Understand the role of business in the global economy. 1

Understand economic conditions 2

 Measuring economic activities  Classifying economic conditions 3

Measuring Economic Activities  GDP is the highly used measurement to determine a country’s overall economic output. GDP is a country’s total dollar value of all final goods and services produced in one year. 4

 GDP  Major categories of 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? 5

GDP per capita – output per person =_________GDP__________ Total Population 6

 Unemployment rate ◦ the people of the labor force that are unemployed  Productivity means … ◦ What can help you be more productive in a computer lab? ◦ What can contribute to employees increasing their production? ◦ equipment, technology, training, and management 7

Measurement of consumer spending:  Personal Income  Retail Sales 8

 Personal Income  the total wages and salaries plus investment income and government payments to individuals. 9

 Retail Sales  the sales of goods and services purchased to indicate the spending patterns 10

11 Investment Activities  The money used for capital projects comes from three main sources: Personal savings The stock market The bond market  How does each investment activity impact economic growth?  What are some examples of investment activities?

12 Borrowing Activities …  by ◦ Government ◦ Businesses  How can government borrowing lead to a budget deficit? ◦ schools, public highways, and parks  How can using borrowed money wisely impact businesses?  result in an increase in sales and profits

13 GDP GDP Per capita Labor Activities Consumer Spending Investment Activities Borrowing Activities

Classification of Economic Conditions 14

15 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. Recovery Unemployment rate is lowering and demand for products and services is increasing. Business Cycle

Year 123 Income Income percent change from year 1 $36,000 n/a $38, % $21, % Gallon of milk cost Gallon of milk cost percent change from year 1 $2.49 n/a $ % $ % 16 Over a three-year period, how has the income been impacted by the cost of a gallon of milk? The buying power for the income for years three was decreased

 Inflation ◦ the demand for products and services exceeds the supply, which may cause an increase in prices  Causes of inflation  Consumer Price Index (CPI)  Deflation ◦ the demand for products and services exceeds the supply, which may cause an increase in prices  Causes of deflation 17

18 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? Research these ? How do interest rates impact businesses?

19 Interest Rates  Types: ◦ Prime rate  usually made available to banks’ best customers ◦ Discount rate  usually made available to banks’ best customers ◦ T-bill rate  the yield for short-term (13 weeks) government debt.

20 Interest Rates ◦ Treasury bond rate  the yield for long-term government debt. ◦ Mortgage rate  the amount borrowers pay for home loans ◦ Corporate bond rate  the cost of loans for large US corporations ◦ Certificate of deposit rate  rate paid for deposits for a period of time ( 6, 12, or 18 months ).