Copyright © Texas Education Agency, All rights reserved. Marketing Dynamics Measuring the Economy and Business Cycles Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Copyright and Terms of Service Copyright © Texas Education Agency. The materials found on this website are copyrighted © and trademarked ™ as the property of the Texas Education Agency and may not be reproduced without the express written permission of the Texas Education Agency, except under the following conditions: 1)Texas public school districts, charter schools, and Education Service Centers may reproduce and use copies of the Materials and Related Materials for the districts’ and schools’ educational use without obtaining permission from the Texas Education Agency; 2)Residents of the state of Texas may reproduce and use copies of the Materials and Related Materials for individual personal use only without obtaining written permission of the Texas Education Agency; 3)Any portion reproduced must be reproduced in its entirety and remain unedited, unaltered and unchanged in any way; 4)No monetary charge can be made for the reproduced materials or any document containing them; however, a reasonable charge to cover only the cost of reproduction and distribution may be charged. Private entities or persons located in Texas that are not Texas public school districts or Texas charter schools or any entity, whether public or private, educational or non- educational, located outside the state of Texas MUST obtain written approval from the Texas Education Agency and will be required to enter into a license agreement that may involve the payment of a licensing fee or a royalty fee. Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Goals The students can identify economic measurements used to analyze an economy. The students will research economic measures that are used in a market economy. The student can describe the concept of price stability as an economic measure. The student can interpret the measure of consumer spending as an economic indicator. The student can examine the impact of a nations unemployment rate. The student can describe the impact of inflation on business. The student can portray the economic impact of interest rate fluctuations. The student can explain the concept of business cycles. The student can describe the impact that phases of a business cycle have on the economy. Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Terms Productivity Gross Domestic Product (GDP) Inflation Consumer Price Index (CPI) Producer Price Index (PPI) Business cycle Prosperity Recession Depression Recovery Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Economic Indicators Economists measure the health of the economy by looking at several different factors. These individual factors when looked at together determine the economic strength of the economy. – Employee Productivity – Gross Domestic Product(GDP) – Inflation Rate – Unemployment Rate – Consumer Price Index(CPI) – Producer Price Index(PPI) Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Economic Indicators Employee productivity – output per worker hour that is measured over a defined period of time such as a week, month or year. Can be increased through technology, new equipment or facilities. Can also be increased by reducing the workforce and increasing the responsibilities of the existing workforce. Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Economic Indicators Gross Domestic Product (GDP) – A measure of the goods and services produced using the labor and property located in this country. – Many other factors are measured against GDP such as the debt that the government carries. Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Economic Indicators Inflation Rate – The general rise in prices over a period of time. Low inflation (1-5%) is an indication of a stable economy. High inflation can be devastating to an economy. Controlling inflation is a major goal of the government. Inflation can be controlled by the government raising and lowering interest rates. Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Economic Indicators Two indications of inflation are: – Consumer Price Index (CPI) Measures change in prices for 400 specific consumer goods over a period of time. – Producer price index (PPI) Measures wholesale prices over a period of time. Often a leading indicator because a rise in wholesale prices is usually passed along to the consumer. Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Economic Indicators Unemployment Rate – Rising unemployment rates are an indicator of an economic slowdown. – The lower the unemployment rate the greater chance of an economic expansion. When more people are working there is more consumer spending because people have jobs. Lower unemployment also means that the government makes more money because more people are paying taxes. Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Business Cycles The recurring cycle of an economy slowing down and then expanding is known as the business cycle. – Four phases of the cycle Prosperity Recession Depression Recovery Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Business Cycles Prosperity – Also known as expansion. Time when economy is flourishing. Low unemployment Low inflation Economic growth Stable economy Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Business Cycles Recession – A period of economic slowdown that lasts for two periods (6 months) Rising unemployment Possibly rising inflation Economy begins to contract (reduced GDP) Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Business Cycles Depression – A period of prolonged recession High unemployment for a prolonged period of time. Many businesses fail. Economy contracts with decreasing GDP. When economy cannot go any lower it is called the trough. Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Business Cycle Recovery – Increase in overall economic activity. Unemployment begins to lower Economy starts to expand (higher GDP) More businesses begin to open Demand for goods and services increases Copyright © Texas Education Agency, All Rights Reserved

Copyright © Texas Education Agency, All rights reserved. Business Cycles Factors that can affect business cycles – Government influences – Consumers – Business Copyright © Texas Education Agency, All Rights Reserved