1. Write a paragraph or two explaining how economists measure the U.S. economy. Use all of the following terms. The way economist usually measure the national economy’s performance is by using national income accounting (PG. 336), This area of economics deals with the overall economy’s output, or production, and its income. Five major statistics measure the national economy. These are gross domestic product (PG. 337), net domestic product (PG. 338), national income, personal income, and disposable personal income. When thinking about GDP, economists need to take inflation into account. Inflation (PG. 342) is a prolonged rise in the general price level of goods and services. Every month, the government measures …show more content…
corporate profits
e. interest on savings and other investments.
Section 2 (pp. 341–345)
12. The difference between inflation and deflation is that inflation is a prolonged rise in the general price level of goods and services. While deflation is the opposite which is a prolonged decline in the general price level
13. In order t find real GDP when only knowing GDP I would use the GDP price deflator. I would do this by removing the effects of inflation from GDP so the overall economy in one year can be compared to the overall economy in another year.
Section 3
14. Aggregate supply and demand curve the way they do because the relation between price level and real domestic output are different. When consumers spend more, aggregate demand increases by shifting to the right because they are saving less money and spending more. If taxes and interest rates are high aggregate supply decreases by shifting to the right because people will want to buy less and businesses will supply less to the …show more content…
The point where the aggregate demand and supply curve crosses equilibrium price level
Section 4
16. The four main phases of a business cycle is expansion, peak or boom, contraction, and trough.
17. When an economy enters a recession, GDP declines for 6 months or more and business activity falls.
18. Psychological factors affect the business cycle because people may be scared to buy something or use service. For example, after the 9/11 attack people were afraid to travel by plane causing some airlines to shut down causing a contraction in the business cycle.
19. The two aspects of government activity that affects the business cycle are policies on taxing and spending, and the government control over the supply of money available in the economy.
20. Economist use past business fluctuations to see how to handle current business fluctuations. Since business fluctuations tend to go up and down, economist use indicators to see how long these cycles may last and what cycle we are in. This helps businesses see if they should invest money or lay off workers.
21.
Disposable Personal income
Personal income and non tax Payment
Equals
Personal Income