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Business CycleNational Debt

Unit 7Decision, Decisions

GDP: Gross Domestic Product

the dollar value of all final goods and services produced within a country’s borders in a given year

Nominal GDP: GDP measured in current prices

Real GDP: GDP measured in constant unchanging prices

Per Capita GDP

a country’s GDP divided by population

2005 US GDP- $12.77 trillion

population- 295,734,134

per capita GDP- $41,800

2005 China GDP- $8.158 trillion

population- 1,306,313,812

per capita GDP- $6,200

standard of living

Per capita GDP can often be used to compare countries and their standard of living: economic prosperity

GNP: Gross National Product

value of goods and services produced within a country in one year, plus income earned by citizens abroad, minus income earned by foreigners in the country

GNP= goods and services produced + money earned by citizens abroad – income earned by foreigners in the US

CPI: Consumer Price Index

an average of a specified set of goods and services

measures the purchasing power of the dollar

Business Cycle NOT a regular, predictable, or

repeating phenomenon like the swing of the pendulum of a clock.

Its timing is random & unpredictable

A business cycle has four phases.

4 Phases of the Business Cycle

Expansion

Contraction

Trough

Peak

Expansion

speedup in the pace of economic activity or Rise in GDP

Recovery: right after a trough, economy is getting better

Prosperity: right before a peak, economy is at its best

economic growth

Contraction

slowdown in the pace of economic activity

Economic decline marked by falling GDP Recession: 6 straight months of

contraction Depression: Especially long contraction

Trough

lower turning point of a business cycle, where a contraction turns into an expansion

GDP stops falling

Peak

upward turning of a business cycle

When GDP stops rising

**A trough & peak both represent a turning point in the business cycle**

National Debt

The National Debt is the total amount of money the Federal Government owes to treasury bondholders.

A bond is essential an IOU issued by the government as a way for them to borrow money.

Problems of the National Debt

Reduces the funds available for businesses to invest.

The government must pay interest to bondholders, the more the government borrows, the more interest it has to pay.

Roughly, to pay off the National Debt today, each citizen would have to pay just over $40,083.53

National Debt

http://brillig.com/debt_clock/ http://www.usdebtclo

ck.org/