Transcript Economic Activity

Understand the role of business in the global
economy.
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Understand economic conditions
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Topics
Measuring economic activities
Classifying economic conditions
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Measuring Economic Activities
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Gross Domestic Product (GDP)
 GDP-GDP is the highly used measurement to determine a
country’s overall economic output. GDP is a country’s total
dollar value of all final goods and services produced in one
year.
 Major categories of GDP




Individual spending
Business spending
Government spending
Exports & imports
 Name some products or services you have
purchased or from which you have received
benefits.
 Which component of GDP would you classify the
product or service you named?
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GDP per capita
GDP per capita – output per person
=_________GDP__________
Total Population
OR
OR
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Labor Activities
 Unemployment rate - Unemployment rate includes the
people of the labor force that are unemployed.
 Productivity: How much output or how efficient the
workforce is.
 Productivity means …
 What can help you be more productive in a computer lab?
 What can contribute to employees increasing their
production? : New equipment, technology, training, and
better management.
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Consumer Spending
Measurement of consumer
spending:
 Personal Income - Personal
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income includes the total wages
and salaries plus investment
income and government payments
to individuals.
 Retail Sales - Retail Sales
include the sales of goods and
services purchased to indicate the
spending patterns
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Investment Activities
 The money used for capital projects comes from three main sources:
• Personal savings - Businesses use money deposited in personal saving
accounts to buy equipment or products for their businesses. Savers earn
interest on money used by companies and other individuals.
• The stock market - Higher earnings for businesses increases their value,
which causes a demand for people wanting to buy the businesses stock.
•
Stock -the certificate of ownership of a single piece of a company. Holder of a
stock is considered an owner.
• The bond market - The bond market make available for businesses and
government to borrow money. Bondholders earn interest on money loaned
to businesses and government.
•
Bond - A security issued by a corporation or public body and usually carrying a
fixed rate of interest and a set date, called the bond's maturity, for redemption of
the principal
 How does each investment activity impact economic growth?
 What are some examples of investment activities?
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Borrowing Activities …
 by
 Government - Governments borrow money to finance
projects like schools, public highways, and parks. If the
government spend more money than it collects, then a
budget deficit is resulted.
 Businesses - Companies may borrow money to start up or
expand. Using borrowed fund efficiently can result in an
increase in sales and profits.
 How can government borrowing lead to a budget deficit?
 How can using borrowed money wisely impact businesses?
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Measuring Economic Activities
GDP Per
capita
Consumer
Spending
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Classification of
Economic Conditions
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Prosperity
Employment rate and
demand for products
and services are high.
Recession
Unemployment rate is
increasing and
demand for products
and services are
lowering.
Recovery
Depression
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Unemployment rate is
high and demand for
products and services
is lowering.
Unemployment
rate is lowering
and demand for
products and
services is
increasing.
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Year
Income
Income
percent
change
from year 1
Gallon of
milk cost
Gallon of
milk cost
percent
change
from year 1
1
2
3
$36,000 $38,000 $21,000
n/a
5.6%
-42%
$2.49
$2.99
$3.19
n/a
20%
28%
Over a
three-year
period, how
has the
income
been
impacted by
the
cost of a
gallon of
milk?
Year two income increased as well as the cost of a gallon of milk during years two and three;
but the income did not keep up with the rate of increases of the cost of a gallon of milk.
Therefore the buying power for this income for years three was decreased.
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Consumer Prices
 Inflation –a persistent, substantial rise in the general level
of prices related to an increase in the volume of money and
resulting in the loss of value of currency
 Causes of inflation - During an inflation, the demand for
products and services exceeds the supply, which may cause
an increase in prices.
 Consumer Price Index (CPI) an index of the changes in the
cost of goods and services to a typical consumer, based on
the costs of the same goods and services at a base period.
 Deflation - During deflation, the prices of products and
services are lowered, but people have less money for
purchases.
 Causes of deflation
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Interest Rates
 Types:


Prime rate - Prime rate is usually made available to banks’ best customers
Discount rate - Discount rate is offered by the federal reserve to financial
institutions for loans.

T-bill rate - T-bill rate is the yield for short-term (13 weeks) government debt.

Treasury bond rate - Treasury bond rate is the yield for long-term government
debt.

Mortgage rate - Mortgage rate is the amount borrowers pay for home loans.

Corporate bond rate - Corporate bond rate is the cost of loans for large US
corporations.

Certificate of deposit rate - Certificate of deposit rate paid for deposits for a
period of time ( 6, 12, or 18 months).
What is the
primary
purpose of
each?
• How do interest rates impact businesses?
Higher interest rates for businesses usually mean higher
business cost.
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Work Cited
 North Carolina Department of Public instruction
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 www.dictionary.com
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