1. Economic Activity in a Changing World
Chapter 3
Economic Activity in a Changing World

2. 3.1 U.S. Economic History How would you describe our local economy?
What changes have you seen in the economy in your lifetime?
What information have you gained about the economy from history or social studies classes?

3. 3.1 U.S. Economic History
Early 1600’s, the colonist bartered, or traded goods and services. This is what created our service-based economy.
1700’s farming was the common way of life. This helped form the agriculture-based ecomony.
Mid 1850’s, the Industrial Revolution. This started the industry-based economy.
1900’s saw the rapid rapid movement of information, and the invention of computers. This created the information-based economy.
We currently live in the information age.
Agriculture , industry services, and information all contribute to the health of our U.S. economy.

4. Measuring Economic Activity
Economic Indicators measure Economic performance. In the economy, they measure:
How much a country is producing
Whether its economy is growing
How it compares to other countries
Just as in baseball they measure a players performance with statistics.

5. Measuring Economic Activity
Gross Domestic Product (GDP)-
Standard of Living-
Unemployment Rate-
Rate of Inflation-
National Debt-

6. Measuring Economic Activity
Gross Domestic Product (GDP)-
The total value of the goods and services produced in a country in a given year.
Most important indicators of how an economy is doing.
Compute: the sum of goods and services sold to businesses, consumers, the government, and other countries
U.S. has a high GDP compared to other countries.

7. Standard of Living
The level of material comfort as measured by the goods and services that are available.
The more goods and services produced per person, the higher the standard of living.
U.S. has a high standard of living because of its productive workforce. This goes back to the U.S. having a free-enterprise system, the wealth created by businesses benefits the entire community because of businesses paying taxes and providing jobs.

8. Unemployment Rate
The measure of the number of people who are ABLE and WILLING to work but cannot find work during a given time.

9. Rate of Inflation
Inflation is a general increase in the price of goods and services.
Causes of inflation:
After a war because of scarce resources.
Increase in the costs of raw materials, expenses, and salaries.
When the government allows too much money to circulate in the economy.
Deflation is a general decrease in the price of goods and services.
When an economy produces more goods than people want, sellers have to lower their prices and also cut production. As a result people have less money to buy goods, so the demand also goes down.

10. National Debt
The main source of income for a government is taxes. National debt is the amount of money a government owes.
Government used taxes to pay for programs such as defense, education, and Social Security.
Budget Deficit- when the government spends more on programs than it collects in taxes.
If a country’s debt gets too large, it may have to rely on another country or borrow more money.
Budget Surplus- when a governments revenue exceeds its expenses during a one-year period.
Governments sometimes use surpluses to cut taxes, reduce the national debt, or increase spending for certain programs.

11. 3.2 The Business Cycle Winning streaks with sports teams?
Go through ups and downs????
What stages of the business cycle do you hear about in the news, media?

12. Guiding the Economy
Congress and the President enact laws that impact the fiscal policy.
The Federal Reserve (The Fed) is a government agency that guides the economy by regulating the amount of money in circulation, controlling interest rates, and controlling the amount of money loaned.

13. Stages of the Business Cycle:
Prosperity
Recession
Depression
Recovery

14. Prosperity A peak of economic activity Unemployment is low
Production of goods and services is high
New businesses open
Wages are usually higher-workers have more income
Greater demand for goods to be produced

15. Recession Economic activity slows down Businesses produce less
Need fewer workers
People have less money to spend
Downturns in many industries

16. Depression High unemployment Low production of goods and services
Usually spreads to other countries
Many people are out of work
Fewer goods and services are produced
1929 Stock Market crash-”Black Tuesday”

17. Recovery Production starts to increase
A rise in business activity after a recession or depression
People start going back to work
People have money to purchase goods and services
More production
Can take a long time or happen very quickly
Some businesses innovate-they bring out new products or services