PRINCIPALS OF BUSINESS & MANAGEMENT CH 2 ECONOMIC ACTIVITY (MEASURING ECONOMIC ACTIVITY) Pd 4B

Transcription

1 PRINCIPALS OF BUSINESS & MANAGEMENT CH 2 ECONOMIC ACTIVITY (MEASURING ECONOMIC ACTIVITY) Pd 4B

2 Unit Goal The student will be able to measure economic activity, explain how and why economic conditions change, and describe other measures of business activity.

3 Economic Activity Objectives: SWBAT articulate what is expected of him/her on Thursday s test. SWBAT articulate the economic downturn of 2008 through the written, and oral, context. SWBAT define GDP.

4 Economic Downturn of 2008 Economic Downturn of 2008

5 Economic Downturn Writing Activity Using Microsoft Word, write not more than two paragraphs describing the causes, and effects, of the economic downturn of Use your notes, and ask me questions.

6 Economic Activity: Measuring Economic Activity Grab a text book, and turn to page 34. Open to your notes section of your notebook.

7 Economic Activity: Measuring Economic Activity Gross Domestic Product (GDP) The total dollar value of all final goods and services produced in a country during one year.

8 Economic Activity: Measuring Economic Activity Components of GDP Consumer spending for food, clothing, housing, and other spending. Business spending for buildings, equipment, and inventory items. Government spending to pay employees and to buy supplies and other goods and services. The total value of exports of a country (-) the total value of the imports into the country.

9 GDP Project Website Review The Observatory of Economic Complexity The World Bank OWL APA Format n Data Sets n Graphic Data n Article from an online periodical

10 PRINCIPALS OF BUSINESS & MANAGEMENT CH 2 ECONOMIC ACTIVITY (MEASURING ECONOMIC ACTIVITY) Pd 4B

11 Objectives for today - Describe economic measures of labor Identify economic indicators for consumer spending

12 Do Now (Sep 15) Why is it important investors to know the GDPs of other countries? Answer Because the the higher a countries GDP, the healthier the countries economy is considered. Health economies attract outside investment. Review Unit Goal on slide #2

13 GDP Formula Expanded GDP = C + I + G + (Exp. Imp.) C Consumption I Investment G Government purchases of goods and services Exp. Exports Imp. Imports

14 What is not included in GDP Calculation? Work that a person completes for themselves The selling of used goods Items and services sold on the black-market

15 GDP Per Capita GDP Per Capita is defined as the output produced by each person in the economy. GDP Per Capita = GDP Total Population

16 GDP Per Capita Why is GDP per capita a helpful figure for investors, governments, and citizens to know? Answer An increase in GDP Per capita means that an economy is growing, and a decrease means that an economy is having trouble.

17 Labor Activities How do labors contribute to a countries economy? Their labor activities create needed goods and services. As labors spend the money they make at work they create demand for goods and services.

18 Labor Activities - Employment Who is the labor force? The labor force consist of all people above the age of 16 who are actively working or seeking work. Who is not in the labor force? People too young to work Retired persons People who can work but are not looking for jobs

19 Labor Activities Employment Unemployment Who is unemployed? n People that are in the labor force, are not working, but are actively looking for jobs. What is the unemployment rate? # of unemployed persons # of people in the labor force = Unemployment Rate

20 Labor Activities - Productivity Productivity is production output in relation to input. Additional Vocabulary n Production and item produced n Input the work of a worker

21 Labor Activities - Productivity Factors that contribute to per worker output: Improvements in capital resources (equipment & technology) Worker training Management techniques

22 Labor Activities - Productivity If wages increase faster than gains in productivity, the cost of producing goods increases and prices rise.

23 Consumer Spending The money you spend

24 Consumer Spending Personal Income Personal income: salaries and wages combined with investment income and government payments to individuals.

25 Consumer Spending Retail Sales Retail Sales the sale of durable and nondurable goods bought by consumers Durable goods goods not purchased frequently Nondurable good goods with expected life span's of three years of less Note: n Knowing how strong, or weak, a countries retail sales are helps business people make informed business decisions about conducting business in those countries.

26 Discussion What are your sources of personal income?

27 PRINCIPALS OF BUSINESS & MANAGEMENT CH 2 ECONOMIC ACTIVITY (ECONOMIC CONDITIONS CHANGE) Pd 4B

28 The Business Cycle The United States shows a pattern of good times to bad times and back to good times. These fluctuations of the economy are called the BUSINESS CYCLE Prosperity/Boom Recession Depression Recovery

29 The Business Cycle Prosperity/Boom Prosperity: a period in which most people who want to work are working. n Businesses produce goods and services in record numbers n Wages are good n GDP growth increases

30 The Business Cycle - Recession Recession: a period in which demand begins to decrease, business lower production, unemployment begins to rise, and GDP growth slows for two or more quarters of the calendar year.

31 The Business Cycle - Depression Depression: marked by a prolonged period of high unemployment, weak consumer sales, and business failures.

32 The Business Cycle - Recovery Recovery: the phase in which unemployment begins to decrease, demand for goods and services increases, and GDP begins to rise again.

33 The Business Cycle Prosperity Recession $ Recovery Depression

34 Where are we now??? What step on the business cycle are we on now?

35 Business Plan Activity Purpose of your business (Business idea/what problem are you going to solve) n One, double spaced page in length Products and/or services your business will offer n Bulleted list Save to your personal USB, the school s hard drive, or to yourself

36 Consumer Prices The buying power of money Have you ever noticed how the price of an item changes but the quantity does not? Have you ever bought new technology products that are less expensive than earlier ones?

37 Consumer Prices - Inflation Inflation Inflation is an increase in the general level of prices. For inflation to occur the buying power of the dollar, i.e., value of the dollar, decreases. If an item cost $100 this year, but cost $105 next year, then we have seen a 5% decrease in the value of the dollar. Inflation is most harmful to people living on fixed incomes.

38 Consumer Prices Causes of Inflation when the demand for goods and services is greater than the supply. Prices when a large supply of money, earned or borrowed, is spend for goods that are in short supply. Prices

39 Consumer Prices Causes of Inflation How would a increase in the minimum wage affect prices??

40 Consumer Prices Measuring Inflation Cost of living vs. Inflation

41 Consumer Prices Measuring Inflation A Price Index is a number that compares prices in one year with some earlier base year. In the united states we watch the CPI The Consumer Price Index compares prices in one year with some earlier base year.

42 Consumer Prices - Deflation Deflation a decrease in the general level of prices Usually occurs in periods of recession or depression n Prices are lower but people have less money to buy them

43 Consumer Prices -Deflation How did the recession of 2008 effect housing prices and the prices of other goods?

44 Interest Rates Interest - the cost to borrow money

45 Interest Rates Types of Interest Rates Prime Rate the rate banks make available to their best business customers, such as large corporations Discount Rate the rate financial institutions are charged to borrow funds from Federal Reserve banks T-bill rates Treasury bond rate Mortgage rate Corporate bond rate Certificates of deposits (CDs)

46 Interest Rates Changing Interest Rates Interest rates change due to changes in the supply or demand of money.

47 Reading Assignment Pg. 43, #1, 2 & 3 Must be completed in a word document. Save the document as: Bbarrett Ecuador p43, into the Handin Barrett -- Principles of Business -- Ecuador p43