 Business Cycle National Debt Unit 7 Decision, Decisions

GDP: Gross Domestic Product the dollar value of all final goods and services produced within a country’s borders in a given year Nominal GDP: GDP measured in current prices Real GDP: GDP measured in constant unchanging prices

Per Capita GDP  a country’s GDP divided by population  2005 US GDP- $12.77 trillion  population- 295,734,134  per capita GDP- $41,800  2005 China GDP- $8.158 trillion  population- 1,306,313,812  per capita GDP- $6,200

standard of living  Per capita GDP can often be used to compare countries and their standard of living: economic prosperity

GNP: Gross National Product  value of goods and services produced within a country in one year, plus income earned by citizens abroad, minus income earned by foreigners in the country  GNP= goods and services produced + money earned by citizens abroad – income earned by foreigners in the US

CPI: Consumer Price Index  an average of a specified set of goods and services  measures the purchasing power of the dollar

Business Cycle  NOT a regular, predictable, or repeating phenomenon like the swing of the pendulum of a clock.   Its timing is random & unpredictable  A business cycle has four phases.

4 Phases of the Business Cycle  Expansion  Contraction  Trough  Peak

Expansion  speedup in the pace of economic activity or Rise in GDP  Recovery: right after a trough, economy is getting better  Prosperity: right before a peak, economy is at its best  economic growth

Contraction  slowdown in the pace of economic activity  Economic decline marked by falling GDP  Recession: 6 straight months of contraction  Depression: Especially long contraction

Trough  lower turning point of a business cycle, where a contraction turns into an expansion  GDP stops falling

Peak  upward turning of a business cycle  When GDP stops rising **A trough & peak both represent a turning point in the business cycle**

National Debt  The National Debt is the total amount of money the Federal Government owes to treasury bondholders. A bond is essential an IOU issued by the government as a way for them to borrow money.

Problems of the National Debt  Reduces the funds available for businesses to invest.  The government must pay interest to bondholders, the more the government borrows, the more interest it has to pay.  Roughly, to pay off the National Debt today, each citizen would have to pay just over $40,083.53

National Debt 