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Measuring the Economy 23.2 Rate yourself! • You will rate yourself according to the homework rubric for EACH poster! • At the end you will give yourself and OVERALL rating for the assignment. – Do this on the back in a blank box next to your name! • Remember: in order to get a 4 it must be ALL the same information I have and in your own words. If you missed something you have to 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. 2008 Real GDP 2009 20 cars x $1,000 = 20 cars x $2,000 = GDP $20,000 GDP $40,000 • 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)! 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 are the changes in taxes and government spending. Fiscal Policy • Political differences often prevent effective use of fiscal policy. • What if they increase taxes? – We have less money to spend might equal recession • What if the decrease taxes? – We have more money to spend might equal expansion? • Inflation is the constant increase in the prices of goods and services. Price Stability • 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 Growth EVERYONE write this in one of your BLANK boxes!!! • To experience growth we 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 period of expansion NOW WORK ON TEST REVIEW AND VOCAB!!! • Vocab 23.1, 23.2, 26.1, 26.2 • Test study guide