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Transcript
Essential Standard 1.00 Understand the role of business in the global economy. 1 Objective 1.02 Understand economic conditions 2 Topics Measuring economic activities Classifying economic conditions 3 Measuring Economic Activities 4 Gross Domestic Product (GDP) Measurement used to determine a country’s overall economic output. A country’s total dollar value of all final goods and services produced in one year. Highly used 5 Gross Domestic Product (GDP) GDP Major categoriesof GDP ◦ ◦ ◦ ◦ Individual spending Business spending Government spending Exports & imports Name some products or services you have purchased or from which you have received benefits. Which component of GDP would you classify the product or service you named? 6 GDP per capita GDP per capita – output per person =_________GDP__________ Total Population 7 GDP Map 8 Labor Activities Unemployment rate Productivity 9 Labor Activities Unemployment rate The people in the labor force that are unemployed 10 Labor Activities Productivity means …??? ◦ What can help you be more productive in a computer lab? ◦ What can contribute to employees increasing their production? 11 Consumer Spending Measurement of consumer spending: Personal Income Retail Sales 12 Consumer Spending Measurement of consumer spending: Personal Income includes ◦ total wages and salaries ◦ Investment income ◦ Government payables To individuals 13 Consumer Spending Measurement of consumer spending: Retail Sales ◦ Includes the sales of goods and services purchased to indicate the spending patterns 14 Investment Activities The money used for capital projects comes from three main sources: • Personal savings • The stock market • The bond market 15 Investment Activities The money used for capital projects comes from three main sources: • Personal savings Businesses use money deposited in personal savings accounts to buy equipment or products for their businesses. 16 Investment Activities The money used for capital projects comes from three main sources: • The stock market Higher earnings for businesses increase their value, which causes a demand for people wanting to buy the businesses’ stock 17 Investment Activities The money used for capital projects comes from three main sources: • The bond market The bond market makes money available for businesses and government to borrow money. Bondholders earn interest on money loaned to businesses and government. 18 Borrowing Activities … by ◦ Government ◦ Businesses 19 Borrowing Activities … by ◦ Government Governments borrow money to finance projects like schools, public highways, and parks. If the government spends more than it collects, then a budget deficit is resulted. 20 Borrowing Activities … By ◦ Businesses Companies may borrow money to start up or expand. Using borrowed funds efficiently can result in an increase in sales and profits. 21 Measuring Economic Activities GDP Per capita Consumer Spending 22 Classification of Economic Conditions 23 BUSINESS CYCLE – Movement of Economy from one phase to another! 24 Prosperity Employment rate and demand for products and services are high. 25 Prosperity Employment rate and demand for products and services are high. Recession Unemployment rate is increasing and demand for products and services are lowering. 26 Prosperity Employment rate and demand for products and services are high. Recession Unemployment rate is increasing and demand for products and services are lowering. Depression Unemployment rate is high and demand for products and services is lowering. 27 Prosperity Employment rate and demand for products and services are high. Recession Unemployment rate is increasing and demand for products and services are lowering. Recovery Depression Unemployment rate is high and demand for products and services is lowering. Unemployment rate is lowering and demand for products and services is increasing. 28 Very Important Business Terms Activity 29 Consumer Prices Inflation Causes of inflation Consumer Price Index (CPI) Deflation Causes of deflation 30 Consumer Prices Inflation is an upward movement in the average level of prices. ◦ “Too many dollars chasing too few goods” During an inflation, the demand for products and services exceeds the supply, which may cause an increase in prices. 31 Consumer Prices Causes of Inflation ◦ The supply of money goes up. ◦ The supply of other goods goes down. 32 Consumer Prices Deflation, a downward movement in the average level of prices. During deflation, the prices of products and services are lowered, but people have less money for purchases. 33 Consumer Prices Cause of Deflation ◦ Demand for money goes down. ◦ Demand for other goods goes up. 34 Year Income Income percent change from year 1 Gallon of milk cost Gallon of milk cost percent change from year 1 1 2 3 $36,000 $38,000 $21,000 n/a 5.6% -42% $2.49 $2.99 $3.19 n/a 20% 28% Over a three-year period, how has the income been impacted by the cost of a gallon of milk? 35 Consumer Prices The boundary between inflation and deflation is price stability. 36 Consumer Prices Consumer Price Index ◦ is a measure estimating the average price of consumer goods and services purchased by households. ◦ The percent change in the CPI is a measure estimating inflation. ◦ It is one of the most closely watched national economic statistics. ◦ Changes used to calculate inflation! 37 How to Calculate Inflation Rate Inflation Rate= Change in Price index divided by Initial price index Times 100 38 Interest Rates Types: ◦ ◦ ◦ ◦ ◦ ◦ ◦ Prime rate Discount rate T-bill rate Treasury bond rate Mortgage rate Corporate bond rate Certificate of deposit rate What is the primary purpose of each? 39 Interest Rates Types: ◦ Prime rate - interest rate charged to bank’s best customer ◦ Discount rate – interest rate offered by the Federal Reserve to financial institutions for loans 40 Interest Rates Types: ◦ T-Bill Rate - the yield for short-term (13 weeks) government debt. ◦ Treasury Bond Rate – the yield for long-term government debt 41 Interest Rates Types: ◦ Mortgage rate - the amount borrowers pay for home loans. ◦ Corporate Bond Rate – the cost of loans for large US corporations. 42 Interest Rates Types: ◦ Certificate of Deposit Rate- paid for deposits for a period of time (6, 12 or 18 months) 43 Interest Rates Types: ◦ Certificate of Deposit Rate- paid for deposits for a period of time (6, 12 or 18 months) 44 Interest Rates • How do interest rates impact businesses? • Higher interest rates for businesses usually mean higher business cost. 45