Name: KEY

Date: __________ Class Period: ________

Chapter 3
Review Packet
Instructions: Below you will find key information you should understand and be able to apply in a testing
situation. Any activity, textbook reading, class discussion, and class notes are all fair game for the test. You
will work all class period, independently on this review packet. It is your responsibility to go online to our
class website and check your answers. There is an electronic version of this review available online if you
prefer responding to the questions in that manner.
Objectives:
Identify the four types of economic shifts that the United States has experienced.
Describe what is shown by GDP, the unemployment rate, rate of inflation, and national debt.
Describe the four stages of the business cycle.
Explain how individuals and government influence the economy.

VOCABULARY You should be able to define (more than just the definition) and use the
following vocabulary terms.
Gross Domestic Product (GDP)
o The total value of the goods and services produced in a country in a
given year.
o Economic indicator
o The United States has a high GDP.
Standard of Living
o Important measure of a countries economic health.
o Measured by goods and services available.
Inflation
o General increase in prices over a given period of time.
o Buying power will decrease.
Deflation
o General decrease in prices of a given period of time.
o Supply is greater than demand.
o Could lead to the collapse of an economy.
Budget Deficit
o Spending more than receiving.
National Debt
o The total amount of money a government owes.
Budget Surplus
o Revenue exceeds spending.
Business Cycle
o Rise and fall of economic activity over time.
o Four stages
o Repeated stages
Prosperity
o Peak
o Everything increases: wages, economic activity, etc.
Recession
o Economic activity slows, unemployment increases, etc.
Depression
o Deep recession, ripple effect, high unemployment etc.

 Recovery
o Rise in business activity, unemployment rate decreases, etc.
REINFORCEMENT QUESTIONS Respond to each of the questions below, in order to
demonstrate your understanding of the concept.
A.) Explain the four types of economic shifts the United States has experienced over
the years. Note: this is not the business cycle it is from your reading of the
chapter.
1600s- bartering, service based economy 1700s farming, agriculture
based
1800s-Industrial revolution
1990s technological
revolution, prosperity
B.) What is the purpose of the GDP?
To determine how well an economy is performing in a given country.
C.)Describe what the unemployment rate represents.
It represents the number of people who are able and willing to work but
are not.
D.)Define rate of inflation and national debt. Then explain how the two concepts are
related.
Gradual steady increase in prices, buying power decreases, represented
as a percentage.
Total amount government owes.
Potentially the government could print more money to pay down the
national debt a very tempting but inflationary solution. , this is one
possible answer.
E.) Estimate the current level of national debt for the United States. Explain why this
number is continuing to increase.
17 trillion dollars the budget deficit is continuing to grow.
F.) What is the main source of income for the government?
Taxes
a. List three areas of the economy where this income is used.
Education, defense, social security
G.)Draw a sample of the business cycle. Be sure to label each section.
Refer to page 44 in your textbook.
H.)Yes or No Is it possible to jump from stage to stage on the business cycle?
I.) Critical Thinking Would cars made in this country by a foreign-owned company be
included in GDP? Why or why not?
Cars made in this country by a foreign-owned company are included in
the GDP. However, items made in a foreign country by an American
company would not be included in the GDP.
J.) Critical Thinking Which would be included in the GDP: babysitting at home or
working at a day-care center?
Babysitting is probably not included in the GDP. Day-care centers would
probably be reported and included.

K.) Critical Thinking Why is inflation especially difficult for individuals who are retired?
Retired individuals income stays the same and the cost of goods and
services increases under inflation.
L.) Explain why the standard of living is higher in the United States than in many other
countries.
The standard of living is high because of productivity. We produce an
abundance of goods and services because of technology, access to raw
materials, an educated workforce, and the entrepreneurial positive
attitude and support.
M.)
Critical Thinking Suppose you go to a store to buy a soda but notice the price
is 20 cents higher than it was last week. Other prices are unchanged. Is this an
example of inflation, deflation, or neither? Why or why not? No, inflation is a
general price increase over an array of items over time.

N.)Explain the ripple effect.

When one industry fails, there is a downward spiral that impacts every
industry in every economy.