© 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

© 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.

© 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

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 4 GROSS DOMESTIC PRODUCT (GDP) ●GDP : the total value of all FINAL goods and services produced in a country. ●Components of GDP : 1.Consumer spending for food, clothing, housing, and other aspects 2.Business spending for buildings, equipment, and inventory items 3.Government spending to pay employees and to buy supplies and other goods 4.Exports of a country less the imports into the country

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 5 GROSS DOMESTIC PRODUCT (GDP) ●Comparing GDP: ●The more goods and services that are produced the healthier a country is. ●GDP per Capita: calculated by dividing DGP by the total Population ●Figures output per person.

© 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

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

© 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.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 9 LABOR ACTIVITIES ●Employment: ●More than 155 million people work in the US. ●Labor force is “anyone who is actively working and is over the age of 16. ●Unemployment rate: portion of people in the labor force who are not working. ●Considered unemployed if not working but looking for work and willing to work ●Productivity

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 10 LABOR ACTIVITIES ●Productivity: production output per worker. ●The more being produced the higher the productivity. ●Standard of living???? ●What if wages increase is this good? ●How do you think we improve productivity?

© 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.

© 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 and government payments ●Retail sales: sales of durable and nondurable goods bought by consumers. ●Indicates general consumer spending patterns. ●Main items measured: autos, building materials, furniture, gas, clothing, food

© 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.

© 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.

© 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

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 16 THE BUSINESS CYCLE ●Prosperity ●Recession ●Depression ●Recovery

© 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

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 18 CONSUMER PRICES ●Inflation ●Causes of inflation ●Measuring inflation ●Deflation

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 19 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.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 20 INTEREST RATES ●Types of interest rates ●Changing interest rates

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 21 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.

© 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.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 23 KEY TERMS ●capital project ●stock ●bond ●budget surplus ●budget deficit ●national debt

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 24 INVESTMENT ACTIVITIES ●Personal savings ●The stock market ●The bond market

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 25 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.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 26 BORROWING ●Government debt ●Business debt ●Consumer debt

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 27 Checkpoint ●What is the cause of a budget deficit? ●A budget deficit occurs when a government or organization spends more than it takes in.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 28 FUTURE ECONOMIC CHALLENGES ●Emerging markets ●Weak economies ●Consumer preferences and behavior

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 2 SLIDE 29 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.