1. Economic Ups and Downs

2. Inflation Prices rise for 2 quarters or (6 months)
Prices tend to rise during periods of expansion
Prices tend to decrease during times of recession.

3. Deflation
Deflation is a decrease in the general price level of goods/services.
Only 2 significant times its occurred:
At the end of WWI (1900s)
During the Great Depression (1920s)

4. Stagflation
Growth in GDP is stagnant (standing still) but with rising prices (inflation).

9. Government tries to be Superhero
President can adopt policies and enact laws that affect the demand (consumers/households) and supply (businesses/producers) in an attempt to get them to buy or to produce.
Policies/laws that President/government can adopt are known as Fiscal Policy.

10. Who’s to Blame when Things Get out of Whack?
People tend to blame government.
Government is blamed if
Economy experiences unemployment
We have decreasing gross domestic product
We have inflation
Economists believe government can help alleviate these problems using Fiscal Policy.
Fiscal Policy – Government’s attempt to stabilize economy through taxing & government spending.

11. Supply Side & Demand Side Economics
Supply-Side Policies
Demand side Policies
Stimulate production to spur output
Cut taxes & government regulations to increase incentives for businesses & individuals
Businesses invest & expand, creating jobs; people work, save, and spend more
Increasing investment and productive lead to increase output
Stimulate consumption of goods/services to spur output
Cut taxes or increase federal spending to put money into people’s hands
With more money, people buy more
Businesses increase output to meet growing demand
With output increasing the economy grows & unemployment goes down

12. What do we know?
People respond to incentives in predictable ways.