Download Economic Activity

Bell Ringer 1
Analyze Career Opportunities in…
BUSINSES DEVELOPMENT
• Use the internet to learn
more about careers in
business and economic
development. Choose one of
the job titles listed and
answer the following
questions.
1. What is the employment
outlook for careers in this
field?
2. Is this a career that
interests you? What can
you do now to help
prepare yourself for this
career?
*Go to www.bls.gov and
search the Occupational
Outlook Handbook
• Economist
• Transportation
Engineer
• Urban and Regional
Planner
• Survey Researcher
• Statistician
• Budget Analyst
• Microloan Officer
Economic Activity
Chapter 2
Today’s Goals
• Define gross domestic product (GDP) and GDP
per capita
2-1
MEASURING ECONOMIC ACTIVITY
Economic Growth
• A steady increase in the production of goods and services
in an economic system
• Government collects information from producers to
estimate output
Gross Domestic Product (GDP)
• Total dollar value of all final goods and services
produced in a country during one year
Consumer
Spending
Exports Imports
Components
of GDP
Government
Spending
Business
Spending
GDP
• The more the goods and services produced, the
healthier an economy is considered to be.
• If GDP increases from year to year, this usually
signals that an economy is growing and is
healthy.
GDP per Capita
• Output per Person
• GDP ÷ Total Population = GDP per Capita
GDP per Capita
• An increase in GDP per capita means that
an economy is growing
• A decrease may mean that an economy is
facing difficulties
Use the internet to obtain the GDP and
population statistics for 3 countries. Use
the data to calculate the GDP per capita for
each country. Show your work. Explain the
differences among the countries.
Today’s Goals
• Describe economic measures of labor
• Identify economic indicators for consumer
spending
Workers of a country
contribute to the economy…
• Over 155 million people work in the US to
create needed goods and services
• Wages earned (paychecks) are spent to
create demand for items
Labor Activities
• Measured in two areas:
• Employment
• Productivity
Labor Force
• All people above age 16 who are actively
working or seeking work
Unemployment Rate
• portion of people in the labor force who are not
working
• Unemployed = over 16, looking for work and
willing to work but unable to find a job
Main Cause of Unemployment
Demand
For Example…
Productivity
production output in relation to a unit
of input, such as a worker
For Example…
Doug earns $25/hour. He can complete 2 tax
returns per hour at $150 each. How would you
measure his output in relation input?
What motivates you
to work harder and
faster?
How can you increase
output per worker?
Productivity
If wages increase faster than gains in
productivity, will prices increase or
decrease? Why?
Increase
Because the cost of producing goods increases.
Labor Activities Trivia
• In the early 1890s, the average employee in the
United States worked about how many hours per
week?
60 Hours
• What is the average number of hours worked per
week today?
40 Hours
Goal 2
• The two ways we measure labor are…
• Employment
• Productivity
Consumer Spending
• Measured in two areas:
• Personal Income
• Retail Sales
Personal Income
Salaries and wages as well as investment income
and government payments to individuals
Retail Sales
sales of durable and nondurable goods bought by
consumers
• Measured monthly by USDC
• Include the following:
•
•
•
•
•
•
•
•
•
Automobiles
Building materials
Furniture
Gas
Clothing
Restaurants
Department stores
Grocery stores
Drug stores
NONDURABLE
GOODS
Retail Sales = Economic Growth
Goal 3
• Economic indicators for consumer
spending are…
• Personal Income
• Retail Sales
Use descriptive words and pictures to design a collage
that illustrates the ways to measure economic activity.
Go to www.photovisi.com to create and print your
collage. You must communicate your understanding of
the topic through your collage.
10 Pictures
3 Terms
Bell Ringer 2
1.What is the current
unemployment rate?
2. What is the highest and the
lowest it has been over the
past 10 years?
* Go to www.bls.gov to research the topic
2-2
ECONOMIC CONDITIONS CHANGE
Today’s Goals
Describe the four phases of the business cycle
Explain causes of inflation and deflation
The Business Cycle
Movement of the economy from one condition to
another and back again, recurring ups and downs
of GDP
• 4 phases:
• Prosperity
• Recession
• Depression
• Recovery
Prosperity aka Expansions or Booms
• Period in which most people who want to work are
working, businesses produce goods and services in record
numbers, wages are good, and rate of GDP growth
increases
• Highest point of the business cycle
Recession
• Period in which demand begins to decrease, businesses
lower production, unemployment begins to rise, and
GDP growth slows for at least 2 quarters (6 months)
• Signals trouble for workers in related businesses, ripple
effect
The Great Recession
2007-2009
• Unemployment rose from 4.7% in November
2007 to peak at 10% in October of 2009
Depression
• Prolonged period of high unemployment, weak
consumer sales, and business failures
• GDP falls rapidly
The Great Depression
1930-1940
• 25% of US labor force was unemployed,
scarcity for many
Recovery
• Unemployment begins to decrease, demand for goods
and services increases, and GDP begins to rise
• May lead back to Prosperity
Goal 1
Prosperity
Recovery
The
Business
Cycle
Depression
Recession
Consumer Prices
Inflation
An increase in the general level of prices
Causes of Inflation
• Demand for goods and services is greater than supply
• If wages go up faster than prices, businesses tend to hire
fewer workers and so unemployment worsens (increases)
Name something you
regularly buy that has
increased in price while
decreasing in size.
