Economic indicators

​Monitoring the economy

One of the executive branch's jobs is to keep the economy stable by keeping the economy growing, unemployment low, and inflation low.


Inflation is the gradual rise in prices over time, which reduces purchasing power.

$5.00 buys you a lot less than it used to.

​Why must the government monitor the economy? The economy is always going through the business cycle

Expansion refers to when the economy is growing. Unemployment is down and inflation is increasing as more people are working and demanding good.

Contraction refers to when the economy is shrinking. Unemployment is going up and inflation is too high. If the economy is shrinking, or slowing down for a long period it is a recession.

Economic indicators

How does the government know how healthy the economy is? They use economic indicators. 3 basic indicators are GDP, CPI, and the unemployment rate.

Consumer Price Index measures inflation. How much to certain goods cost now compared to a year ago?

​CPI

Gross domestic product is how much an economy is producing in a given time period.


You want the economy to be growing steadily.

GDP

​Unemployment rate

How many people who want to work can't find a job.

What does a healthy economy look like?

GDP: A country's economy is growing every year.



CPI: Inflation is slow and gradual. Worker's pay is increasing to match it.



Unemployment rate: 3-5% of the people cannot find jobs.

The Federal Reserve, an independent agency, uses monetary policy to stop inflation and help unemployment.

​Monetary Policy

Congress and the President use taxing and spending to fix problems.

Fiscal Policy

What does the government do if the economy is unhealthy?

Multiple Choice

What is the definition for inflation?

• The market value of all final goods and services produced in a nation during a period of time, usually a year.

• The increase of general prices over time.

• When people do not have jobs and are actively looking for one.

Multiple Choice

What is the definition for unemployment?

• The market value of all final goods and services produced in a nation during a period of time, usually a year.

• The increase of general prices over time.

• When people do not have jobs and are actively looking for one.

Multiple Choice

_______ is the total value of goods produced, and services provided by a country for one year, equal to the gross domestic product plus the net income from foreign investments​.

• Gross National Product

• Inflation

• Gross Domestic Product

• Productivity

Multiple Choice

What are the three economic goals of policy makers?

• Economic growth, low unemployment, and stable prices

• High inflation, high interest rates, and high taxes

• Government control, income inequality, and international trade

• Consumer spending, business investment, and government spending

Multiple Choice

What is the business cycle?

• The expansion and contraction of an economy over time

• The fluctuation of interest rates in the stock market

• The rise and fall of consumer spending

• The increase and decrease of government debt

Multiple Choice

The Business Cycle measures ___ over time.

• wealth

• inflation

• economic growth