1. BUSINESS MANAGEMENT PAVONE 3-4 MANAGING THE ECONOMY

2. PROMOTING ECONOMIC GROWTH

3. INTRODUCTION The strength of a nation depends upon its economic growth. Economic growth is measured by an annual increase in the GDP, increased employment opportunities, and continuous development of new and improved goods and services.

4. PROMOTING ECONOMIC GROWTH Economic Growth – Occurs when a country’s output exceeds its population growth. Basic ways to promote economic growth are: Increasing workplace numbers. Increasing productivity in the workplace. Increasing supply of capital goods. Improving technology. Redesigning work processes. Increasing exports to foreign countries. Decreasing imports from foreign countries.

5. PROMOTING ECONOMIC GROWTH For economic growth to occur, more goods and services must be consumed. Through healthy economic growth, more and better products become available.

6. MEASURING ECONOMIC GROWTH Consumer Price Index (CPI) – Indicates what is happening in general to prices in the country. The federal government collects information to keep track of the economy. Governments track price changes of hundreds of items to track costs of living. Between 1983 and 2006, cost of living in America has doubled.

7. IDENTIFYING ECONOMIC PROBLEMS

8. Recession – Economic problem in which there is a decline in the GDP that continues for six months or more. Inflation – Rapid rise in prices caused by an inadequate supply of goods and services. Economic problems occur when the growth rate jumps ahead or drops back too quickly. Recessions occur when demand for total goods and services is less than the supply. Inflation results in a decline in the purchasing power of money.

9. CORRECTING ECONOMIC PROBLEMS Business Cycles – A pattern of irregular but repeated expansion and contraction of the GDP, which is experienced by most industrialized nations. Depression – A long and severe drop in the GDP. On average, a business cycle lasts five years and goes through four phases: expansion, peak, contraction and trough. Taxes can be raised or lowered to control economic growth- raised to slow growth or lowered to encourage growth. Government expenditures also influence economic growth. Interest rates can also help regulate economic growth- higher interest rates discourage growth and lower rates encourage growth. Controls on economic growth are not always clearly visible in the short run.