Economic Basics
What is the study of how people make choices about using limited resources?
What is Economics?
What does GDP stand for?
Gross Domestic Product.
What is inflation?
A sustained increase in the general level of prices.
What is the main source of government income?
Taxes.
Why is it important to stay aware of the economy?
It helps you prepare for economic changes and make smarter financial plans.
What do economists assume about people’s wants and needs?
They can’t have everything, so they must make choices.
What does GDP measure?
The total value of all final goods and services produced within a country each year.
What does CPI stand for?
Consumer Price Index.
What happens when the government spends more money than it earns?
It creates a deficit and adds to debt.
What is an emergency fund?
Money saved for unexpected events like job loss or medical bills.
What is the difference between microeconomics and macroeconomics?
Microeconomics studies individual and business decisions; macroeconomics looks at the economy as a whole.
What happens when GDP increases from one year to the next?
The economy is growing.
What does the Consumer Price Index measure?
Whether goods and services are more or less expensive than before.
Name two things the government spends money on.
Roads, military, education, healthcare, retirees.
During inflation, why might people adjust their lifestyle?
Because rising prices make it harder to maintain the same standard of living.
What is the system in which individuals, businesses, and governments interact?
What is the Economy?
What is a recession?
A period when the economy is shrinking.
Give one reason why inflation can be a good thing.
It helps businesses grow, prevents deflation, and encourages wage growth.
Give two examples of common taxes.
Income tax, sales tax, property tax, gas tax, inheritance tax.
How can people protect themselves from job loss during a recession?
By saving money, learning new skills, and networking.
Give one example of an economic decision you make every day.
What to buy for lunch, whether to go to a movie, or how much to save.
What is the difference between a recession and a depression?
A depression is a severe, long-lasting recession.
If inflation is 3% and your investment grows by 5%, what is your real gain?
2%.
Why are government deficits bad in the long term?
Because debt must be repaid with interest, adding to future financial strain.
Why should you avoid keeping all your money in cash during inflation?
Because inflation decreases its value over time.