The document summarizes key aspects of the US economy and business cycles. It describes how the US economy has transitioned from agriculture to industry to information-based. It also outlines important economic indicators like GDP, standard of living, unemployment and inflation. Finally, it discusses the stages of the business cycle - prosperity, recession, depression and recovery - and characteristics of each stage.

1. 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