Chapter 3:2 Promoting Growth and Stability

Objectives: • Students will study how the

government seeks to make the

economy stable.

• Students will see how innovation

and technology aids in the

growth of the economy.

• Pro_2:9 Then shalt thou

understand righteousness,

and judgment, and equity;

yea, every good path.

• Even under our free enterprise system, the government intervenes to influence macro-economic trends.

• Macroeconomics is the study of economic behavior and decision-making in a nation’s whole economy.

• By contrast, microeconomics, is the study of economic behavior and decision-making in small units such as households and firms.

GDP and Business Cycle:

• One measure of a nation’s economic well being is gross domestic product (GDP), the total value of final goods and services produced in a country in a given year.

• In a period of macro-economic expansion, or growth a country produces more than it did before and GDP goes up.

GDP and Business Cycle:

• In a period of contraction or

decline, the country produces

less GDP goes down.

• This pattern of a period of

expansion or growth followed

by a period of contraction or

decline is called a business

cycle.

Making Predictions:

• Changing in the business cycles take place because individuals and businesses, acting in their own self interest, make decisions about factors such as prices, productions, and consumptions.

• In Washington, government economists analyze the business cycle to predict the direction of the cycle’s future.

Promoting Economic Strength

• Government tries to create public policies to promote economic strength to protect from the vulnerabilities of the business cycle.

• The three main goals are

• High Employment

• Growth

• Stability

Employment:

• One aim of government

economic policy is to ensure

jobs for everyone who is able

to work.

• In the U.S. many economists

consider an unemployment

rate of between 4 to 6 percent

to be evidence of a healthy

economy.

Economic Growth:

• American Dream is to have each generation to enjoy a higher standard of living than that of previous generations.

• For that to happen the economy must grow to provide additional goods and services in succeeding generations.

• An increasing GDP is a sign of such growth.

• To help growth, the government may cut taxes or increase spending.

Pop Quiz!!!!! • What is macro-economics?

• What is micro-economics?

• What is GDP?

• What are three main goals for the

government to promote economic

health?

Stability and Security:

• The government also seeks to keep the economy stable.

• Consumers, producers, and investors need to feel confident that economic conditions will not fluctuate unpredictably.

• If this happens, confidence wavers, economic growth may slow or even stop.

Stability and Security:

• An indicator is the general level of

prices.

• A surge in overall prices strains

consumers, especially poor on fixed

incomes.

• But if prices sink, producers feel

the pain

• The government seeks to prevent

sudden drastic shifts in prices.

Stability and Security:

• Another sign of economic stability is the security of our financial institutions, such as banks or the stock market.

• Imagine going to the bank and finding it boarded up and empty.

• To provide such protections the Federal government monitors and regulates banks and other financial institutions.

• Such regulations protect bank deposits and retirees pensions.

Economic Citizenships

• Economic policy is made by elected officials and workers they appoint.

• But it is the voters who put these officials in office and play a vital role in government policy.

• On the state and local level, voters can include referendums, proposed laws submitted directly to the public or spending or other economic issues.

Technology and Productivity:

• The American economy supports

a far higher standard of living,

than most economies in the

world.

• One way to preserve that high

standard is increasing

productivity.

Technology and Productivity:

• Improved technology is a key

factor in boosting productivity.

• Technological progress has

long enabled the economy of

the U.S. to operate more

efficiently, increasing GDP

and giving American

businesses a competitive

advantage in the world.

Technology and Productivity:

• Innovation often leads to

obsolescence, as older products

and processes become out of

date.

• Workers can also be in this

category (e.g., telephone

operator, milk man, etc.).

Discussion Question

o What type of technology do you think helps

you to be more productive in school work?

The Government’s Role

• To help maintain the country’s

technological advantage, the

government promotes innovation

and invention.

• Federal agencies funds research.

• NASA is the government’s own

research institute where technology

used for space travel has spun off

into commercial uses.

The Government’s Role

• The government also encourages innovation by granting patents and copyrights.

• A patent gives the inventor of a new product exclusive right to produce and sell it for 20 years.

• A copyright grants an author exclusive rights to publish and sell his or her creative works.

• These are incentives for innovation.

The Government’s Role

• American Work Ethic: The commitment to the value of work.

• It not only means working hard, but also caring about the quality of one’s work.

• The American work ethic has long been seen as the ingredient for economic success.

• Ecc_5:12 The sleep of a

labouring man is sweet,

whether he eat little or

much: but the abundance

of the rich will not suffer

him to sleep.

Discussion Question

o What Jobs do you think will be obsolete in

the next ten years?