3.03Explain economic measurements and the business (economic) cycle

Economic Understanding Economic Strength or weakness Economic Strength or weakness Economic strength effects consumers and businesses Economic strength effects consumers and businesses

When is a Economy Successful? Goals Goals –Increase productivity –Decrease unemployment –Maintain stable prices All nations analyze their economies to see how they are doing All nations analyze their economies to see how they are doing Helps us make decisions Helps us make decisions

Essential Information Must get accurate economic measures Must get accurate economic measures Key economic measurements Key economic measurements –Labor productivity –GDP and GNP –Standard of living –Inflation rate –Unemployment rate

Labor Productivity The amount produced per worker measured during a specific time period The amount produced per worker measured during a specific time period Example: Packing computers Example: Packing computers

Gross Domestic Product (GDP) A measure of the goods and services produced IN a country. A measure of the goods and services produced IN a country.

Gross national product (GNP) The sum of the dollar value for products produced BY a country The sum of the dollar value for products produced BY a country Example: Briggs and Stratton Example: Briggs and Stratton

Standard of Living Amount of goods and services available Amount of goods and services available Reflects quality of life Reflects quality of life GDP/Population= per capita GDP/Population= per capita Higher production= higher standard of living Higher production= higher standard of living Higher standard of living= more social programs Higher standard of living= more social programs –Free education, health care programs, etc. look at overall living conditions look at overall living conditions Example: United States vs. Ethiopia Example: United States vs. Ethiopia

Inflation Rate The rate at which prices are rising The rate at which prices are rising Stable rate- 1-5% inflation rate per year Stable rate- 1-5% inflation rate per year Interest rates- the government tries to discourage borrowing money by raising interest rates Interest rates- the government tries to discourage borrowing money by raising interest rates

Unemployment Rate Total number of people willing/able to work Number of unemployed workers

Business Cycle Expansion- highest period of economic growth Expansion- highest period of economic growth Recession- economic slowdown Recession- economic slowdown –Depression- prolonged recession Trough- low point Trough- low point –Stops slowing shows signs of growth Recovery- renewed economic growth Recovery- renewed economic growth