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 LABOR ACTIVITIES Employment Labor force = 16+ people working or actively seeking jobsUnemployment increases when demand for current goods and services decreases
10 LABOR ACTIVITIES Productivity – output in relation to input Increase with fewer workers and same or increased outputCan decrease if wages grow, but output doesn’tImproved equipment/technologyMore skills/trainingBetter management techniques (motivation)
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 CONSUMER SPENDING Personal income Retail sales Salaries/wages Investment incomeGovernment paymentsRetail salesDictates general health of economyWhat’s included?
13 Checkpoint What are the main sources of personal income? Sources of personal income include wages, salaries, investment income, and government payments.
14 2-2 Economic Conditions Change Goal 1 Describe the four phases of the business cycle.Goal 2 Explain causes of inflation and deflation.Goal 3 Identify the importance of interest rates.
16 THE BUSINESS CYCLE What factors are evaluated? GDP, demand for products/services, employment rate, wagesProsperity – highest pointRecession – economy shrinkingDepression – prolonged recessionRecovery – jobs increase, demand increases, GDP rises
17 Checkpoint What are the four phases of the business cycle? ProsperityRecessionDepressionRecovery
18 CONSUMER PRICES Inflation Causes of inflation Bad for fixed incomes Supply < demand for productsWages increase slower than product prices
19 CONSUMER PRICES Measuring inflation Deflation Some inflation is good If businesses make more $, they can hire more peopleConsumer Price Index (CPI) – measures inflation (based on selected products)DeflationRecession/depressionsCan result from improved technoogy
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 INTEREST RATES Types of interest rates Changing interest rates Prime rate, discount rate, T-bill rate, treasury bond rate, mortgage rate, corporate bond rate, certificate of deposit rateChanging interest ratesHigh amount saved lower demand for $ Lower interest ratesHigher spending more demand higher interest rates
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 2-3 Other Measures of Business Activity Goal 1 Discuss investment activities that promote economic growth.Goal 2 Explain borrowing activities by government, business, and consumers.Goal 3 Describe future concerns of economic growth.
24 KEY TERMS capital project stock bond budget surplus budget deficit national debt
25 INVESTMENT ACTIVITIES These activities provide funds for capital projectsPersonal savingsLow risk, low return (usually <1%)The stock market – ownership in corporationsHigher potential risk for higher potential returnPrices determined by supply and demandThe bond market – loans to corps./govt.
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 BORROWING Government debt – necessary to fund projects Business debt Surplus vs. deficitSurplus helps chip away at national debtBusiness debtLoans, bonds, mortgagesConsumer debtOverly convenient or necessary evil?
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 FUTURE ECONOMIC CHALLENGES Emerging marketsWhat is an emerging market right now?Weak economiesStronger ones usually helpConsumer preferences and behaviorKnow your target market
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.