Download Unit A 1.04

Unit A
Business in a Changing World
Section 1.04
Economic Indicators and the
Business Cycle
Measuring Economic Activity
 Supply.
– Represents how much the market can offer.
The quantity supplied refers to the amount
of a certain good producers are willing to
supply when receiving a certain price.
– The relationship between price and how
much of a good or service is supplied into
the market is known as the supply
relationship.
Measuring Economic Activity
 Demand.
– Refers to how much (quantity) of a product
or service is desired by buyers. The quantity
demanded is the amount of a certain product
people are willing to buy at a certain price.
– The relationship between price and quantity
demanded is known as the demand
relationship.
Measuring Economic Activity
 Gross Domestic Product
– The value of all manufactured goods and
services produced in a country during a
given period; usually one year.
– GDP serves as the principal measure of
the size of a country's economy and
measures: consumption, gross investment,
government purchases of goods and
services, and net exports.
– This is compiled by the U. S. Commerce
Department.
Measuring Economic Activity
 Inflation.
– The rapid rise in prices caused by an inadequate
supply of goods and services.
– Total demand exceeds total supply.
– Dollars are plentiful, so their value declines and
prices increase
– The result is a decline in purchasing power; A
dollar does not buy as much as it did before
inflation.
– Retirees and individuals on a fixed income are
financially hurt the most because their income
buys less.
Measuring Economic Activity
 Deflation:
– A decrease in the volume, or amount, of
currency so that there is less currency available
for goods and services within a free market;
this tends to force market prices lower.
– Deflation occurs when too few dollars are
chasing too many goods. Scarce dollars are
worth more, so prices go down.
Measuring Economic Activity
 Consumer Price Index (CPI).
– A measure of the average change over time
in the prices paid by urban consumers for a
market basket of 400 consumer goods and
services:
Food and beverage.
 Housing.
 Apparel.
 Transportation.
 Medical Care.
 Education.

Measuring Economic Activity
 Productivity.
– The efficiency with which goods and
services are produced, as measured by the
quantity produced per human or machine
hour.
– Businesses look for productive
employees to increase the profitability of
their business.
Measuring Economic Activity
 Unemployment.
– Joblessness.
– The measure of unemployment is the
number of jobless people who are
available for work and are actively
seeking jobs. The unemployment rate is
unemployment as a percentage of the
labor force.
Stages of the Business Cycle
 Prosperity.
– The condition of being successful or
thriving; Especially : economic wellbeing.
– Prosperity is the peak of the business
cycle and is characterized by:
Rise in the gross domestic product.
 Expansion of business and their profits.
 Expansion of employment.
 Low inflation.

Stages of the Business Cycle

Recession.
–
An extended decline in general business
activity, typically three consecutive
quarters of falling real gross domestic
product.
– Recession is characterized by:


Demand for goods and services is less than
supply.
Decreased production and increased
unemployment.
Stages of the Business Cycle

Depression.
–
–
–
A PROLONGED period of low general
economic activity marked especially by rising
levels of unemployment, declines in the sale
of goods and services, and business failures.
This is the lowest point in the business cycle.
The United States experienced a depression
from 1929 – 1939.
Stages of the Business Cycle
 Recovery.
–
The act, process, or an instance of
recovering ; especially : an economic
upturn (as after a depression).
– A recovery is characterized by:
Demand for goods and services
increases.
 Companies hire more employees;
Unemployment decreases.
 Business profits increase with increased
production.

Stages of the Business Cycle
 These
stages are the movement of
an economy from one condition to
another.
 Each nation experiences these
stages and works to keep their
economies as consistent as
possible.
Conclusion
How does supply and demand
determine the price of products?
 What can you tell about a nation by
looking at their Gross Domestic
Product?
 Why is inflation a bad thing for
economies?
 In what economic cycle is the United
States currently?

Vocabulary Review
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Supply
Demand
Gross Domestic
Product
Inflation
Deflation
Consumer Price
Index
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Productivity
Unemployment
The Business Cycle
Prosperity
Recession
Depression
Recovery