Economic Activity in a Changing World

Chapter 3pp. 34-47

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Gross Domestic Product (GDP) One way of telling how well an economy is performing is to determine how many goods and services it produces during a certain period of time.

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Gross Domestic Product (GDP) The standard of living is the amount of goods and services the average citizen can buy.

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Rate of Inflation Inflation is a general increase in the cost of goods and services.

Inflation can happen when an economy actually becomes too productive.

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Rate of Inflation Deflation is a general decrease in the cost of goods and services.

When an economy produces more goods than people want, it has to lower prices and cut production.

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National Debt When the government spends more on programs than it collects in taxes, the difference in the amount is called the budget deficit.

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National Debt The total amount of money a government owes is its national debt.

If the debt gets too large, a nation can become dependent on other nations or unable to borrow any more money.

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National Debt If a nation spends less than its income, it has a budget surplus.

The government will probably use a surplus to cut taxes, reduce the national debt, or increase spending for certain programs.

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The Business Cycle Over long periods of time economic changes seem to form patterns.

The rise and fall of economic activity over time is called the business cycle.

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Figure3.2 BUSINESS CYCLE MODEL

The repeated rise and fall of economic activity over time is called a business cycle.

What are the four phases of the cycle?

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Measuring Economic Activity Economic indicators are figures used to measure economic performance.

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Measuring Economic Activity Economic indicators measure things like how much a country is producing, whether its economy is growing, and how it compares to other countries.

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Unemployment Rate The unemployment rate measures the number of people who are able to work but don’t have a job during a given period of time.