Understand the role of business in the global economy. 1 All Images Compliments of

Understand economic conditions 2

Topics Measuring economic activities Classifying economic conditions 3

Measuring Economic Activities 4 =

Gross Domestic Product (GDP) GDP- 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. 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 GDP per capita – output per person =_________GDP__________ Total Population 6 OR All Pictures Complements of Google Images

Labor Activities Unemployment rate - Unemployment rate includes the people of the labor force that are unemployed. Productivity: How much output or how efficient the workforce is. Productivity means … What can help you be more productive in a computer lab? What can contribute to employees increasing their production? : New equipment, technology, training, and better management. 7

Consumer Spending Measurement of consumer spending: Personal Income - Personal income includes the total wages and salaries plus investment income and government payments to individuals. Retail Sales - Retail Sales include the sales of goods and services purchased to indicate the spending patterns 8

9 Investment Activities The money used for capital projects comes from three main sources: Personal savings - Businesses use money deposited in personal saving accounts to buy equipment or products for their businesses. Savers earn interest on money used by companies and other individuals. The stock market - Higher earnings for businesses increases their value, which causes a demand for people wanting to buy the businesses stock. Stock -the certificate of ownership of a single piece of a company. Holder of a stock is considered an owner. The bond market - The bond market make available for businesses and government to borrow money. Bondholders earn interest on money loaned to businesses and government. Bond - A security issued by a corporation or public body and usually carrying a fixed rate of interest and a set date, called the bond's maturity, for redemption of the principal How does each investment activity impact economic growth? What are some examples of investment activities?

10 Borrowing Activities … by Government - Governments borrow money to finance projects like schools, public highways, and parks. If the government spend more money than it collects, then a budget deficit is resulted. Businesses - Companies may borrow money to start up or expand. Using borrowed fund efficiently can result in an increase in sales and profits. How can government borrowing lead to a budget deficit? How can using borrowed money wisely impact businesses?

Measuring Economic Activities 11 GDP GDP Per capita Labor Activities Consumer Spending Investment Activities Borrowing Activities

Classification of Economic Conditions 12

13 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.

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 $ % $ % 14 Over a three-year period, how has the income been impacted by the cost of a gallon of milk? Year two income increased as well as the cost of a gallon of milk during years two and three; but the income did not keep up with the rate of increases of the cost of a gallon of milk. Therefore the buying power for this income for years three was decreased.

Consumer Prices Inflation –a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency Causes of inflation - During an inflation, the demand for products and services exceeds the supply, which may cause an increase in prices. Consumer Price Index (CPI) an index of the changes in the cost of goods and services to a typical consumer, based on the costs of the same goods and services at a base period. Deflation - During deflation, the prices of products and services are lowered, but people have less money for purchases. Causes of deflation 15

16 Interest Rates Types: Prime rate - Prime rate is usually made available to banks’ best customers Discount rate - Discount rate is offered by the federal reserve to financial institutions for loans. T-bill rate - T-bill rate is the yield for short-term (13 weeks) government debt. Treasury bond rate - Treasury bond rate is the yield for long-term government debt. Mortgage rate - Mortgage rate is the amount borrowers pay for home loans. Corporate bond rate - Corporate bond rate is the cost of loans for large US corporations. Certificate of deposit rate - Certificate of deposit rate paid for deposits for a period of time ( 6, 12, or 18 months). What is the primary purpose of each? How do interest rates impact businesses? Higher interest rates for businesses usually mean higher business cost.

Work Cited North Carolina Department of Public instruction