Facts about the Economy

1. Facts about the Economy Michele Towne September 2009

2. Big Ideas • Every nation has an economic system which is the way the nation uses it resources to produce goods and services. • An economy grows when it produces goods and services at an increasing rate. • Is the U.S economy in a positive Position? Or a decline?

3. How Are Economies Measured? • Gross Domestic Product (GDP) • Value of all goods and services produced in a year. • Inflation • General Increase in the average level of prices in an economy • Consumer Price Index (CPI) • Measures the monthly changes in the price of about 400 goods and services( food, clothing, housing)

4. How Are Economies Measured? • Unemployment Rate • The percentage of people who are able to work and looking for work but don’t have jobs. • Personal Income • The income received through wages, profits, dividends, interest and other sources. • Economic Indicators Chart

5. Big Ideas • Economies don’t grow at the same rate every year. • Consumer confidence has a large effect on the economy.

6. Managing the Economy

7. Business Cycle Expansion = growth in consumer spending Recession = falling consumer confidence and less spending Back

8. Fiscal Policy – Taxes and Spending • In a rapidly growing economy– the government might want to slow down consumer spending. • Increase taxes • Cut back on government spending • In a declining economy – government might choose to spend more more of its own money or cut taxes. Back

9. Monetary Policy • The government’s effort to stabilize the economy by managing interest rates and the amount of money available for loans. • The Federal Reserve • Reduce interest rates to make loans less expensive. • Increase interest rates to slow down spending. • bnhgf

10. International Trade and the US Economy • Trading with other countries helps to maintain our lifestyle. • US imports are motor vehicles, appliances, electronics, oil, (money goes out of US) • US exports are machinery, electronics, transportation, agriculture. (money comes into US) sales of products grows the economy.

11. International Trade and the US Economy • Trade deficit = when a country spends more on imports than it earns on exports. • Trade surplus = when a country earns more from exports than it spends on imports. • It is a good idea to have a balance of trade with another country. • Currently, the United States has a trade deficit because we spend about $200 billion per year more on imports than we make on exports. This directly affects the number of jobs we have available.

12. Reasons to Restrict Trade • Trade restrictions help achieve a balance of trade with partners. • Reasons to impose trade restrictions: • To help young industries compete in the world market. • To support national security • To protect jobs

13. Barriers to Trade • Tariffs – tax on imported goods • Quotas – a limit set by the government on the amount of product that can be imported. • Often used when the country produces some but not all of the product it needs. ( ex. China –rice)

14. Trade Agreements and Treaties • To reduce trade barriers, nations may negotiate trade agreements with each other. • The World Trade Organization • NAFTA - the North American Free Trade Agreement 1993 • European Union

15. What can Americans do to make sure that the economy grows? • Buy American made products • Reasonable and responsible pay increases. (The real effect of a raise in the minimum wage) • Investment in American owned businesses.