Vocabulary

Expansion- The economy is steadily growing, employment & production are increasing and people are spending more.

Peak- Production, employment, spending, & wages are at it’s highest point.

Contraction- The economy is starting to decline, interest rates rise, spending decreases, unemployment rises & production decreases

Trough- The economy is at it’s lowest point, high unemployment, falling stock prices, minimal production.

GDP- Gross Domestic Product, measures the size of the economy

Capital Gain- A stock is worth more that when it was bought.

Dividend- % of corporation profits distributed to stockholders.

review HOW DOES THE GOVERNMENT USE

TAXES TO REGULATE THE ECONOMY?

SUMMARIZE THE DIFFERENCE B/W REGRESSIVE AND PROGRESSIVE TAXES

HOW DOES GOVERNMENT SPENDING AFFECT THE ECONOMY?

IN WHAT 3 WAYS DOES THE FED CONDUCT MONETARY POLICY AND CONTROL THE AMOUNT OF MONEY IN CIRCULATION?

Warm up?

What happens to the money supply when the FED raises the discount rate?

The Business Cycle

Examine Business Cycle

The Business Cycle The business cycle acts like a

roller coaster and has 4 main parts:1. Expansion: The steady

ride up is characterized by a growing economy, more production, increased employment, people are able to spend more.

2. Peak: Expansion will reach the point at which production, wages, and employment are at it’s highest point (Full Employment).

Unemployment

3. Contraction: Economy is starting to come back down and is characterized by falling production, high interest rates, declining profits, decreased demand, increased unemployment.

Recession: When the period of contraction lasts from 6-8 months.

4. Trough: Economy is at its lowest point. This period is characterized by high unemployment, low economic production, and falling stock prices.

Depression: If it continues to worsen or last an extended period of time

What do you think?

What might the FED do during the contraction part of the business cycle?

Lower the reserve requirement, lower the discount rate or buy back Treasury Bonds

Measuring the Economy

Economic Indicators› Facts and data that help track the

business cycle.1. Gross Domestic Product (GDP)

Total value of all goods/services produced in an economy

2. Per Capita GDP Calculates the number of

goods produced per person.

Preferred by economists because it indicates the standard of living Level of economic

prosperity at which people live

3. Consumer Price Index (CPI) Monthly index that

measures the prices of goods/services (inflation)

4. National Debt How much money the

Federal Government owes

Fiscal Policy

Government spending and tax policies.

Taxes go up…people spend less

Taxes go down…people spend more

Stock Market

New York Stock Exchange (Wall St.) Buy or sell stock

Two ways to earn profits:1. Dividends: A % of the corporation profits that

are distributed to the stockholders.2. Capital Gain: Selling a stock at a higher price

than when you bought it.

GRAPHIC ORGANIZER

EQ: EXPLAIN HOW THE FED MAY CONTROL THE MONEY SUPPLY DURING THE DIFFERENT PARTS OF THE BUSINESS CYCLE?

reflection Summarize the 4 main parts of the

business cycle. What might the FED do during the

contraction part of the business cycle? Summarize the 4 economic indicators

that experts use to track the business cycle.

What are two ways to earn a profit by investing in the stock market?

Closing ? What are the two ways a person can

make money in the stock market? Capital gain- Sell stock for more than

you bought it Dividend- Receive part of corporate

profits based on how much stock you hold