Click here to advance to the next slide.

Read to Learn Describe the four types of economy that the United States has experienced. Describe what is shown by GDP, the unemployment rate, rate of inflation, and the national debt.

The Main Idea Throughout the years, the U.S. economic system has changed. Each change affected what was produced and how people were employed. To gauge the health of our economic system, we use a variety of economic indicators.

The Changing U.S. Economy Sometimes major shifts in certain growth areas can change the emphasis of the U.S. economy. The United States has experienced four major economic shifts.

Graphic Organizer Farming created our agriculture-based economy The invention of computers created the information-based economy 1600s 1700s 1850s 1900s Present Bartering and trading created our service-based economy The Industrial Revolution started the industry-based economy We live in the information age, but still rely upon the other types of economies

Unsung Heroes Each nation’s economy has had its unsung heroes and heroines. One hero of the Industrial Revolution might have been French-born Joseph Jacquard, who conceived the Jacquard loom, a system for the mass production of woven fabrics.

Measuring Economic Activity Economic indicators measure things such as: how much a country is producing whether the economy is growing how the economy compares to other countries

Gross Domestic Product Measuring gross domestic product (GDP), involves computing the sum of goods and services sold to businesses, consumers, the government, and other countries. gross domestic product (GDP) the total value of goods and services produced in a country in a given year

Standard of Living The United States has a high standard of living because of its productive workforce. standard of living the level of material comfort as measured by the goods and services that are available

Graphic Organizer Free Enterprise System Benefits to the Community Wealth is created by businesses Benefits to the Community Businesses pay taxes Businesses provide jobs

Unemployment Rate The unemployment rate measures the number of people who are able and willing to work but cannot find work during a given period.

With inflation, one’s buying power decreases. Rate of Inflation With inflation, one’s buying power decreases. inflation a general increase in the price of goods and services

Rate of Inflation War Increase in the price of raw materials Causes of Inflation War Increase in the price of raw materials Increase in expenses Increase in salaries Too much money circulating in the economy

Rate of Inflation Deflation can occur when the supply of goods is greater than the demand. deflation a general decrease in the price of goods and services

Graphic Organizer Deflation Economy produces more goods than people want. Sellers lower prices. Sellers cut production. People have less money to buy goods. Demand continues to go down.

National Debt To pay for a budget deficit, governments borrow money from the public, banks, and other countries. budget deficit when the government spends more on programs than it collects in taxes

National Debt If the national debt gets too large, a nation can become dependent on other nations or unable to borrow money. national debt the total amount of money a government owes

In the late 1990s, the United States experienced a budget surplus. National Debt In the late 1990s, the United States experienced a budget surplus. budget surplus when a government’s revenue exceeds its expenditures during a one-year period

You are a purchasing agent for a large furniture manufacturer You are a purchasing agent for a large furniture manufacturer. You have received several bids from lumber companies for a supply of teak, a very dense and decay-resistant type of wood. The lowest bid comes from a lumber company that has been known to abuse the environment. Decision Making How does the lumber company’s reputation affect your decision? Explain your answer.

Answer Students might suggest that all aspects of the company’s reputation should be considered before making a decision to buy from the company.

When did the service-based economy begin? The service economy started in colonial times, when colonists traded among themselves for services.

What do economic indicators measure? Economic indicators measure the economic health of the nation.

What is the difference between a budget surplus and a budget deficit? A budget surplus occurs when revenue is more than expenses whereas a budget deficit occurs when expenses are more than revenue.

End of

Click here to advance to the next slide.

The Main Idea In a market economy, there is an economic cycle, which includes four stages: prosperity, recession, depression, and recovery. These are also the four stages of the business cycle. In the last few decades, we have experienced the economic cycle a number of times.

Guiding the Economy Congress and the President enact laws that impact fiscal policy. Government expenditures are often planned to guide the economy.

Guiding the Economy The Federal Reserve (“the Fed”) is a government agency that guides the economy.

Graphic Organizer Guiding the Economy The Federal Reserve Regulates the amount of money in circulation Controls the amount of money loaned Controls interest rates State and local governments also take steps to influence their economies

Four Stages of the Business Cycle The business cycle of one country can affect other trading partners. business cycle the rise and fall of economic activity

Figure 3.1 Business Cycle Model

Prosperity Prosperity results from low unemployment, high production of goods and services, and the opening of new businesses. prosperity a peak of economic activity

Characteristics of Prosperity Graphic Organizer Characteristics of Prosperity Higher wages Greater demand for goods to be produced More people buy houses, which creates work for builders People buy more goods from other countries, which benefits those countries

Recession During a recession, businesses produce less, so they need fewer workers. recession when economic activity slows down

Characteristics of a Recession Graphic Organizer Characteristics of a Recession Businesses produce less Unemployment increases People have less money to spend Fewer goods and services are produced The GDP declines

Recession A recession in one industry can cause a ripple effect throughout the entire economy.

Depression A depression can be limited to one country but usually spreads to related countries. depression a deep recession

Characteristics of a Depression Graphic Organizer Characteristics of a Depression High unemployment Low production of goods and services Can last for several years Spreads to other countries High number of unused manufacturing facilities Very rare

Depression The stock market crash on October 29, 1929, or “Black Tuesday,” marked the beginning of the Great Depression.

Graphic Organizer Many banks around the country failed Unemployment rose nearly 800 percent The Great Depression Many towns and other civic bodies printed their own money The GDP fell nearly 50 percent The average manufacturing wage was 5 cents an hour The money supply fell by one-third

“Depressionproof” During the Great Depression, millions of people lost their homes and livelihoods. A large percentage of middle-class Americans were able to keep their jobs. These people were in professions considered “depressionproof.”

Production starts to increase during a recovery. a rise in business activity after a recession or depression

Characteristics of a Recovery People start going back to work People have money to purchase goods and services Demand for goods and services stimulates more production New businesses open Businesses become more innovative

Recovery In 1939, the United States was beginning to recover from the depression when World War II began. The war increased the rate of recovery because of the demand for production.

What is the stage that follows a recession or depression? The recovery stage can happen after either a recession or a depression.

What is the difference between a recession and a depression? A recession is a slight downturn; a depression is a major downturn.

Why may innovation play an important role in the recovery stage of a business cycle? Innovation creates demand that leads to more employment and production, which leads to more demand.

End of