Chapter 27:

GOVERNMENT
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Hello!
I am Jayden Smith
I am here because I love to give
presentations.
You can find me at @username

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 SETTING YOUR
OBJECTIVES
1 (Psst…you arent alone! )
INFLATION!
Inflation is the increase in the average price level of
goods and services over time.

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The concept of real income
XYZ’s Income = $ 110 8 % XYZ’s Income = $
Basket of goods- 115.5
Fruits and veggies $20 Basket of goods-
Clothes $40 Fruits and veggies
Healthcare $30 $21.6
Office supplies $20 5 % Clothes $43.2
Healthcare $32.4
Total - 110 Totalsupplies
Office – 118.8
$21.6

Real income is the value of income, and it falls when price rises faster than
money income 6
IF Inflation rises…
Real income falls Businesses wont
expand..
Real income is
inversely Could reduce the creation
proportional to Rise in price of jobs and will result in
inflation lowering living standards.
Directly proportional
to inflation and
could impact
employment.

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One of the most
popular economic
problems??

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Unemployme
nt!
Exists when people who are willing and able to
work cannot find a job.

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The consequences of
unemployment

LOWERS
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OUTPUT
UNEMPLOYMEN
2
T BENEFITS

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 Economic
growth!
Economic growth is when a country’s GDP
increases- more goods and services are produced
than in the previous year.

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Economic growth
The value of goods and services produced in a country in one
year is known as Gross Domestic Product (GDP)
Economic growth is directly proportional to standard of
living.

Problems caused if economic growth is not observed:

o The rule of three- Output falls, workers aren’t needed,
unemployment rises
o Falling average standard of living
o Businesses will be reluctant to expand as they will not
have enough money to spend on the expansion

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 GUESS
Balance
USINGof
payment!
EMOJIS!
Balance of payments records the difference between
a country’s imports and exports.

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 Exports vs imports
Exports Imports

Goes out Comes in

Will country want more exports, more

imports or a balance of both? Explain
your choice.

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Balance of payments
When imports > exports- balance of payments deficit
When exports > imports- balance of payments surplus

Problems caused due to balance of payments deficit:

o Fear of running out of foreign currency
o Exchange rate* could fall; known as exchange rate
depreciation.

Exchange rate is the price of one currency in terms

of another.
Exchange rate depreciation is the fall in the value of
a currency compared to other currencies.
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The funnel of a good economy

Low Inflation

Low unemployment

High Economic growth

Stable balance of
payments

HEALTHY ECONOMY

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 The business
cycle
2 The last topic to cover
The business cycle graph

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Business cycle stages
⊹ Growth:
× GDP high, unemployment low, Living standards
low

⊹ Boom:
× Prices rise, highly skilled workers low, business
expenses rise, uncertainty of future

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Business cycle stages
⊹ Recession:
× Too little spending
× GDP falls
× Unemployment
× Falling demand and profit
Recession is a period of falling gross domestic product.

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Business cycle stages
⊹ Slump:
× Long drown out recession
× High unemployment
× Prices fall

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Thank you!

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