ECONOMICS

Understanding Economics

What is Economics

• Economics is the social science that studies economic activity to gain an understanding of the processes that govern the:

• Production • Distribution • consumption of goods• services in an economy.

• Economics deals primarily with the concept of:– Scarcity

• What is scarcity?• Scarcity is the

fundamental economic problem of having – unlimited human

wants in a world of limited resources.

Explain the picture in your own words

Market Economy

• What is a market economy?

• A market economy is an economy in which decisions regarding investment, production and distribution are based on

• Supply• demand

• Main purpose of a market economy would be:– Encourage political and

economic cooperation between member nations

Market Economy

Market Economy

• Market economies are guided by the idea that they are:– Governed by self interest– Set prices

• If more people want a product – the price goes up and companies make less

• If less people want a product – the price goes down and companies make more

Deficit Spending

• What is deficit spending?– The act in which the

federal government spends more than it receives

– Deficit spending is normal in times of economic slowdowns

• Job:– Pumps money into the

economy to:• Stimulate activity and job

growth

Deficit Spending

• Purchasing power will increase and economic growth will be stimulated

• The overall amount of money that the U.S. owes to its creditors is Deficit spending

Deficit Spending

• Some issues that Governments face with deficit:– Hard to reduce the size

of a deficit– The larger the budget

deficit – the greater the national debt

– Deficit occurs when the government spends more than it receives

Economic Depression

• What are the causes of Economic Depression?– High unemployment– overproduction

Business Cycle

• Business cycle:– The fluctuations in economic

activity that an economy experiences over a period of time.

– A business cycle is basically defined in terms of periods of expansion or recession.

Business Cycle

• Business cycles purpose are for governments to look at:– Irregular fluctuations in

economic activity

Government Spending

• People disagree with the laws of deficit spending– Do you support /not

support the idea of government intervention to help stimulate the economy?

Activity

• Work with a partner to track the nations deficit and debt over a period of 10 years

• Write a brief explanation on your findings

• Draw a detailed graph or chart of the information you found