Identify economic problems

Recession: decline the GDP that continues for six months or more, occurs when demand for the total goods and services available is less than the supply

Inflation: rapid rise in prices caused by an inadequate supply of goods and services, total demand exceeds supply, results in a decline in purchasing power of money

Business cycles

A pattern of irregular but repeated expansion and contraction of the GDP, which lasts about 5 years.

4 phases: 1.Expansion (inflation)

2. Peak

3. Contraction (recession)

4. Trough

Raise or lower taxes ( raised to slow growth and lowered to encourage growth)

Chapter 8.4 Managing the Economy