1. Promoting growth and stability
Chapter 3

2. Tracking economic data is one tool the government uses to promote economic growth and stability

3. Tracking Business Cycles
Even under our free enterprise system, the government intervenes to influence macroeconomic trends
Macroeconomics is the study of economic behavior and decision- making in a nation’s whole economy
Microeconomics is the study of economic behavior and decision- making in small units, such as households or firms

4. gDP and the Business cycle
One measure of a nation’s economic well-being is gross domestic product (GDP)
The total value of all final goods and services produced in a country in a given year
In a period of growth, a country produces more than it did before and GDP goes up
In a period of contraction, the country produces less than it did before and GDP goes down
The pattern of expansion and decline is called the business cycle (major fluctuations, not day-to-day)

5. Making predictions
Changes in the business cycle take place because individuals and businesses, acting in their own self-interest, make decisions about factors such as price, production, and consumption.
Increase production
Hire more workers
Buy fewer goods/services
Cut production
Lay-off workers

6. Promoting economic strength
Because the market is vulnerable to the business cycles, the government tries to create public policies that promote economic strength.
They do so by pursuing three main goals:
High employment
Growth
stability

7. employment Ensure jobs for everyone who is able to work
Unemployment rate between 4-6% is a health economy
If the unemployment rate is too high, the government may take steps to encourage job growth

8. Economic Growth
Part of the “American Dream” has always been for each generation to enjoy a higher standard of living than that of the previous generations
For that to happen, the economy must grow to provide additional goods and services to succeeding generations
An increasing GDP is a sign of growth
To help growth, governments may cut taxes or increase spending (stimulating the economy)

9. Stability and security
The government also seeks to keep the economy stable
If the economy fluctuates unpredictably, economic growth will slow or even stop
One indicator of economic stability is the general level of prices— drastic price changes (up and down) can send problems across the economy
Another indicator is economic stability of our financial institutions (banks and stock market)

10. Economic Citizenship
Voters play a vital role in shaping government economic actions
Economic policy is made by elected officials and workers they appoint

11. Technology and productivity
The American economy support a greater standard of living than most economies of the world
One way to preserve that standard of living is by increasing productivity—producing more outputs from same or smaller amounts of inputs

12. Technological process
Improved technology is a key factor in boosting productivity
Technological progress has enabled the US to operate more efficiently, increasing GDP, and giving us a competitive advantage in the world
Innovation leads to obsolescence—older products and processes become out-of-date

13. The government’s role The government promotes innovation and invention
owns research institutions
Grants patents and copyrights