Chapter 3 ECONOMIC ACTIVITY IN A CHANGING WORLD

Chapter 3 ECONOMIC ACTIVITY IN A CHANGING WORLD 11/6/2020 1

Economic Indicators Figures used to measure economic performance 11/6/2020 2

Gross Domestic Product (GDP) Most important economic indicator. It represents a broad measure of economic activity and signals the direction of overall aggregate (whole) economic activity. It measures the country’s economic health. 11/6/2020 3

Computed by taking the sum of four main areas Consumer goods and services Business goods and services Government goods and services Goods and services sold to other countries (Exports) 11/6/2020 4

Unemployment Rate Measures the number of people who are able to work but don’t have a job during a given period of time. 11/6/2020 5

Inflation An increase in the price you pay or a decline in the purchasing power of money. In other words, inflation is when prices get higher or it takes more money to buy the same item. Measured using the Consumer Price Index (CPI) 11/6/2020 6

Business Cycle The rise and fall of economic activity over time. There are four phases. 11/6/2020 7

Prosperity Peak of economic activity Unemployment is low, production of goods and services is high, and new businesses open. 1990 s was a record period of prosperity in the United States. 11/6/2020 8

Recession Economic activity slows down Spending decreases and so does the demand for products. Businesses produce less so they need fewer workers. Unemployment rate then increases so people have less to spend. “Newspaper Definition” – decline in GDP for two or more consecutive quarters. Economics. about. com 11/6/2020 9

Depression A deep recession that affects the entire economy and lasts for several years. High unemployment and low productivity. The state of the economy is affected by large numbers of people out of work, acute shortages, and excess capacity in manufacturing plants. 11/6/2020 10

Crash - Stock Market Crash of 1929 Crash Video 11/6/2020 11

Recovery A rise in business activity after a recession or depression. Production starts to increase. People start going back to work and have money to spend again. There is a new demand for goods and services which stimulates more production. GDP grows 11/6/2020 12

Four Phases of the Business Cycle 11/6/2020 13

Budget Deficit When the government spends more on programs than it collects in taxes. 11/6/2020 14

http: //www. brillig. com/debt_clock/ 11/6/2020 15

Budget Surplus Government’s revenue exceeds its expenditures during a one year period. 11/6/2020 16

Homework - Chapter 3 – “Economic Activity in a Changing World” 1. FAST REVIEW PAGE 39 QUESTIONS 1 -2 2. FAST REVIEW PAGE 43 QUESTIONS 1 -2 3. USING BUSINESS KEY WORDS PAGE 44 -QUESTIONS 1 -12 11/6/2020 17