ECONOMIC STABILIZATION

Proficiency Statements and Indicators:

Define/explain the following concepts:

• Fiscal Policy    
      

• Monetary Policy    
      

• Aggregate Supply and Demand    
      

• Unemployment    
     

• Gross Domestic Product (GDP)
  
  

• Explain the four phases of the business cycle.
  

• Explain how the relationship between aggregate supply and aggregate
  
  demand is an important determinant of the levels of unemployment and inflation
  
   in an economy.
  

• Explain how the government uses taxing and spending decisions (fiscal policy)
  
   to promote price stability, maximum employment, and economic growth.
  

• Explain the limitations of  using GDP to measure economic welfare.
  

• Explain how the Federal Reserve uses monetary tools to promote price stability,
  
   maximum employment, and economic growth.
  

• Explain how monetary policy affects the level of inflation in the economy.
  

Sample Student Activities/Projects:

• Using black line masters of a world map, color different countries
  according to GDP levels.
• Interview people and ask their definition of gross domestic product
  (GDP) and their estimate of annual GDP growth. Compare to actual data.
• Construct and label a model of the business cycle.
• Research and graph recent Federal budget deficits. Identify ways to
  demonstrate to a group of younger students the volume of $1 billion.
• Research and graph unemployment levels during the past 25 years.
  Compare and contrast with levels in Europe and Southeast Asia.
• Use newspaper grocery ads to calculate the percentage change in price
  of specific products over a ten year period. Illustrate graphically.
• Analyze current newspaper articles to assess current economic conditions
  and to identify current monetary and fiscal policies. Predict changes in the
  business cycle and assess whether current policies are appropriate.

TRADE