2. 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.

3. 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.

4. Key Concepts
The Changing U.S. Economy
Measuring Economic Activity

5. Key Terms
the total value of the goods and services produced in a country in a given year
gross domestic product (GDP)
the level of material comfort as measured by the goods and services that are available
standard of living

6. Key Terms
a general increase in the price of goods and services
inflation
a general decrease in the price of goods and services
deflation

7. Key Terms
budget deficit
when the government spends more on programs that it collects in taxes
national debt
the total amount of money a government owes

8. Key Terms
when a government’s revenue exceeds its expenditures during a one-year period
budget surplus

9. 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.

10. 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

11. 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.

12. 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

13. 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

14. 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

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

16. 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.

17. 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

18. 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

19. 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

20. 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.

21. 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

22. 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

23. 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

24. 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.

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

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

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

28. 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.

29. End of