1.

​ Gross Domestic Product (GDP)

a.​ measures the total value of all goods and services produced within a
country over a specific period of time. It is used to show how strong or
healthy an economy is. When GDP increases, it usually means the
economy is growing.
-​ EX. When the U.S. economy recovered after COVID-19, increased
spending on travel, dining, and healthcare raised the country’s
GDP. This showed that businesses were producing more goods
and services and people were spending more money.
2.​ Inflation
a.​ Inflation is the general increase in prices of goods and services over time,
which reduces the purchasing power of money. When inflation rises, each
dollar buys less than it did before. Moderate inflation is normal in a
growing economy, but high inflation can make everyday living more
expensive.
-​ EX. In recent years, inflation in the United States caused higher
prices for groceries, gas, and rent. Many households noticed that
the same amount of money no longer covered the same monthly
expenses as before.
3.​ Deflation
a.​ Deflation is a general decrease in the prices of goods and services over
time. While lower prices may seem positive, deflation can be harmful
because it often occurs when people spend less and businesses slow
production. This can lead to lower wages and higher unemployment.
-​ EX. During the Great Depression, prices fell sharply, causing
deflation. People delayed spending, businesses earned less, and
unemployment rose, which made the economic downturn even
worse.
4.​ Unemployment Rate
a.​ The unemployment rate is the percentage of people in the labor force who
are willing and able to work but cannot find a job. It measures how many
people are actively seeking work but are unemployed. A high
unemployment rate usually indicates a weak economy, while a low rate
suggests a stronger job market.
-​ EX. During COVID-19, the U.S. unemployment rate spiked as
businesses closed and millions of people lost jobs. This showed
that many workers were unable to find employment despite wanting
to work.
5.​ Business Cycle
 a.​ The business cycle is the natural rise and fall of economic activity over
time, including periods of growth and decline. It shows how the economy
expands, peaks, contracts, and then recovers. Understanding the cycle
helps governments and businesses plan for changes in spending,
production, and employment.
-​ EX. The U.S. economy went through a business cycle during the
COVID-19 pandemic, with rapid contraction in 2020 followed by
strong recovery in 2021 as businesses reopened and consumer
spending increased.
6.​ Fiscal Policy
a.​ Fiscal policy is how a government uses spending and taxes to influence
the economy. By increasing spending or cutting taxes, the government
can stimulate growth, and by decreasing spending or raising taxes, it can
slow inflation. Fiscal policy helps manage economic stability and
encourage employment.
-​ EX. In 2020, the U.S. government passed stimulus checks and
expanded unemployment benefits to help the economy recover
from the COVID-19 recession. These actions increased consumer
spending and supported businesses during the downturn.
7.​ Monetary Policy
a.​ Monetary policy is how a country’s central bank, like the Federal Reserve,
controls the money supply and interest rates to influence the economy.
Lowering interest rates can encourage borrowing and spending, while
raising rates can slow inflation. It helps stabilize prices, promote growth,
and maintain employment.
-​ EX. In 2022, the Federal Reserve raised interest rates to fight high
inflation in the U.S., making loans more expensive and slowing
consumer spending. This aimed to reduce price increases and
stabilize the economy.
8.​ Federal Reserve
a.​ The Federal Reserve, often called the Fed, is the central bank of the
United States. It manages the country’s money supply, sets interest rates,
and regulates banks to keep the economy stable. Its goal is to control
inflation, encourage employment, and support economic growth.
-​ EX. In 2023, the Federal Reserve raised interest rates to slow
inflation, making borrowing more expensive for businesses and
households. This action helped reduce spending and stabilize
prices in the economy.
9.​ Recession
 a.​ A recession is a period of economic decline, usually marked by falling
GDP, lower consumer spending, and rising unemployment. It occurs when
economic activity slows for at least two consecutive quarters. Recessions
can reduce incomes, business profits, and overall economic confidence.
-​ EX. The U.S. experienced a brief recession in 2020 due to the
COVID-19 pandemic, when businesses closed and millions of
people lost jobs. This caused a sharp drop in economic activity and
consumer spending.
10.​Economic Growth
a.​ Economic growth is the increase in a country’s production of goods and
services over time, usually measured by rising GDP. It indicates that
businesses are producing more, people are earning more, and the
economy is expanding. Sustained growth can improve living standards
and create more job opportunities.
-​ EX. China has experienced rapid economic growth over the past
few decades, building new cities, factories, and infrastructure. This
has increased incomes and improved living standards for millions of
people.
11.​Aggregate Demand
a.​ Aggregate demand is the total demand for all goods and services in an
economy at a given overall price level and time. It includes spending by
households, businesses, government, and foreign buyers. Changes in
aggregate demand can influence economic growth, employment, and
inflation.
-​ EX. During the 2020 COVID-19 pandemic, U.S. aggregate demand
fell as people stayed home, businesses closed, and travel dropped.
This decline contributed to the economic recession that year.
12.​Aggregate Supply
a.​ Aggregate supply is the total goods and services producers are willing to
supply at a given price level. It shows how much an economy can
produce.
-​ In 2021, supply chain disruptions limited the production of cars and
electronics, causing higher prices and inflation in the U.S.
13.​Interest Rates
a.​ Interest rates are the cost of borrowing money or the reward for saving it,
usually expressed as a percentage. They influence spending, borrowing,
and investment in the economy. Higher rates can slow spending, while
lower rates encourage it.
 -​ In 2022, the Federal Reserve raised interest rates to fight inflation,
making loans and mortgages more expensive. This slowed
consumer spending and borrowing in the U.S.
14.​National Debt
a.​ National debt is the total money a government owes from spending more
than it collects in taxes.
-​ In 2023, the U.S. national debt exceeded $33 trillion, with much of
the budget going to interest payments.
15.​Consumer Price Index (CPI)
a.​ The Consumer Price Index (CPI) measures the average change in prices
of goods and services that households buy over time. It shows how
inflation affects the cost of living.
-​ In 2022, the U.S. CPI rose sharply, reflecting higher prices for
groceries, gas, and housing, which showed that everyday living
costs were increasing.