3.1
What is GDP?
The dollar value of all the goods and services produced and sold within the country's border in a given year.
1. What is inflation?
2. Inflation does what to purchasing power?
1. The increase in prices across an economy.
2. Decreases it.
1. What 3 criteria must you meet to be considered in the labor force?
1. At least 16 years old
2. Not in the military
3. actively looking for a job
Who creates the budget?
Congress and the President
The more you make, the higher percentage you pay.
Progressive tax.
Do exports count toward GDP?
Yes, all exports count toward GDP. Even if it is an intermediate good.
What are the three effects of inflation?
1. Decreases purchasing power
2. Bad for savings (money is worth less)
3. Hurts people on a fixed income. Wages do not go up to match inflation.
1. How long do recessions last?
2. How long do expansions last?
1. 1 year
2. 5 years
What are the two biggest expenses of the government each year?
1. social security
2. medicare and medicaid
Everyone is taxed the same percentage.
Proportional tax.
If you resell a car to your friend would this count toward GDP?
No, resells do not count toward GDP.
1. Unemployment due to high wages and a surplus of workers.
2. Unemployment due to you being fired, quitting, or laid off.
1. structural
2. frictional
During recessions what happens to:
1. GDP
2. Unemployment
3. Inflation
1. decrease
2. increase
3. decrease
What is the difference between mandatory and discretionary spending?
Lower incomes pay a larger percentage of their overall income.
Regressive tax.
If the government purchases a product from another country does this count toward GDP?
Yes. Government spending.
1. Unemployment due to the season changing.
2. Unemployment due to businesses closing.
1. seasonal
2. cyclical
During expansions what happens to:
1. GDP
2. Unemployment
3. Inflation
1. increase
2. decrease3. increase
What is a budget deficit?
When the government spends more than it brings in through taxes.
Sales taxes are examples of what type of tax?
Regressive tax.
What are the three things that GDP fails to measure?
1. quality of life
2. underground economy (black market transactions)
3. does not count services people can do themselves.
What are the 4 types of unemployment?
1. frictional
2. seasonal
3. Cyclical
4. structural
Draw the business cycle diagram. Label expansion, recession, peak, trough, and long term trend correctly.
Make sure your axis is labeled.
See 3.4 worksheet.
1. What is the national debt?
2. Who is the government mostly in debt to?
1. The adding up of all the deficits year after year.
2. Its citizens through bonds.
Progressive tax.