Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Nominal rigidity wikipedia , lookup
Steady-state economy wikipedia , lookup
Monetary policy wikipedia , lookup
Economics of fascism wikipedia , lookup
Money supply wikipedia , lookup
Business cycle wikipedia , lookup
Fiscal multiplier wikipedia , lookup
Long Depression wikipedia , lookup
Transformation in economics wikipedia , lookup
IV. ECONOMIC INDICATORS ► LEARNING OBJECTIVE 5 Discuss the three major indicators of economic conditions. (Text pages 56-60) A. Understanding economic indicators helps you assess the nation’s economy. B. Gross Domestic Product 1. GROSS DOMESTIC PRODUCT (GDP) is the total value of goods and services produced in a country in a given year. 2. GDP includes the output of both domestic and foreign-owned companies as long as the companies are located within the U.S. 3. GROSS NATIONAL PRODUCT (GNP) is similar to GDP, but only counts Americans producing products in the country, not other foreign nationals. 4. A major influence on the growth of GDP is how productive the work force is. 5. The total U.S. GDP in 2006 was over $13 trillion. C. Unemployment 1. The UNEMPLOYMENT RATE is the number of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks. 2. In recent years, the unemployment rate has been as low as 3.9%. 3. There are four types of unemployment: frictional, structural, cyclical, and seasonal (as seen in Text Figure 2.6.). POWERPOINT 2-10 Economic Indicators (Refers to text pages 56-60) BONUS INTERNET EXERCISE 2-2 Exploring the Gross Domestic Product This Internet exercise asks students to gather data regarding the gross domestic product (GDP) of the United States from the Census Bureau’s Website. (See complete exercise on page 2.Error! Bookmark not defined. of this manual.) TEXT FIGURE 2.6 Types of Unemployment and U.S. Unemployment Rates from 1989 to 2007 (Box in text on page 58) 4. The U.S. tries to protect those who are unemployed because of recessions, industry shifts, and other cyclical factors. D. PRICE INDEXES are indexes of the changes in goods and prices of goods and services based on the prices of the same goods and services from a previous period. 1. The price indexes help measure the health of the economy. 2. The Consumer Price Index measures the prices of products from month to month so economists can measure inflation. a. INFLATION refers to a general rise in the prices of goods and services over time. b. HYPERINFLATION occurs when inflation increases beyond 50% in a given time period. c. STAGFLATION occurs when unemployment rates and inflation rates are high. d. DEFLATION is a situation in which prices are actually declining, occurring when countries produce so many goods that people cannot afford to buy them all. 3. Consumer Price Index (CPI) a. The CONSUMER PRICE INDEX (CPI) consists of the monthly statistics that measure the pace of inflation or deflation. b. It tracks the price of 400 goods. c. Some wages, rents, government TEXT FIGURE 2.7 Economic Indicators for the U.S. Economy (Box in text on page 59) BONUS CASE 2-3 The Rule of 72 No formula is more useful for understanding inflation than the rule of 72. Basically, the rule allows you to quickly compute how long it takes the cost of goods and services to double at various compounded rates of growth. (See complete case, discussion questions, and suggested answers on page 2.Error! Bookmark not defined. of this manual.) LECTURE LINK 2-4 Other Economic Indicators In addition to the GDP, CPI, and unemployment indicators, there are other economic indicators that can forecast changes in the economy. (See complete lecture link on page 2.Error! Bookmark not defined. of this manual.) benefits, and interest rates are based on the CPI. 4. The PRODUCER PRICE INDEX (PPI) is similar to the consumer price index, but measures prices at the wholesale level. E. Fiscal and Monetary Policy 1. FISCAL POLICY refers to the federal government’s efforts to keep the economy stable by increasing or decreasing taxes or government spending. a. The first half of fiscal policy involves taxation. i. High tax rates may discourage small business ownership. ii. Low tax rates would tend to give the economy a boost. b. The second half of fiscal policy involves government spending. i. The national deficit is the amount of money that the federal government spends over and above the amount it gathers in taxes. ii. The NATIONAL DEBT is the sum of government deficits over time. c. One way to lessen the annual deficits is to cut government spending, but there is a continuing need for social programs and for military spending. 2. In an economic boom, businesses do well. TEXT FIGURE 2.8 Government Revenues and Expenditures (Box in text on page 61) POWERPOINT 2-12 Fiscal and Monetary Policy (Refers to text pages 62-64) CRITICAL THINKING EXERCISE 2-4 Balancing the Federal Budget Can your students balance the federal budget? This exercise presents actual 2006 figures and asks them to make adjustments in spending and income to do just that. (See complete exercise on page 2.Error! Bookmark not defined. of this manual.) BONUS INTERNET EXERCISE 2-3 The Power of the Fed The Federal Reserve is one of the most powerful institutions in our economy. This Internet exercise directs students to explore the Fed website. (See complete exercise on page 2.Error! Bookmark not defined. of this manual.) POWERPOINT 2-11 Fiscal and Monetary Policy (Refers to text pages 60-62) TEXT FIGURE 2.9 a. 3. A RECESSION occurs when the GDP falls for two consecutive quarters. b. A DEPRESSION is a severe recession, when the GDP falls for several quarters, and recovery is a long time off. c. The Great Depression in the late 1920s and 1930s in the U.S. lasted almost an entire decade. d. RECOVERY is an improvement in the economy, marking the end of a recession or decline. MONETARY POLICY is the management of the monetary supply and interest rates. a. The Federal Reserve System (the Fed) is a semiprivate organization that decides how much money to put into circulation. b. Using interest rates i. When the economy is booming, the Fed tends to raise interest rates. ii. Lowering interest rates encourages more business borrowing. iii. Raising and lowering interest rates helps control the rapid ups and downs of the economy. c. The Federal Reserve also controls the money supply. i. The more money the Fed makes available to businesspeople, the faster the The National Debt (Box in text on page 62) TEXT REFERENCE Ethical Challenge: Recon Still Cleaning Up After Katrina (Box in text on page 63) Hurricane Katrina is the worst natural disaster in U.S. history. This text box presents some of the failures and unethical practices that resulted from the government’s inadequate response to the storm’s destruction. It is a good overview of the role of government in disaster situations. LECTURE LINK 2-5 Controlling Your Personal Money Supply Controlling your personal money supply is harder than you may think. (See complete lecture link on page 2.Error! Bookmark not defined. of this manual.) TEXT REFERENCE Career Spotlight: Economics and You (Box in text on page 64) Although most of your students will not become economists, they will use economic concepts in their chosen career fields. This text box discusses how businesspersons use d. economy grows. ii. To slow the economy, the Fed lowers the money supply. The economic goal is to keep the economy growing. SELF CHECK QUESTIONS (Text page 64) 1. Name and discuss the three economic indicators. 2. What are price indexes? What do they have to do with the economy? 3. What is the difference between monetary policy and fiscal policy? economic indicators and principles on a daily basis. TEXT REFERENCE Real World Business Apps This text box continues the story of Ashon presented earlier in the text. Throughout the day Ashon recalled the news article and has done some basic research. He now understands how economic forecasts can help his Internet business. (Box in text on page 65)