E CS 07

Government and the Economy

The health of a nation’s economy is influenced by governmental policy. Fiscal policy can be used to spur economic growth. Monetary policy can be used to moderate fluctuations in the business cycle.

Content Statement

7. A nation’s overall level of economic well-being is determined by the interaction of spending and production decisions made by all households, firms, government agencies and others in the economy. Economic well-being can be assessed by analyzing economic indicators gathered by the government.

Content Elaborations

One of the indicators on a nation’s economic health is its Gross Domestic Product (GDP). This is a basic measure of economic output of the total market value of all final goods and services produced in a country in a given year. It allows experts to see whether the economy is moving forward or regressing.

Economists distinguish between nominal and real GDP. Nominal GDP is reflected in current dollars. Real GDP is adjusted for inflation.

Other economic indicators include the Consumer Price Index (CPI), unemployment rates, new residential sales, new residential construction, personal income and outlays, consumer confidence index and U.S. international transactions.

Expectations for Learning

Interpret and evaluate economic indicators (e.g., GDP, unemployment rates, CPI) to assess a nation’s economic well-being.