Successful Economy How do you measure?

Goals of an Economy 1) Increase Productivity 2) Decrease Unemployment 3) Maintain Stable Prices All nations analyze their economies to see how well they are doing the goals above.

Economic Measurements How do they measure their goals?? Productivity Gross Domestic Product (GDP) Gross National Income (GNI) Standard of Living Inflation Rate Unemployment Rate

Economic Measures Productivity

Productivity Measures output of a country, business or individual How much “product” is made per hour OUTPUT WORKER HOURS usually weeks, month or year

Productivity (cont) Tootsie Rolls Individual Company Country 10,000 pcs - wk 700,000 pcs - wk 9,000,000 tons - yr 40 hrs 10 w X 40 hrs 150 w X 40 hrs X 52 250 pieces per hour 1750 pieces per hour 28.8 tons per hour

Do Question 1 of “Measuring Productivity”

Productivity (cont) How can businesses increase productivity? 1. Invest in new equipment 2. Provide additional training or incentives 3. Reduce work force through efficiency

Productivity (cont) Invest in New Equipment 700,000 pieces 10 w X 40 hrs 10 w X 40 hrs 1750 pieces per hour 2250 pieces per hour

Do Question 2 of “Measuring Productivity”

Productivity (cont) Provide Training or Incentives 700,000 pieces 10 w X 40 hrs 10 w X 40 hrs 1750 pieces per hour 2250 pieces per hour

Productivity (cont) Reduce Workforce through Efficiencies 700,000 pieces 700,000 pieces 10 w X 40 hrs 8 w X 40 hrs 1750 pieces per hour 2188 pieces per hour

Do Question 3 of “Measuring Productivity”

Gross Domestic Product Economic Measures Gross Domestic Product GDP

Gross Domestic Product (GDP) Finished Goods and Services Produced Inside a Country Finished Goods for Sale to End Consumers Intermediate Goods for Sale to Industry Cars Window Glass for Car - Dresses - Cloth for Dress - Cruise Missiles - Screws for Missile

Gross Domestic Product (GDP) Finished Goods and Services Produced Inside a Country Inside Country Includes Toyota in Nashville Ford Plant in Mexico Includes Canadian workers in Michigan GDP World Ranking

Economic Measures Gross National Income GNI

Gross National Income (GNI) Formally known as GNP Finished Goods and Services Produced Domestically and Abroad by a Country’s Nationals (Citizens) By a Country’s Nationals Toyota in Nashville Includes Ford Plant in Mexico GNI Global Ranking

Economic Measures Standard of Living

Standard of Living Amount of Goods and Services a nation’s people have. “QUALITY OF LIFE” Human Development Index GNP Education Pollution Health Poverty Population HDI Rank

Economic Measures Inflation Rate

Inflation Rate A Rise in the General Level of Prices Over time, the price of goods increases. Ex. 1956 1986 2006 Bread .22 .99 (2) 1.99 Paper .05 .25 .35 Car $2929 $8479 $15,786 1956 Prices 1986 Prices 2006 Prices

Inflation Rate If 2% inflation: $1.00 $1.02 (price) (Money is worth less over time) If you put $1000 in your mattress in 2000 and took it out in 2006 it would only be worth $920 What causes inflation? The supply of money goes up. The supply of goods goes down. 3. Demand for money goes down. 4. Demand for goods goes up.

Inflation Rate Rising Prices - What money is worth 3-5% Good: Stable Economy (not in recession) 10% Bad: Money is worth little (no buying power) Current Inflation Rate FED tries to control inflation through interest rates Raise interest rates = Lower borrowing (money worth more) Inflation goes down Lower interest rates = More borrowing (money worth less) Inflation goes up (get out of recession)

Economic Measures Unemployment Rate

Unemployment Rate Unemployment Rate History Currently at 8.1% Unemployment Rate by State

Economic Measures The Business Cycle

The Business Cycle Why keep all of these statistics ?!? To determine stage economy is in Prosperity Recession Recovery Recovery Depression

Business Cycle - Prosperity Period of Economic GROWTH Increase in output (goods/services) Low Unemployment High Consumer Spending

Business Cycle - Recession Period of Economic SLOWDOWN Consumer spending decreases Fewer goods and services produced Unemployment BEGINS to rise (this is LAST characteristic)

Business Cycle - Depression Period of PROLONGED and DEEP Recession Consumer spending VERY LOW Goods and services down significantly Unemployment VERY HIGH POVERTY RESULTS

Business Cycle - Recovery Period of Economic UPTURN (Renewed Growth) Consumer spending increases Moderate expansion by business Unemployment begins to fall (this is LAST characteristic)

Business Cycle FACTORS THAT AFFECT THE BUSINESS CYCLE: Businesses (react by expanding or curtailing operation) Consumers (react by spending or not) Government (taxing and interest rates)