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1 . 0 2 ~ E C O N O M I C A C T I V I T I E S A N D C O N D I T I O N S
CHAPTER 2MEASURING ECONOMIC ACTIVITY
GROSS DOMESTIC PRODUCT (GDP)
• The total dollar value of all final goods and services produced in a country during one year.• http://www.bbc.co.uk/news/business-13200758
Chapter 2 Slide 2
COMPONENTS OF GDP
Consumer spending for food, clothing, housing, and other
spending
Business spending for buildings,
equipment, and inventory items
Government spending to pay
employees and to buy supplies and other goods and services
The EXPORTS of a country LESS the IMPORTS into a
country.
Chapter 2 Slide 3
NOT INCLUDED IN GDP
Value of the work you do for yourself
Intermediate goods used in
manufacturing, such as steel and
fabrics.Chapter 2 Slide 4
GDP PER CAPITAGDP per capita
output per person = GDP ÷ Total Population
Increase in GDP per capita means
economy is growing
Decrease in GDP per capita may mean
economy is having trouble
5
LABOR ACTIVITIES
The workers of a country contribute to an economy in
several ways:
Create needed goods and services
Wages received are spent to create demand for various
itemsChapter 2 Slide 6
LABOR ACTIVITIES ~ EMPLOYMENT
Labor force
consists of all people above age 16 who are actively
working or seeking employment.
Students, retired people, and others who cannot or do
not wish to work are not part of the labor force.
Unemployment rate
Portion of people in the labor force who are not
working (must be looking for work and able and willing to
work)
Main cause: reduced demand for goods and
services
As of July 2011, US Unemployment Rate = 9.1% (Bureau of Labor Statistics)• http://www.bls.gov/news.releas
e/empsit.nr0.htm
Chapter 2 Slide 7
LABOR ACTIVITIES ~ PRODUCTIVITY
A vital source of economic
growth is an increase in output per
worker.
Productivity
the production output in relation to a unit of input.
Can be increased
by:
Improvements in capital resources (equipment and
technology)
Worker training
Management techniques
Chapter 2 Slide 8
CONSUMER SPENDING
The money you earn and spend is one of the most important factors for economic growth.
Personal income• The salaries and wages as well
as investment income and government payments to individuals.
Chapter 2 Slide 9
CONSUMER SPENDING
Retail sales
The sales of durable and nondurable goods bought
by consumers.
Main items measured include:• Automobiles, Building Materials,
Furniture, Gasoline, Clothing• Purchases from Restaurants,
Department Stores, Food Stores, Drug Stores
Chapter 2 Slide 10
>> C H E C K P O I N T
1. Unemployment/GDP mapping activity.2. You are to label the blank US map with the
following information:1. Unemployment rate per state2. GPD per capita per state
3. Answer the following question based on your map:
1. What correlation can you see between the unemployment rates and the GDP per capita?
Chapter 2 Slide 11
LESSON 2-2
ECONOMIC CONDITIONS CHANGE
Goals• Describe the four phases of the business cycle.• Explain causes of inflation and deflation.• Identify the importance of interest rates.
Chapter 2 Slide 12
THE BUSINESS CYCLE
• Our economy has its ups and downs; seems to run in cycles• Good times Bad times Good
times• This movement of the economy from one
condition to another and then back again is called a Business Cycle.• Four phases
Chapter 2 Slide 13
Prosperity
• Employment rate and demand for products and services are high.
• Businesses continue making profits.
Recession
• Unemployment rate is increasing and demand for products and services are lowering.
• Businesses must strategize to stimulate demand for products & services.
Depression
• Unemployment rate is high and demand for products and services is lowering.
• Businesses try to maintain profits or break even to avoid going out of business.
Recovery
• Unemployment rate is lowering and demand for products and services is increasing.
• Business may increase human capital.
14
CONSUMER PRICES
Chapter 2 Slide 15
Inflation
An increase
in the general level of prices.
Demand for goods
and services is
greater than
supply causing prices to
rise faster than
wages
Buying power of the dollar decreases
It now takes more money to buy the same
amount of goods and services
Most harmful to
people living on
fixed incomes – retirees
and disabled persons
Deflation
A decrease
in the general level of prices
Usually occurs during
periods of recession
and depressio
n
Prices of products are lower, but people have less money to buy them
Significant deflation occurred
in the U.S. during the
Great Depression of the 1930s, when prices
declined about 25%.
Chapter 2 Slide 16
LESSON 2-3
OTHER MEASURES OF BUSINESS ACTIVITY
Chapter 2 Slide 1
Goals• Discuss investment activities that promote
economic growth.• Explain borrowing activities by government,
business, and consumers.• Describe future concerns of economic growth.
INVESTMENT ACTIVITIES
Chapter 2 Slide 18
•Your time in school is an investment in your future•Companies buying buildings and equipment•Capital spending – money spent by a business for an item that will be used over a long period
Investing for the
future can happen in
several ways.
INVESTMENT ACTIVITIES, CONT’D.
Chapter 2 Slide 19
Capital projects involve spending by businesses for
items such as land, buildings, equipment, and new products.
PERSONAL SAVINGS
Chapter 2 Slide 20
THE STOCK MARKET
Chapter 2 Slide 21
Many people invest by
becoming part owners of a corporation.
Investors are issued stock to represent this
ownership.
Supply and demand are major influencers in stock prices• If a company has
higher earnings, more people will want to buy its stock, which causes the value to increase
THE BOND MARKET
Chapter 2 Slide 22
Another investment activity involves the sale of bonds.
• In return, you are paid interest for the use of your money.
A bond represents debt for an organization.
When you purchase a corporate or government bond, you have become a creditor.
GOVERNMENT DEBT
Chapter 2 Slide 23
Credit is often referred to as “Buy now, pay later”
GOVERNMENT DEBT, CONT’D.
Chapter 2 Slide 24
A government may spend less than it takes in – a budget surplus is the
result.
May cause a reduction in taxes
or increased spending
DECISION-MAKING
Chapter 2 Slide 25
Economic decision-making plays a major
role in how well companies (both
large and small) will manage their debt.
Borrowing can be helpful when
funds are used to expand sales and
profits.
Poor decision-making can lead to debt problems
and business failure.
>> C H E C K P O I N T
Chapter 2 Slide 26
What is the cause of a budget deficit?
FUTURE ECONOMIC CHALLENGES
Chapter 2 Slide 27
Limited access to health care Traffic and crime
>> C H E C K P O I N T
Chapter 2 Slide 28
What are future economic concerns for a country’s economy?