1. Section 2: Promising Growth & Stability
Chapter 3
Section 2: Promising Growth & Stability

2. Tracking Business Cycles
Macroeconomics- study of the behavior & decision making of entire economies
Examines major trends for the economy as a whole
Microeconomics- study of behavior & decision making of small units such as individuals, families, households, & businesses

3. One way economies measure economic well being is by calculating the nation’s Gross Domestic Product (GDP)
Total value of all final goods & services provided in an economy

4. Economics follows a country’s GDP & other key stats to predict business cycles
Period of macroeconomic expansion followed by a period of contraction
Cycles are major fluctuations
May last less than a year or continue for many years
Government plays a role in attempting to prevent wild swings in economic behavior

5. Promoting Economic Strength
Government creates public policies that aim to stabilize the economy
Policy makers pursue 3 main outcomes as they seek to stabilize the economy
1. High employment
2. Steady growth
3. Stable prices

6. Employment
Aim to provide jobs for everyone who is able to work
4-6% is the desirable unemployment rate

7. Growth
Each generation should enjoy a higher standard of living than that of the previous generation
Economies must grow to provide additional goods & services
GDP is a measure of such growth

8. Stability
Gives consumers, producers, & investors confidence in the economy & in our financial institutions, promoting economic freedom & growth
One indicator is general price levels
Government aim is to help prevent sudden, drastic shifts in prices

9. A surge in overall prices puts a strain on consumers
In either direction, major fluctuations in price levels can cause a macroeconomics chain reaction that policymakers seek to avoid

10. Another sign is the health of the nation’s financial institutions
Federal government monitors & regulates American banks & other financial institutions
Produces hundreds of regulations & has the power to enforce them

11. Protect bank deposits & retirees’ pensions
Investigate fraud & manage interest rates & the flow of money through the economy

12. Economic Citizenship
Through the way it spends money & influences other macroeconomics factors, the government helps to compensate for the typical swings of the business cycle
As a voter, your elective choices will help guide government policy

13. Technology & Productivity
Increase productivity through work ethic

14. Technological Progress
Improvements allow the U.S. economy to produce more output from the same or a smaller quantity of inputs or resources
Allows the U.S. economy to operate more efficiently & productively increasing GDP & giving U.S. businesses a competitive advantage in the world

15. Innovation makes some production processes & workers obsolete, these resources can be used in other ways

16. The Government’s Role Provides incentives for innovation
Federal agencies fund scores of research & development projects at universities
Governments own research institutions, also produces a steady stream of new technology that makes their way into the marketplace

17. EX: NASA
Created spin off producers with commercial users
Muscle stimulators, scanners that see invisible flames
Offers inventors the possibility of making huge profits in the free market
Grants, patents, & copyrights