1.

)Gross Domestic Product (GDP)-the total value of the goods and services produced in a
country in a given year
Standard of Living-the level of material comfort as measured by the goods and services that
are available
Inflation-a general increase in the price of goods and services
Deflation-a general decrease in the price of goods and services
Budget Deficit-when the government spends more on programs than it collects in taxes the
difference in the amount
National Debt-the total amount of money a government owes
Budget Surplus-when a governments revenue exceeds its expenditures during a one year
period
Business Cycle-the rise and fall of economic activity over time
Prosperity-a peak in economic activity
Recession-when economic activity slows down
Depression-a deep recession that affects the entire economy and lasts for several years
Recovery-a rise in business activity after a recession or depression
2.)The service-based economy started in the 1600s. Colonists bartered for goods and services.
In the 1700s, the agriculture-based economy began because farming was a way of life. The
Industry-Based economy started in the mid-1850s when the Industrial Revolution began. We
later see another shift when computers are invented in the 1900s and information is moved very
rapidly. This began the information-based economy.
3.) GDP shows the total value of the goods and services produced in a country in a given year.
The unemployment rate measures the number of people who are able and willing to work but
cannot find work during a given period. Inflation is the general increase in the price of goods and
services. National debt shows and measures the total amount of money that a government
owes.
4.) Individuals have jobs in which they are paid. They can use that money to purchase goods or
services. If there are not enough jobs for individuals, they wont have one. Therefore, they will
not have money to purchase goods and services which affects our economy and henceforth
hurts the government.
5.) The first stage in the business cycle is prosperity. It is the highest peak of economic activity
and spreads throughout the entire economy. Wages are typically higher, so more people save
up and buy a house. The second stage in the business cycle is recession. It is the point in the
business cycle when economic activity slows down. Businesses produce less and need fewer
workers, therefore, unemployment increases. The GDP of the country often declines. The third
stage in the business cycle is depression. A depression is a deep recession that affects all areas
of the economy and lasts for several years. During a depression, many people are out of work
and fewer products are produced. Manufacturing buildings are often empty and unused. The
fourth business cycle is recovery. A recovery is a rise in business activity after a depression or
recession. The GDP often rises and people begin to return back to work. Businesses often

begin to innovate in order to increase sales.

7.) Working in a day-care center because the job is in the public sector and so it is included in
the GDP.
11.) No, this would not be considered inflation because it is only this product and not the others
that are having an increase in price.
12.)There would be more personal bankruptcies during a period of recession or depression
because unemployment is increasing. New businesses could be formed during a period of
prosperity or recovery because people have jobs so they can pay for new items.
13.)The United States has a higher standard of living because the the United States has a
productive workforce.