Macroeconomics: output, employment and income in the Australian Economy Chapter 2.

Slides:



Advertisements
Similar presentations
Economic Changes and Cycles
Advertisements

Business Cycle Theory Changes in Business Activity ©2012, TESCCC Economics, Unit: 06 Lesson: 01.
Business Cycle Theory Changes in Business Activity ©2012, TESCCC Economics, Unit: 06 Lesson: 01.
MACRO-ECONOMICS The Business Cycle
Measuring GDP and Economic Growth Chapter 1 Instructor: MELTEM INCE
Chapter 12SectionMain Menu Gross Domestic Product What is gross domestic product (GDP)? How is GDP calculated? What is the difference between nominal and.
Chapter 12 Managing the Macroeconomy. Stagflation: it occurs when recession and inflation takes place simultaneously in the economy.
Business Cycle Unit 2 Lesson 5 Activity 17 & 18 by
Economy / Market Analysis
Business Cycles Objectives: Describe the effect of fluctuations in national output and its relationship to the causes and costs of unemployment and inflation.
Business Cycle Changes in Business Activity © 2012, TESCCCEconomics Unit 7, Lesson 2.
ECON2: The National Economy
Relationship Between Businesses & The Economic Environment
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 17: Short-term Economic Fluctuations 1.Identify the.
The Business Cycle Murad Rattani Oxford College of London Murad Rattani.
Phases and Influences on the Business Cycle CHAPTER 10, Section 2
Growth of the Economy And Cyclical Instability
Lesson 3 11E.
 Circular Flow of Income is a simplified model of the economy that shows the flow of money through the economy.
Gross Domestic Product & Growth Ch 12 National Income Accounting Because of the Great Depression, economists felt they needed to monitor our economy,
economic indicator  Statistics about the economy that allows analysis of economic performance and predictions of future performance.  Usually calculated.
Measuring National Output Chapter 5. Economic goals  Economic growth  Full employment  Low inflation  An economy grows because of increases in available.
Economics Chapter 13. National Income Accounting The measurement of the national economy’s performance. A measure of the amount of goods and services.
Economics: Chapter 13 Measuring the Economy’s Performance.
Review GDP Define GDP---- Why do you only count the “final” value of goods and services? Why do you not count the value of goods or services produced in.
Warm-Up: What do you think the term “Economic Indicator” means?
Economic Fluctuations Chapter 11. Chapter Focus Learn about aggregate demand and the factors that affect it Analyze aggregate supply and the factors that.
Objectives 1. What are the 4 phases of the business cycle? 2.What factors influence the business cycle? 3. What are the 3 leading indicators used to determine.
 Economic Growth in Canada  Before World War I (1870 – 1914)  Canada’s growth was gradual  Until 1973, there was steady growth in per-capita income.
Business Cycle and Economic Indicators
The Economic or Business Cycle. Measuring Economic Growth We calculate the value of a country's output or wealth generated in a year by measuring GDP-Gross.
Economics 7b The Business Cycle. The Business Cycle: The performance of the American economy changes over time. This is called the business cycle.
Macroeconomics SSEMA1 Students will explain and describe the means by which economic activity is measured by looking at gross domestic products, consumer.
© 2006 Prentice Hall Business Publishing The Economic Way of Thinking, 11/e Heyne/Boettke/Prychitko “The Economic Way of Thinking” 11 th Edition Chapter.
Chapter 10 Section 1. Objectives How do economist calculate gross domestic product? How do economist calculate gross domestic product? What are some of.
What is a business cycle? It is a recurring cycle of economic growth, decline, recession, and recovery in a country. It is the process leading to an economic.
Changes in Business Activity
The Economy.  Small businesses are can be influenced by the conditions in the wider New Zealand economy.  Often how an economy is performing is based.
Contraction TroughExpansion Peak The business cycle is a period of macroeconomic expansion followed by a period of contraction. During the expansion phase,
Business Cycle A business cycle reflects the rise and fall of economic activity Five Stages: peak, recession, trough, recovery, and expansion Depression.
The Business Cycle Chapter 10 Economic Fluctuations, Unemployment and Inflation.
Business Cycle Theory Changes in Business Activity © 2009, TESCCC.
Ch 12 Economics Gross Domestic Product And Growth.
Fun Facts- The Lion King  Simba means “lion”  Mufasa means “King”  Scar’s original name is Taka which means “trash”- he changed his name after getting.
WARM UP #9 What does it mean for an event to be cyclical? What are some examples? What do they all have in common? When you go to the doctor, what are.
Chapter 12 and 13 Economics. First part of Jeopardy deals with Chapter 12 and GDP.
Level 1 Business Studies AS90838 Demonstrate an understanding of external factors influencing a small business Economics Influences.
NEXT WEEK: Analyzing demographic and economic data of first, second and third world countries Today: Gross Domestic Product and Population Growth (Chapter.
Powerpoint Jeopardy VocabularyGDPUnemploymentInflationPotpourri
The business cycle. Gross domestic product (GDP) Gross Domestic Product (GDP) is the value of all the goods and services produced in an economy over a.
Downturn and recession in the business cycle. Gross domestic product (GDP) Gross Domestic Product (GDP) is the value of all the goods and services produced.
The Business Cycle. What is the business cycle? Periodic fluctuation in the rate of economic activity, as measured by levels of employment, prices, and.
What is a business cycle?
Sara Shackett AP/IB Economics
GDP: Measuring the National Economy
Objectives 1. What are the 4 phases of the business cycle?
Business Cycles ~What are the four phases of the business cycle?
Topic 1: Introduction to Economics Concept: The Business Cycle
The Business Cycle.
Measurement of Economic Performance
MACROECONOMIC OBJECTIVES
2.1 The Level of Overall Economic Activity
Chapter Seven: Economic Growth and Fluctuations
Measuring the Economy’s Performance
GDP and the Business Cycle
Reading the Business Cycle
Business Cycles.
Reading the Business Cycle
Business cycles Chapter 12.
Business Fluctuations
Presentation transcript:

