Transcript Ch3 - Economic Activity in a Changing World

Chapter
3
Economic Activity in a
Changing World
Mr. Manning
pp. 36-51
LEARNING OBJECTIVES
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.
Chapter 3 - Economic Activity in a Changing World
Slide 2
Why It’s Important
Economic activity affects
everyday life. The history of the
economy affects the industries of
today and tomorrow.
Chapter 3 - Economic Activity in a Changing World
Slide 3
Changing U.S. Economy
1600’s – Colonists traded goods
and services (Service-based)
1700’s – Agriculture-based
economy
1850’s – Industry-based economy
1900’s – Information-based
economy
Chapter 3 - Economic Activity in a Changing World
Slide 4
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
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Slide 5
Gross Domestic Product (GDP)
Gross Domestic Product - 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
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Slide 6
Gross Domestic Product (GDP)
Economists include four main areas in
calculating the GDP:
1.
2.
3.
4.
Consumer G&S
Business G&S
Government G&S
G&S sold to other countries
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Slide 7
Gross Domestic Product (GDP)
Consumer
goods
and
services
+
Business
goods
and
services
Government
+
goods
and
services
+
Chapter 3 - Economic Activity in a Changing World
Goods
and
services
sold to
other
countries
=
Gross
Domestic
Product
Slide 9
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
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Slide 10
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
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Slide 11
????????????????????????
 What are the four factors that compute the
GDP?
–
–
–
–
Consumers G&S
Business G&S
Government G&S
G&S sold to other countries
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Slide 12
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
Chapter 3 - Economic Activity in a Changing World
Slide 13
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
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Slide 14
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.
Chapter 3 - Economic Activity in a Changing World
Slide 15
????????????????????????
 What are three of the four reasons for
unemployment?
–
–
–
–
Temporary
Seasonal
Economic slowdown
Changes in industry
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Slide 16
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
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Slide 17
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.
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Slide 18
HOMEWORK
Rd. Pgs. 43-47
Review questions on Pg. 47
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Slide 19
Fast Review
1. Describe some of the economic
indicators economists use
2. Name some of the different reasons
for unemployment
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Slide 20
LEARNING OBJECTIVES
1.Describe the four stages of the
business cycle.
2.Explain some of the effects the
Great Depression had on our
economy.
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Slide 21
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
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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
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Slide 23
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
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Slide 24
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
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Slide 25
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
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Slide 26
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
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Slide 27
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
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Slide 28
Chapter 3 - Economic Activity in a Changing World
Slide 29
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
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Slide 30
HOMEWORK
Pg. 48
Questions 2-5
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Slide 31
How did the assembly line change
American society?
How has the Internet changed
the way people do business?
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Slide 32
Did colonists develop their own
industries?
How do factories influence the
workplace?
continued
Chapter 3 - Economic Activity in a Changing World
Slide 33
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
Chapter 3 - Economic Activity in a Changing World
Slide 34
Making an Ethical
Decision
2. Does it matter if your product is
desperately needed by the country to
save lives?
continued
Chapter 3 - Economic Activity in a Changing World
Slide 35
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?
Chapter 3 - Economic Activity in a Changing World
Slide 36
End of Chapter
3
Economic Activity in a Changing World