show
whether an economy is picking up or slowing
down.
• For example in 2003, the employment rates in
Japan and the us were 5.2 and 5.9 percent.
1990-1999, the rate in the us remained at the
same level while Japan it almost doubled.
Rate of Inflation
• Important economic strength is inflation.
Like when wages go up, producers raise
prices to pay for higher wages, and so on.
Which may lead to hyperinflation.
• However, Deflation can occur, like when an
economy produces more goods than
people want, it has to lower prices and cut
production. The us tries to maintain a slow
but steady rate of economic growth.
National Debt
• Main source of income for a government is
taxes. They use it for programs like
defense, education, and social security.
When debt gets too high though, a nation
can become dependent on other nations.
• The government will probably use a
surplus to cut taxes, reduce the national
debt, or increase spending for certain
programs.
The Business Cycle
• One entering the workforce, you could
experience many ups and downs like
making a lot of money, getting laid off, or
having a temp job. Some changes happen
cause of changes in the economy such as
when wars begin, foreign competition, and
changes in technology.
• Over long periods of time these changes
seem to form patterns. Like the us went
through slumps during the 1930’s, 50’s,
and 70’s.Sumps were always followed by
a new wave productivity.
Prosperity
• Unemployment is low, production of goods
and services is high, new businesses is
open. That spreads throughout the
economy. The 1990’s was a record period
of prosperity.
• Much was due to the low rate of inflation
and the internet creating new business
opportunities. Although, it doesn’t last.
Recession
• Spending decreases and so does the
demand for products. A recession can
actually affect only one industry, related
industries, or spread to the entire
economy.
Depression
• There is high unemployment during
depression along with low production of
goods and services which the state is
affected by large numbers of people out of
work.
• Depressions are rare though but do
happen like in 1929 when the stock market
crash began and the beginning of the
Great Depression.
Recovery
• During recovery, production starts to increase.
Although a recovery can take a long time or it
can happen quickly. Like in 1939 the us was only
beginning to recover from the depression when
WW2 began.
• During the war, the us recovered much faster
because of the demand for war production.
When businesses recover, it gains and edge of
competition. Profits increase, and economic
activity soars.