2. Economic Activity in a Changing World Chapter 3 pp. 36-51 Mr. Manning

3. Chapter 3 - Economic Activity in a Changing World Slide 2 LEARNING OBJECTIVES 1.Describe 1.Describe how economic activity is measured (GDP, unemployment rate, rate of inflation, etc.). 2.Describe the 4 types of economy the U.S. has experienced.

4. Chapter 3 - Economic Activity in a Changing World Slide 3 Why It’s Important Economic activity affects everyday life. The history of the economy affects the industries of today and tomorrow.

5. Chapter 3 - Economic Activity in a Changing World Slide 4 Changing U.S. Economy 1600’s – Colonists traded goods and services (Service-based) 1700’s – Agriculture-based economy 18 1850’s – Industry-based economy 1900’s – Information-based economy

6. Chapter 3 - Economic Activity in a Changing World Slide 5 Measuring Economic Activity Economic indicators are figures used to measure economic performance: how much a country is producing whether its economy is growing and how it compares to other countries

7. Chapter 3 - Economic Activity in a Changing World Slide 6 Gross Domestic Product (GDP) G ross D omestic P roduct - The total value of the G&S produced in a country in a given year Economists compute the sum of G&S Doesn’t include the G&S that aren’t reported to the government standard of living is the amount of G&S the average citizen can buy

8. Chapter 3 - Economic Activity in a Changing World Slide 7 Economists include four main areas in calculating the GDP: 1. Consumer G&S 2. Business G&S 3. Government G&S 4. G&S sold to other countries Gross Domestic Product (GDP)

9. Chapter 3 - Economic Activity in a Changing World Slide 8 What percentage did the GDP increase from the end of Year 2 to the beginning of Year 3?

10. Chapter 3 - Economic Activity in a Changing World Slide 9 Consumer goods and services Business goods and services Government goods and services Goods and services sold to other countries +=++ Gross Domestic Product Gross Domestic Product (GDP)

11. Chapter 3 - Economic Activity in a Changing World Slide 10 Unemployment Rate unemployment rate measures the number of people who are able to work but don’t have a job during a given period of time Different reasons for being unemployed: ● Temporary ● Seasonal ● ● Changes in industry ● Economic slow down

12. Chapter 3 - Economic Activity in a Changing World Slide 11 Unemployment Rate The worst type of unemployment occurs when the entire economy slows down This type of unemployment lasts until the economy recovers, which can take years Changes in the unemployment rate show whether an economy is picking up or slowing down

13. Chapter 3 - Economic Activity in a Changing World Slide 12 ????????????????????????  What are the four factors that compute the GDP? –Consumers G&S –Business G&S –Government G&S –G&S sold to other countries

14. Chapter 3 - Economic Activity in a Changing World Slide 13 Rate of Inflation Inflation - a general increase in the cost of G&S (stuff costs more) Can happen when an economy actually becomes too productive As the demand for goods goes, producers raise their prices To pay the higher prices, workers demand higher wages

15. Chapter 3 - Economic Activity in a Changing World Slide 14 Rate of Inflation When wages go, producers raise prices again to pay for the higher wages, and so on If this spirals out of control, leads to hyperinflation

16. Chapter 3 - Economic Activity in a Changing World Slide 15 Rate of Inflation Deflation - a general decrease in the cost of G&S (stuff costs less) Economy produces more goods than people want, it has to lower prices and cut production United States tries to maintain a slow but steady rate of economic growth to avoid both inflation and deflation.

17. Chapter 3 - Economic Activity in a Changing World Slide 16 ????????????????????????  What are three of the four reasons for unemployment? –Temporary –Seasonal –Economic slowdown –Changes in industry

18. Chapter 3 - Economic Activity in a Changing World Slide 17 National Debt When the government spends more on programs than it collects in taxes, the difference in the amount is called the budget deficit National debt -The total amount of money a government owes If debt gets too large, a nation can become dependent on other nations or unable to borrow any more money

19. Chapter 3 - Economic Activity in a Changing World Slide 18 National Debt If a nation spends less than its income, it has a budget surplus. The government will probably use a surplus to cut taxes, reduce the national debt, or increase spending for certain programs.

