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Topic 3 Notes

by: Kirsten Notetaker

Topic 3 Notes

Marketplace > Lewis University > Business > > Topic 3 Notes
Kirsten Notetaker
Lewis University

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About this Document

Notes from class and text
American Economy
Class Notes
25 ?




Popular in American Economy

Popular in Business

This 4 page Class Notes was uploaded by Kirsten Notetaker on Thursday February 4, 2016. The Class Notes belongs to at Lewis University taught by Hennebry in Fall 2015. Since its upload, it has received 12 views. For similar materials see American Economy in Business at Lewis University.


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Date Created: 02/04/16
American Economy: T opic 3  The US economy can set many goals but only they can’t all be achieved at the same time  Economic freedom – the freedom to choose what and how an individual’s economic resources are used  Economic growth – an increase or decrease in the grow domestic product (GDP) or gross national product (GNP) from one period to another, a decrease in GDP or GNP is negative growth  GDP – the value of all goods and services made for the domestic economy  GNP – the value of all goods and services made for the domestic world economies  Economic security – means the provision of adequate economic resources for maintenance of a minimum standard of living for all  More equitable distribution of income – generally means in the United States that we believe there should not be starving and homeless Americans and super rich Americans  Price stability – means the goal is that inflation and deflation should not exist in the economy  Inflation – constantly rising prices  Deflation – constantly falling prices  Business cycle: o Depression stage – when the vulture rules the economy  High unemployment  High underemployment – when a person is employed but at less than their skill level  Prices are falling  Negative growth o Creeping inflation – best stage of the nosiness cycle  Prices rising 0 to 6%  Moderate growth  Neat full employment o Hyperinflation – referred to as the peak  Prices are rising greater than 10%  Unemployment near zero  The price system begins to lose its ability to ration good o Recession  Falling prices  Unemployment rising  Two quarters of falling GNP o Stagflation – occurs occasionally, the worst stage  High unemployment  Rising prices  High underemployment  If the economy does not go into a depression after a recession it sometimes gets stuck in a stagflation for a year or two  The business cycle could be controlled by the government using monetary and fiscal policy 2  Monetary policy – changing the money supply and interest rate  Fiscal policy – changing government spending and taxes  What would the government do? o In the case of inflation:  Decrease spending  Increase taxes  Decrease the rate of interest  Decrease the money supply o In the case of recession:  Decrease taxes  Increase spending  Lower the interest rate  Increase the money supply  Any, all, or some of these  Monetary policy o During an inflation  Increase interest rates  Decrease the money supply o During a deflation  Decrease the interest rate  Increase the money supply  Fiscal policy o During an inflation  Increase taxes  Decrease spending 3 o During a deflation  Decrease taxes  Increase government spending 4


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