Section 3.1 What Is an Economy? Chapter 3 political and economic analysis Section 3.2 Understanding...

Section 3.1What Is an Economy?

Chapter 3political and economic analysis

Section 3.2Understanding the Economy

CONNECT How do your actions affect the economy?

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Understanding the Economy

• List the goals of a healthy economy.

• Explain how an economy is measured.

• Analyze the key phases of the business cycle.

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Aspects of an economy such as consumers,

businesses, and governments affect the

economy and marketing decisions.


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• productivity

• gross domestic product (GDP)

• gross national product (GNP)

• inflation

• consumer price index (CPI)

• producer price index (PPI)


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.2• business cycle

• expansion

• recession

• depression

• recovery


Identifying Economic MeasurementsS

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The Economy and Marketing

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.2Economic Measurements

Labor Productivity

productivityOutput per worker hour that is measured over a defined period of time.



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Labor Productivity

gross domestic product (GDP)The output of goods and services produced by labor and property located within a country.

Gross Domestic Product(GDP)



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Labor Productivity

gross national product (GNP)The total dollar value of goods and services produced by a nation, including goods and services produced abroad by U.S. citizens and companies.


Gross National Product(GNP)



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Labor Productivity

inflationRising prices.



Inflation



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Labor Productivity

consumer price index (CPI)Measures the change in price over a period of time of 400 specific retail goods and services used by the average urban household.



Inflation

Consumer Price Index(CPI)



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Labor Productivity

producer price index (PPI)Measures wholesale price levels in the economy.



Inflation


Producer Price Index(PPI)



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Labor Productivity



Inflation


Producer Price Index(PPI)

Standard of Living

UnemploymentRate



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.2Examples of the Three Types of Goods and Services

That Make Up the GDP



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.2How Do These Two

Economic Measurements Compare?


The Business Cycle

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The Business

Cycle

business cycleRecurring changes in economic activity.

Expansion Recession expansionA time when the economy is expanding.

recessionA period of economic slowdown that lasts for at least two quarters, or six months.

TroughRecoveryrecoveryThe term that signifies a period of renewed economic growth following a recession or depression.


The Business Cycle

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depressionA period of prolonged recession.

During a depression, consumer spending is very low, unemployment is very high, and production of goods and services is down significantly.



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Factors Affecting the Business Cycle


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Explain how monitoring economic measures helps economists achieve the three goals of a healthy economy.

Section 3.2

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Monitoring economic measures helps economists quickly notice changes in productivity, employment, and prices, and determine when the government should respond to changing conditions; for example, by lowering interest rates to spur the economy.


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Describe the effect of high unemployment on a nation’s economy.

Section 3.2

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High unemployment has a negative effect on a nation’s economy. The unemployed cannot make purchases so companies produce less and cut back on capital projects. Tax revenue decreases. Unemployment benefits cause state governments to reduce spending.


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Describe what happens to an employee in each phase of the business cycle.

Section 3.2

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During an expansion, jobs are readily available and wages typically increase; employees can move from one job to another fairly easily. In a recession, employees may be laid off and finding another job can be difficult. In a trough, jobs are typically scarce but may gradually become more plentiful. In a recovery, more jobs become available as the economy grows and workers may see their wages increase, enabling them to increase their standards of living.

End of

Section 3.1What Is an Economy?

Chapter 3political and economic analysis

Section 3.2Understanding the Economy

Section 3.1 What Is an Economy? Chapter 3 political and economic analysis Section 3.2 Understanding...

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