1.02 – Analyze economic indicators and how they affect the business cycle

Economic Indicators Economic Indicators simply measure economic activity. They are: –GDP (Gross Domestic Product) –Unemployment Rate –Rate of Inflation –National Debt

Gross Domestic Product The total value of the final goods and services produced in a country in a given year. Why is the word “final” important???

Unemployment Rate The number of people who are able to work but don’t have a job during a given period of time. Changes in the rate show whether an economy is picking up or slowing down.

Rate of Inflation Inflation is the general increase in the cost of goods and services.

National Debt The total amount the government owes. Main source of income for government… Taxes If it spends more than it makes in taxes, the government will: –Borrow money from the public –Borrow money from other countries Let’s look at our handout about the current National Debt.

The Business Cycle The Business Cycle is best described as the movement of an economy from one condition to another. It has 4 phases: –Prosperity –Recession –Depression –Recovery

Prosperity Prosperity is a peak of economic activity. Unemployment - low Production of goods and services – high New businesses open

Recession Economic activity slows down. Spending – decreases Demand for products – decreases Unemployment – increases

Depression The lowest point in the Business Cycle Extended period of high unemployment Low productivity Decline in sales of goods and services Business failures Can spread to other countries

Recovery A rise in business activity after a recession or depression Production starts to increase Unemployment decreases Increase demand for goods and services Can take a while

Let’s Take a Further Look… Activity 1: Using the internet, find the dollar amount of the current national debt. What was it ten years ago. Has it gone up or down? Activity 2: Using the internet, find the GDP and the GDP per capita for the United States, China, India, and Russia. Analyze the comparisons.