How does this affect your
decision to purchase the
item?
Measuring Inflation
• Mild inflation(2 or 3 percent a year) can stimulate economic
growth
Inflation is harmful to…
• People living on fixed incomes
• Retired people
• Those whose income does not change
Price Index
• Number that compares prices in one year with
prices in some earlier base year
• For example: 5% increase makes something that
cost $100 last year, now $105
Cost of Living
Year
Inflation Rate
1950s-1960s
1-3%
1970s-1980s
10-12%
Deflation
A decrease in the general level of prices
• Usually occurs in periods of recession and depression
Goal 2
What is the main cause of inflation?
Demand for goods and services is greater
than supply
Go to www.bls.gov
Click Subject Areas > Inflation & Prices Overview,
and take a look at the different price indexes
Click CPI inflation calculator
•
Use the calculator to find the buying power of
$100 in 2014 compared to the year you were born
and years before that.
• Write a one paragraph summary that relates your
findings to inflation or deflation and how this
will affect you as a consumer.
Bell Ringer 3
1.What is a credit score?
2. List 3 things you can do to
help your credit score.
3. List 3 things you can do to
hurt your credit score.
Today’s Goals
Identify the importance of interest rates
Interest Rates
• Represent the cost of money
• Higher interest rates mean higher business
costs
• Lower interest rates = consumer spending
power which increases demand, productivity,
and employment
Interest Rates
• People with poor credit ratings pay a higher
interest rate than people with good credit ratings
Types of Interest Rates
• Prime Rate – rate commercial banks make available to their
best business customers, such as large corporations
• Discount Rate – rate financial institutions are charged to
borrow funds from Federal Reserve banks
• T-bill Rate – yield on short-term (13 week) U.S. government
debt obligations
• Treasury Bond Rate – yield on long-term (20 year) U.S.
government debt obligations
Types of Interest Rates
• Mortgage Rate – amount individuals pay to borrow for the
purchase of a new home
• Corporate Bond Rate – cost of borrowing for large U.S.
corporations
• Certificate of Deposit Rate – rate for time deposits at savings
institutions
Influence on Interest Rates
• Supply and demand for money
• As amounts saved increase, interest rates
decrease (banks have more money)
• As borrowing increases, interest rates increase
(banks have less money)
Bell Ringer 4
• Go to the following website and review
the “Investing Your Money Basics” lesson.
• http://money.cnn.com/magazines/money
mag/money101/lesson4/index.htm
• Take the test at the end of the lesson and
record your results.
2-3
OTHER MEASURES OF BUSINESS
ACTIVITY
Today’s Goals
Explain borrowing activities by government,
business, and consumers
Describe future concerns of economic growth
Investment Activities
• Capital Spending
& Projects
• The Stock Market
• Personal Savings
• The Bond Market
Capital Spending
money spent by a business for an item that will be
used over a long period of time (more than one
year)
• Examples:
•
•
•
•
Buildings
Machinery
Equipment
Vehicles
Capital Projects
spending by businesses for items such as land,
buildings, equipment, and new products
• Money for Capital Projects comes from:
• 1. personal savings
• 2. stock investments
• 3. bonds
Personal Savings
• Major source of investment funds for companies
• Companies use money you deposit in a bank to buy
expensive equipment or create new products
• Savings rate is a factor for economic growth
The Stock Market
• Stock = ownership in a corporation
• Equity = stock ownership
• Stockholder = stock purchaser
• Value of shares is affected by:
• Supply and demand
• Company earnings
The Bond Market
• Bond = debt for an organization
• Creditor = lent money to the organization, bond
purchaser
• Creditors are paid interest for the use of their
money
Goal 1
• The money for capital projects comes from three
main sources:
• Personal Savings
• The Stock Market
• The Bond Market
Borrowing
• “Buy now, pay later”
• Done by:
• Governments
• Businesses
• Consumers
• Influential on the economy
Government Debt
• Federal, state and local governments borrow to fund projects
• Used for:
•
•
•
•
New schools
Public buildings
Highways
Parks
Budget Surplus (under budget, extra money)
• When a government
spends less than it takes in
• May lead to:
• Tax reductions
• Increased spending on
programs
Budget Deficit (over budget, overdrawn)
• When a government spends
more than it takes in
• May lead to:
• Tax increases
• Cutbacks or termination of
programs
• Layoffs
National Debt
• Total amount owed by the federal government
Business Debt
• Loans
• Bonds
• Mortgages
+ Proper use of debt can help expand sales and profits
- Poor use of debt can lead to going out of business
Consumer Debt
• Credit cards
• Auto loans
• Home mortgages
• Improper use can result in financial difficulties and legal action
• Careful use can result in economic growth
Goal 2
• What is the cause of a budget deficit?
• Government or organizations spend more than they
take in
THE END!!!
Chapter 2 Test!!!