| A | B |
|---|
| GDP-Gross Domestic Product | Is the value of all goods and services produced in a year |
| 4 categories make up the GDP | C+I+G+X |
| National Income | $=wages,rental property, investments, corporate profits |
| Transfer payments | welfare payments and other assistance |
| Disposable Income | $ people have left after taxes are taken out |
| Economic indicators | statistics that help us determine the health of the economy |
| Macroeconomics | study of the entire economy |
| Examples of indicators | Stock market, housing sales, building permits, unemployment rate |
| Consumer Price Index | This measures the change in price of a specific group of goods and services |
| Market Basket | thousands of goods tracked by the CPI to determine inflation |
| Leading indicators | These statistics tell us where the economy is headed |
| Peak | A time in a cycle when the economy is booming |
| Recession | 6 months of straight decline in the GDP |
| Trough | Economic collapse/depression |
| Recovery | The economy is improving in regards to business growth |
| Medium of exchange | a function of money: use $ to buy things |
| Unit of accounting | a function of money: sets a value of goods/services |
| Store of value | THis $ can be saved and used later |
| Characterstics of money | Durability, Portability, Divisibility, acceptability |
| Durability | Can the money withstand wear and tear |
| Portability | Ability to easily carry around the money |
| Fiat Money | money that obtains value through government order |
| Federal Reserve System | U.S. National Banking System |
| Structure of the Fed | Board of Governors, 12 Fed District Banks, FOMC, Member banks |
| Major function of the Federal Reserve | To regulate the money supply, to control circulation of $ |
| Check clearing | A Fed responsibility to take $ from one account and put it in another |
| Tight Money Policy | Actions taken to cut supply of $ to make it more expensive |
| Loose Money Policy | Actions taken to make money more available, cheaper, encourages spending |
| Reason to implement Tight Money Policy | To handle rising prices (inflation) by discouraging spending |
| 3 tools of the FED | Adjust discount rate, reserve requirement, and |
| benefits received principle | Tax is applied to those who benefit from the service or good |
| ability to pay principle | the tax is higher for those with a higher income |
| progressive tax | percent of tax you pay goes up due to higher income |
| proportional tax | all people pay the same % of tax |
| regressive tax | same tax applied to all (sales tax) |
| most serious unemployment | structural- loss of jobs due to technology |
| seasonal unemployment | loss of job due to seasonal changes |
| Fiscal policy(Keynesian) | Gov't should change taxes and spending to boost economy |
| Monetary Policy | The Federal Reserve can help the economy by adjusting the money supply |
| injection | money is put into the economy |
| leakage | money is taken out of the economy |
| National Debt | Total amount of money the U.S. Government owes (add up all the deficits) |
| National deficit | Government spent more than we brought in with taxes in one year |
| Largest amount of revenue for the U.S. Government comes from this source | Income tax |
| 3 areas where the govt spends the most money | Social Security, Medicare, Defense |
