Download Chapter 3.2

Chapter 3
political and
economic analysis
Section 3.1
What Is an Economy?
Section 3.2
Understanding the
Economy
Section 3.2
Understanding the Economy
CONNECT How do your actions affect the
economy?
Section 3.2
Understanding the Economy
• List the goals of a healthy economy.
• Explain how an economy is measured.
• Analyze the key phases of the business cycle.
Section 3.2
Understanding the Economy
Aspects of an economy such as consumers,
businesses, and governments affect the
economy and marketing decisions.
Section 3.2
Understanding the Economy
• productivity
• business cycle
• gross domestic product (GDP)
• expansion
• gross national product (GNP)
• recession
• inflation
• depression
• consumer price index (CPI)
• recovery
• producer price index (PPI)
Section 3.2
Understanding the Economy
Identifying Economic Measurements
Section 3.2
Understanding the Economy
Identifying Economic Measurements
Section 3.2
Understanding the Economy
The Economy and Marketing
Examples of the Three Goals of a Healthy Economy
Section 3.2
Understanding the Economy
The Economy and Marketing
Examples of the Three Goals of a Healthy Economy
Section 3.2
Understanding the Economy
The Economy and Marketing
Economic Measurements
Labor Productivity
productivity
Output per worker hour that is
measured over a defined period
of time.
Section 3.2
Understanding the Economy
The Economy and Marketing
Economic Measurements
Labor Productivity
Gross Domestic Product
(GDP)
gross domestic product (GDP)
The output of goods and services
produced by labor and property
located within a country.
Section 3.2
Understanding the Economy
The Economy and Marketing
Economic Measurements
Labor Productivity
Gross Domestic Product
(GDP)
Gross National Product
(GNP)
gross national product (GNP)
The total dollar value of goods
and services produced by a
nation, including goods and
services produced abroad by U.S.
citizens and companies.
Section 3.2
Understanding the Economy
The Economy and Marketing
Economic Measurements
Labor Productivity
Gross Domestic Product
(GDP)
Gross National Product
(GNP)
Inflation
inflation
Rising prices.
Section 3.2
Understanding the Economy
The Economy and Marketing
Economic Measurements
Labor Productivity
Gross Domestic Product
(GDP)
Gross National Product
(GNP)
Inflation
Consumer Price Index
(CPI)
consumer price index (CPI)
Measures the change in price
over a period of time of 400
specific retail goods and services
used by the average urban
household.
Section 3.2
Understanding the Economy
The Economy and Marketing
Economic Measurements
Labor Productivity
Consumer Price Index
(CPI)
Gross Domestic Product
(GDP)
Producer Price Index
(PPI)
Gross National Product
(GNP)
Inflation
producer price index (PPI)
Measures wholesale price levels
in the economy.
Section 3.2
Understanding the Economy
The Economy and Marketing
Economic Measurements
Labor Productivity
Consumer Price Index
(CPI)
Gross Domestic Product
(GDP)
Producer Price Index
(PPI)
Gross National Product
(GNP)
Standard of
Living
Inflation
Unemployment
Rate
Section 3.2
Understanding the Economy
The Economy and Marketing
Examples of the Three Types of Goods and Services
That Make Up the GDP
Section 3.2
Understanding the Economy
The Economy and Marketing
Examples of the Three Types of Goods and Services
That Make Up the GDP
Section 3.2
Understanding the Economy
The Economy and Marketing
How Do These Two
Economic Measurements Compare?
Section 3.2
Understanding the Economy
The Economy and Marketing
How Do These Two
Economic Measurements Compare?
Section 3.2
Understanding the Economy
The Business Cycle
business cycle
Recurring changes in economic
activity.
Expansion
Recession
The
Business
Cycle
Recovery
expansion
A time when the economy is
expanding.
recession
A period of economic slowdown
that lasts for at least two
quarters, or six months.
Trough
recovery
The term that signifies a period of
renewed economic growth following
a recession or depression.
Section 3.2
Understanding the Economy
The Business Cycle
During a depression, consumer
spending is very low, unemployment is
very high, and production of goods and
services is down significantly.
depression
A period of prolonged recession.
Section 3.2
Understanding the Economy
The Economy and Marketing
Factors Affecting the
Business Cycle
Section 3.2
Understanding the Economy
The Economy and Marketing
Factors Affecting the
Business Cycle
Section 3.2
Understanding the Economy
Section 3.2
1.
Explain how monitoring economic measures helps economists
achieve the three goals of a healthy economy.
Monitoring economic measures helps economists quickly notice
changes in productivity, employment, and prices, and determine when
the government should respond to changing conditions; for example,
by lowering interest rates to spur the economy.
Section 3.2
Understanding the Economy
Section 3.2
2.
Describe the effect of high unemployment on a nation’s economy.
High unemployment has a negative effect on a nation’s economy. The
unemployed cannot make purchases so companies produce less and
cut back on capital projects. Tax revenue decreases. Unemployment
benefits cause state governments to reduce spending.
Section 3.2
Understanding the Economy
Section 3.2
3.
Describe what happens to an employee in each phase of the business
cycle.
During an expansion, jobs are readily available and wages typically
increase; employees can move from one job to another fairly easily. In
a recession, employees may be laid off and finding another job can be
difficult. In a trough, jobs are typically scarce but may gradually
become more plentiful. In a recovery, more jobs become available as
the economy grows and workers may see their wages increase,
enabling them to increase their standards of living.
End of
Chapter 3
political and
economic analysis
Section 3.1
What Is an Economy?
Section 3.2
Understanding the
Economy