The Government and the Economy • Page 59 in packet • Awww, aren’t they cute!I have one loose in here right now!
Let’s review shall we... • The GDP is? • The total number in dollars of all FINAL goods and services sold in the US in 1 year! • All the $$spent on :
Ours as of 4:56 p.m. May 8th, 2008 $13.86 trillion What if a country’s GDP goes up but only b/c prices went up? IT would SEEM that our economy was growing even though it really didn’t To avoid this ECONOMISTS use the REAL GDP: economy’s production AFTER the distortions of price increase/over production are removed.
Business Cycle The periodic and cyclical ups and downs of the economy
Expansion Period -phase where the economy is growing It doesn’t matter if it is growing by a lot or a little. If the real GDP is higher from one period to the next, the economy is “expanding.” -amount of goods produced? -number of jobs produced? -number of business starting?
Peak Period -phase where the economy has reached its peak of growth The highest point in an expansion…then it starts to decline -amount of goods produced? -number of jobs produced? -number of business starts
Contraction Period -phase where the economy is starting to decline from its peak activity -amount of goods produced? -number of jobs produced? -number of business starts
Trough Period -phase where the economy has reached its lowest point -amount of goods produced? -number of jobs produced? -number of business starts -recessionis an extended trough period Decline in a country’s real GDP goes down for 6 straight months... Not good times when economy declines, many people lose jobs… A decline in a country's real GDP, for two or more successive quarters of a year...
We can also measure the economy by looking at EMPLOYMENT • Unemployment rates • Layoffs • People “looking” for jobs • If we don’t have a job, we can’tSPEND. • Thus, economy keeps going DOWN. • 4.6 % unemployed as of 2007 • Below poverty line, 12%
The number of unemployed persons- • 7.6 million • A year earlier, # of unemployed persons: • 6.8 million • Jobless rate- • 4.6 percent. • Last month unemployment rates for most major worker groups— • adult men (4.6 percent), • teenagers (15.4 percent), • whites (4.4 percent), • blacks (8.6 percent), • Hispanics (6.9 percent) • The jobless rate for adult women decreased to 4.3 %
Standard of Living Standard of Living- Measured by standards such as income inequality, poverty rate, income per person. Other measures- access & quality of health care, educational standards & social rights Examples are access to certain goods (such as number of refrigerators per 1000 people), or measures of health such as life desires aka WANTS It is the ease by which people living in a time or place are able to satisfy their wants. -Standard of Living -a measure of how well a person lives & amount of free time they have Based on the “luxuries” we have… -Gross Domestic Product -the value of all goods and services produced in a nation in a given year -Why do we compare GDP with previous years? To see how we are doing as compared to previous years…
Inflation Concerns -Inflation -a general increase in the cost of goods and services -Why is inflation a bad thing for the economy? B/c it reduces the purchasing power of money & may change the decisions we make. To keep track of inflation the gov’t does a survey called the: -Consumer Price Index-- Survey of many goods and services that are compared to the same goods and services over time to measure the increase or decrease in prices Sample prices every month of 400 or so of the most commonly used products… -Controlling Inflation-hard to control Costs you 1$ last year Now- the same cone costs you 2$ Price increase makes the purchasing power of your dollar go down b/c you have to use twice as much $ to buy the same item. Hurts people that have a FIXED income...