8.4 Managing the Economy

What are basic economic problems that exist and how can the government help?

1. Recession: decline in the GDP that exists for 6 months or more

2. Inflation: rapidly rising prices due to inadequate supply of goods and services

Business cycles are patterns of irregular, but repeated expansions and contraction of the GDP.

How the government controls the economy:

One way the government corrects these problems is by lowering or raising taxes to control economic growth. The government expenditures also control economic growth. Lastly economic growth can be controlled by regulating interest rates, which is the money paid to borrow money from the government.