Macroeconomics: output, employment and income in the Australian Economy Chapter 2

Economic Activity Economic activity refers to the actions of individuals, firms or the government that help to generate the production of goods and services, income, employment and expenditure.

Participation in Production (current and capital goods and services) Generates Spent on Economic Activity Expenditure (consumption, investment, govt spending) Participation in Production (employment, resource use, managing) Provides funds for Rewarded by Income (wages, profits, rent, taxes)

The Economic Cycle The Economic Cycle refers to the changes or fluctuations in production economic activity that occur over time. The diagram below shows the rising and falling of economic activity over a period of time.

The Economic (Business) Cycle

Main Phases of the Economic Cycle Boom/Peak: An economic boom is considered the peak of the business cycle. At this time growth reaches its highest point, and unemployment reaches its lowest point. However, also at this stage of the cycle we can expect higher rates of inflation, wages rises, rising business profits and high demand for imports, leading to high Current Account Deficit

Main Phases of the Economic Cycle Contraction or slowdown: This phase will usually follow a peak or boom. At this time the rate of growth in GDP may fall. Usually after a time lag the unemployment rate will start to rise and inflation eases.

Main Phases of the Economic Cycle Trough: Lowest level of economic activity. Sometimes a trough is simply a slow down in the rate of economic growth causing a slight rise in unemployment. It may become a recession. A recession is a phase in which the rate of growth is seen to be negative for two consecutive quarters. During this phase of the business cycle few new jobs will be created, and therefore the unemployment rate will continue to increase, declining business profits, loss of consumer and business confidence, increase in bankruptcies.

Main Phases of the Economic Cycle Expansion or recovery: During a recession policies will be put in place to try and encourage economic expansion once again. Eventually confidence will return, and with it so will the level of investment. As this happens new jobs may be created, and the rate of growth will once again become positive. Unemployment falls and inflation starts to accelerate.

Ideal Level of Economic Activity The best possible situation for an economy to experience is the ideal situation of domestic economic stability. Domestic Economic Stability: is a desirable or ideal level of economic activity where, simultaneously, there is low inflation, a sustainable rate of GDP and low unemployment. Productive capacity: is the potential level of national production of goods and services that can be achieved when all resources are used efficiently and effectively. This determines the sustainable rate of economic growth in the long term.

Indicators of the Level of Economic Activity Measuring productive activity is difficult and inaccurate, partly because there are two types of productive activity: Economic Activity Non-market Activity

Indicators of the Level of Economic Activity Economic Activity: the indicator used to measure economic activity is the Gross Domestic Product (GDP). Gross Domestic Product: is a measure of the real value of final goods and services produced in Australia in a given time period.

Indicators of the Level of Economic Activity Non-market activity: consists of production that occurs mostly within individual households and is not included in GDP. E.g. Parents Transporting children to school, household chores such as washing, cleaning.

Indicators of Economic Activity Leading indicators: predict or forecast in advance the likely future level of economic activity.

Indicators of Economic Activity Coincident indicators: move closely with actual changes in the level of economic activity. They are published at short intervals and tell us what is happening right now.

Indicators of Economic Activity Lagging indicators: show changes in economic activity some time after the event has occurred because they take time to be processed and released.

Indicators of Economic Activity Not all economic activity is Cyclical, with peaks and trough. Economic activity in some sectors can be Seasonal (E.g sales of soft drinks, Ice creams) Economic activity can also be erratic (e.g. Fad products, video games, new technology products, hotel stays)