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© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 1 2-1 2-1Measuring Economic Activity 2-2 2-2Economic Conditions.

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Presentation on theme: "© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 1 2-1 2-1Measuring Economic Activity 2-2 2-2Economic Conditions."— Presentation transcript:

1 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE Measuring Economic Activity Economic Conditions Change Other Measures of Business Activity 2 C H A P T E R Economic Activity

2 © 2012 Cengage Learning. All Rights Reserved. SLIDE 2 2-1Measuring Economic Activity Goal 1Define gross domestic product. Goal 2Describe economic measures of labor. Goal 3Identify economic indicators for consumer spending.

3 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 3 KEY TERMS ●Gross Domestic Product (GDP) ●GDP per capita ●unemployment rate ●productivity ●personal income ●retail sales

4 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 4 GROSS DOMESTIC PRODUCT (GDP) ●Components of GDP ●Consumer spending ●Business spending ●Government spending ●Exported goods – imported goods ●Exclusions ●Things you do for yourself ●Intermediate goods

5 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 GDP PER CAPITA ●Comparing GDP ●More accurate to compare GDP per capita ●Divide GDP by total population ●Who has the best? ●If population grows, but GDP doesn’t then economy is shrinking SLIDE 5

6 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 6 COMPARISON OF GDP IN SELECTED COUNTRIES

7 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 7 COMPARING GROSS DOMESTIC PRODUCT

8 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 8 Checkpoint ●What types of economic activities are not included in GDP? ●GDP only applies to reported final goods and services. ●Money earned for goods or services that are not reported would not be included. ●Goods and services used in the manufacture of other products are only counted once—in the final product.

9 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 9 LABOR ACTIVITIES ●Employment ●Labor force = 16+ people working or actively seeking jobs ●Unemployment increases when demand for current goods and services decreases

10 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 LABOR ACTIVITIES ●Productivity – output in relation to input ●Increase with fewer workers and same or increased output ●Can decrease if wages grow, but output doesn’t ●Improved equipment/technology ●More skills/training ●Better management techniques (motivation) SLIDE 10

11 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 11 Checkpoint ●How can productivity be increased? ●Productivity can be increased by improvements in capital resources (equipment and technology), worker training, and management techniques.

12 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 12 CONSUMER SPENDING ●Personal income ●Salaries/wages ●Investment income ●Government payments ●Retail sales ●Dictates general health of economy ●What’s included?

13 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 13 Checkpoint ●What are the main sources of personal income? ●Sources of personal income include wages, salaries, investment income, and government payments.

14 © 2012 Cengage Learning. All Rights Reserved. SLIDE Economic Conditions Change Goal 1Describe the four phases of the business cycle. Goal 2Explain causes of inflation and deflation. Goal 3Identify the importance of interest rates.

15 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 15 KEY TERMS ●business cycle ●prosperity ●recession ●depression ●recovery ●inflation ●price index ●deflation

16 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 16 THE BUSINESS CYCLE ●What factors are evaluated? ●GDP, demand for products/services, employment rate, wages ●Prosperity – highest point ●Recession – economy shrinking ●Depression – prolonged recession ●Recovery – jobs increase, demand increases, GDP rises

17 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 17 Checkpoint ●What are the four phases of the business cycle? ●Prosperity ●Recession ●Depression ●Recovery

18 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 18 CONSUMER PRICES ●Inflation ●Bad for fixed incomes ●Causes of inflation ●Supply < demand for products ●Wages increase slower than product prices

19 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 CONSUMER PRICES ●Measuring inflation ●Some inflation is good ●If businesses make more $, they can hire more people ●Consumer Price Index (CPI) – measures inflation (based on selected products) ●Deflation ●Recession/depressions ●Can result from improved technoogy

20 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 20 Checkpoint ●What are the main causes of inflation? ●Inflation is an increase in the general level of prices that occurs when the demand for goods and services is greater than supply.

21 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 21 INTEREST RATES ●Types of interest rates ●Prime rate, discount rate, T-bill rate, treasury bond rate, mortgage rate, corporate bond rate, certificate of deposit rate ●Changing interest rates ●High amount saved  lower demand for $  Lower interest rates ●Higher spending  more demand  higher interest rates

22 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 22 Checkpoint ●How do interest rates affect business activities in our economy? ●Interest rates can encourage or discourage borrowing and spending. ●Lower interest rates allow consumers greater spending power, which increases demand, productivity, and employment. ●Businesses often pass on the cost of higher interest rates to consumers.

23 © 2012 Cengage Learning. All Rights Reserved. SLIDE Other Measures of Business Activity Goal 1Discuss investment activities that promote economic growth. Goal 2Explain borrowing activities by government, business, and consumers. Goal 3Describe future concerns of economic growth.

24 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 24 KEY TERMS ●capital project ●stock ●bond ●budget surplus ●budget deficit ●national debt

25 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 25 INVESTMENT ACTIVITIES ●These activities provide funds for capital projects ●Personal savings ●Low risk, low return (usually <1%) ●The stock market – ownership in corporations ●Higher potential risk for higher potential return ●Prices determined by supply and demand ●The bond market – loans to corps./govt.

26 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 26 Checkpoint ●Name some examples of capital projects. ●Capital projects include the purchase of any item a business will use over an extended period of time such as land, buildings, and equipment.

27 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 27 BORROWING ●Government debt – necessary to fund projects ●Surplus vs. deficit ●Surplus helps chip away at national debt ●Business debt ●Loans, bonds, mortgages ●Consumer debt ●Overly convenient or necessary evil?

28 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 28 Checkpoint ●What is the cause of a budget deficit? ●A budget deficit occurs when a government or organization spends more than it takes in.

29 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 29 FUTURE ECONOMIC CHALLENGES ●Emerging markets ●What is an emerging market right now? ●Weak economies ●Stronger ones usually help ●Consumer preferences and behavior ●Know your target market

30 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 30 Checkpoint ●What economic challenges do countries face in the future? ●Future economic concerns for any country include the ability to increase its output and provide a means for its citizens to meet the basic needs of food and shelter, adequate health care, education, transportation, employment, and safety.


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