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Transcript
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CHAPTER 4: GLOBAL ECONOMICS
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CHAPTER FOUR SECTION ONE
4.1
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I. WHAT IS ECONOMICS?


THINGS THAT TOUCH YOUR DAILY LIFE.

(Gasoline – Oil)

(Cheese – Oil)

Interest Rates (Car / House)
THE WAY A NATION MAKES DECISIONS FOR USING
RESOURCES TO PRODUCE AND DISTRIBUTE GOODS AND
SERVICES.
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A. RESOURCES
ALL THINGS USED IN PRODUCING GOODS AND SERVICES.
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THERE ARE THREE BASIC
ECONOMIC RESOURCES:
1. LAND- EVERYTHING ON EARTH IN A NATURAL STATE
2. LABOR- ALL PEOPLE WHO WORK IN OUR ECONOMY
3. CAPITAL- MONEY AND MACHINERY NEEDED TO START
AND OPERATE A BUSINESS
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B. CONCEPT OF SCARCITY
PEOPLE HAVE UNLIMITED WANTS AND NEEDS BUT LIMITED
RESOURCES AND WE MUST MAKE CHOICES.
UNLIMITED WANTS+LIMITED RESOURCES=SCARCITY
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II. HOW DOES AN ECONOMY
WORK?

NATIONS MUST ANSWER THREE BASIC QUESTIONS WHEN
DECIDING HOW TO USE THEIR RESOURCES:

WHAT GOODS AND SERVICES SHOULD BE PRODUCED?

HOW SHOULD THEY BE PRODUCED?

FOR WHOM SHOULD THEY BE PRODUCED FOR?
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A. MARKET ECONOMY
THE PEOPLE ANSWER THE BASIC ECONOMIC QUESTIONS
AND PRODUCTS AND PRICES ARE KEPT COMPETITIVE.
CAPITALISM
(U.S. AND JAPAN)
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B. COMMAND ECONOMY
THE GOVERNMENT ANSWERS ALL
PRODUCTS AND PRICES.
COMMUNISM
(CUBA, NORTH KOREA, CHINA)
QUESTONS AND SETS
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C. MIXED ECONOMYBOTH GOVERNMENT AND PEOPLE ANSWER THE ECONOMIC
QUESTIONS AND RUN THE COUNTRY.
SOCIALISM
(SWEDEN, AUSTRIA, GREAT BRITIAN)
+
CHAPTER FOUR SECTION TWO
4.2
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III. ECONOMIC MEASUREMENTS
A. GOALS OF A HEALTHY AND SUCCESSFUL ECONOMY ARE:
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1. INFLATION-
PRICES RISE (1-5% IS STABLE)
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2. FULL EMPLOYMENT-
WHEN 96% OF THE CIVILIAN WORK FORCE IS EMPLOYED
(16 YRS. OR OLDER)
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3. PRODUCTIVITY
DIVIDING OUTPUT OF PRODUCTION BY INPUT OF
RESOURCES AND CAPITAL
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4. STABLE PRICES- PRICES THAT DO NOT INCREASE
IN A SHORT PERIOD OF TIME.
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B. FOUR INDICATORS THAT
MEASURE THE ECONOMY

Employee Productivity

GDP

Inflation (CPI / PPI)

Unemployment Rate
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1. Employee Productivity
PRODUCTIVITY IS OUTPUT PER WORKER HOUR THAT IS MEASURED
OVER A DEFINED PERIOD OF TIME.
HOUR
DAY
WEEK
MONTH
YEAR
WORKERS X HOURS X TIME = OUTPUT PER TIMEFRAME
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2. GROSS DOMESTIC PRODUCT
MEASURES TOTAL VALUE OF A NATIONS GOODS AND
SERVICES PRODUCED IN A GIVEN PERIOD OF TIME (1 YEAR)
+
3. STANDARD OF LIVING-
A MEASUREMENT OF THE AMOUNT OF GOODS AND
SERVICES THAT PEOPLE HAVE IN A NATION.
DETERMINES QUALITY OF LIFE.
U.S HAS THE HIGHEST.
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4. UNEMPLOYMENT RATE-
AVAILABLE FROM BOTH STATE AND FEDERAL GOV, THE
HIGHER UNEMPLOYMENT, THE GREATER THE CHANCE OF
RECESSION OR DEPRESSION.

Long Term Unemployment

Part-Time Unemployment
GREAT DEPRESSION: AT ITS HIGHEST, THE UNEMPLOYMENT
RATE REACHED 25%
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IV. BUSINESS CYCLE

THE SUCCESS OF ANY INDIVIDUAL BUSINESS IS STRONGLY
AFFECTED BY EVENTS IN THE ECONOMY AND BY THE
INDIVIDUAL MEMBERS WITHIN THE ECONOMY.

THERE ARE 4 PHASES WITHIN A BUSINESS CYCLE:
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A. PROSPERITY-
ECONOMY IS GROWING, LOW UNEMPLOYMENT, INCREASE
IN OUTPUT OF GOODS AND SERVICES, AND HIGH
CONSUMER SPENDING.
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B. RECESSIONECONOMIC GROWTH SLOWS, UNEMPLOYMENT BEGINS TO
RISE, FEWER GOODS AND SERVICES ARE PRODUCED AND
CONSUMER SPENDING DECREASES. SOMETIMES THERE
IS QUICK RECOVERY.
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C. DEPRESSION-
A PROLONGED RECESSION. POVERTY CAN RESULT.
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D. RECOVERY-
THE ECONOMY BEGINS TO GROW AGAIN AFTER
DEPRESSION OR RECESSION.
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V. FACTORS THAT AFFECT THE
BUSINESS CYCLE

BUSINESS CYCLES ARE AFFECTED BY THE ACTIONS OF
BUSINESSES, CONSUMERS, AND GOVERNMENT.
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A. ACTIONS OF BUSINESS-
BUSINESSES MAKE THEIR DECISIONS BASED ON THE
BUSINESS CYCLE. DURING PROSPERITY AND RECOVERY
THEY WILL INVEST IN PROPERTY, EQUIPMENT, AND INVENT.
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B. ACTIONS OF CONSUMERS-
CONSUMERS HAVE AN EFFECT ON THE ACONOMY WHEN
THEY INCREASE OR DECREASE THEIR SAVINGS AND/OR
SPENDING.
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C. ACTIONS OF GOVERNMENT-
GOVERNMENT WILL SET POLICIES TO CONTROL HIGHS
AND LOWS OF THE BUSINESS CYCLE.