20. Chapter 3 - Economic Activity in a Changing World Slide 19 HOMEWORK  Rd. Pgs. 43-47  Review questions on Pg. 47

21. Chapter 3 - Economic Activity in a Changing World Slide 20 Fast Review 1.Describe some of the economic indicators economists use 2.Name some of the different reasons for unemployment

22. Chapter 3 - Economic Activity in a Changing World Slide 21 LEARNING OBJECTIVES 1.Describe 1.Describe the four stages of the business cycle. 2.Explain some of the effects the Great Depression had on our economy.

23. Chapter 3 - Economic Activity in a Changing World Slide 22 The Business Cycle Economic patterns start to form over time Business Cycle – is the rise and fall of economic activity over time 4 Phases of the Business Cycle 1) Prosperity 2) Recession 3) Depression 4) Recovery

24. Chapter 3 - Economic Activity in a Changing World Slide 23 Prosperity Prosperity is a peak of economic activity Unemployment is low Production of G&S is high New businesses open Prosperity does not last Companies produce too much People stop buying Inflation starts to rise

25. Chapter 3 - Economic Activity in a Changing World Slide 24 Recession Recession – economic activity slows down General drop in productivity; GDP declines Can affect only one industry, related industries, or spread to the entire economy Ripple effect - when a recession in one industry leads to a recession in other industries

26. Chapter 3 - Economic Activity in a Changing World Slide 25 Depression A deep recession that affects the entire economy and lasts for several years is called a depression High unemployment Low productivity Excess capacity in manufacturing plants Can be limited to one country but usually spreads to related countries

27. Chapter 3 - Economic Activity in a Changing World Slide 26 Depression The stock market crash on October 29, 1929, or “Black Tuesday,” - beginning of the Great Depression 1929-1933: GDP $103 billion to $55 billion Number of people out of work rose 800% Many banks failed The money supply fell by one-third

28. Chapter 3 - Economic Activity in a Changing World Slide 27 Recovery Recovery - A rise in business activity after a recession or depression Production starts to increase People start going back to work People have money to spend again New demand for G&S stimulates production GDP grows New businesses open

29. Chapter 3 - Economic Activity in a Changing World Slide 28 Recovery A recovery can take a long time or it can happen quickly During World War II, the United States recovered from the Great Depression much faster because of the demand for war production

30. Chapter 3 - Economic Activity in a Changing World Slide 29

31. Chapter 3 - Economic Activity in a Changing World Slide 30 The Business Cycle In a global economy, in which several countries are trading goods and services with one another, one country’s economy can affect its trading partners’ economies

32. Chapter 3 - Economic Activity in a Changing World Slide 31 HOMEWORK  Pg. 48  Questions 2-5

33. Chapter 3 - Economic Activity in a Changing World Slide 32 How did the assembly line change American society? How has the Internet changed the way people do business?

34. Chapter 3 - Economic Activity in a Changing World Slide 33 Did colonists develop their own industries? How do factories influence the workplace? continued

35. Chapter 3 - Economic Activity in a Changing World Slide 34 Making an Ethical Decision 1.Should you encourage other company executives to sell your product to countries that have an economic system you disapprove of? continued

36. Chapter 3 - Economic Activity in a Changing World Slide 35 Making an Ethical Decision 2.Does it matter if your product is desperately needed by the country to save lives? continued

37. Chapter 3 - Economic Activity in a Changing World Slide 36 Making an Ethical Decision 3.If the United States bans trade with that country, would you still discuss the topic with other executives? If the executives want to help the banned country, how else could your company get a product to those who need it?

38. End of Chapter 3 Economic Activity in a Changing World