1. How much are we producing and buying????

2. total value of all the goods and services produced in a country in a year.  This is one way to measure a country’s economic growth. It is the total value of all the goods and services produced in a country in a year.  It consists of 4 things: 1. Spending on food, clothing, housing, and other aspects 2. Business spending on buildings, equipment, and inventory 3. Government spending 4. Net Exports (Exports minus Imports)

3.  The more goods and services produced, the healthier an economy is thought to be; but GDP doesn’t tell the whole story.  GDP Per Capita tells us the GDP per person in a country. GDP/# of people

4.  Unemployment rate- portion of people in the labor force who are not working (Labor force is all people 16+ yrs old)  Productivity- How much output you are getting from a worker ( increased by better technology & equipment, worker training, or management techniques)  Consumer Spending- when personal income (money you earn) is spent on retail sales (durable and nondurable goods), economic growth is thought to be occurring.

5.  Looking at the economic state of the country throughout history reveals many ups and downs. Can you think of any major ones???  This cycle is referred to as the business cycle.

7.  Prosperity- unemployment is down, businesses produce goods and services in record numbers, wages are good, and the rate of GDP growth increases.  This is the high point of the business cycle

8.  Recession- demand begins to decrease, business lower production, unemployment begins to rise, and GDP growth slows for at least 2 quarters  May not last too long or be too serious, but has a big impact (ripple effect)

9.  Depression- prolonged period of unemployment, weak consumer sales, and business failures  Worst one ever was in 1930-1940, The Great Depression. 1 in 4 people in the work force were unemployed  What things can help counteract a Depression?

10.  Recovery- unemployment begins to decrease, demand increases, and GDP begins to rise  Can occur slow or fast.  It is the road back to prosperity

11.  Inflation- Increase in the general level of prices  Inflation decreases buying power  EX: if the price of something increased 5% during the year, things that were $100 would now be $105  Who Does This Affect the Most???

12.  Shortage. When money is spent on goods that are in short supply…inflation  Even though wages tend to increase also, they can’t keep up with price.  With fast, high inflation, it is hard to maintain the standard of living

13.  One of the most common tools for measuring inflation is CPI or Consumer Price Index.  Price Index- number that compares prices in one year to prices in some earlier base year  Disadvantages: PI only uses certain items to measure inflation. So if the cost of food, gas, and health care increase faster than nonessentials measured by the PI, then the reported inflation rate will be much lower than actual cost-of-living increase

14.  It’s a decrease of the general level of prices  Occurs during recession and depression in order for companies to keep selling stuff

15.  When People, business, or countries borrow money, interest is the amount they pay for that privilege.  A higher interest rate means higher cost of doing business.  As a consumer you are affected by interest rates when you borrow or save money  This is why credit is important. People with bad credit pay a higher interest rate

16.  Prime Rate- the rate banks make available to their best business customers, such as large corporations  Discount Rate- the rate financial institutions are charged to borrow funds from the federal reserve banks  T-Bill- the yield on short term U.S. Government debt obligations (13-week)  Treasury Bond Rate- the yield on long term U.S. Government debt obligations (up to 30 years)

17.  Mortgage Rate- Interest rate people pay that borrow money to buy a house  Corporate Bond Rate- Cost of borrowing from large corporation  Certificate of Deposit Rate- Rate for time deposits at savings institution

18.  The supply and demand of money- as people save more, there is more money for banks to lend out and rates go down. As more people borrow money rates tend to go up.  Interest rates help stimulate the economy and affect many aspects of business, including investments.

19.  Investments come in many forms. You are all making an investment in your futures now by attending school.  Capital Spending (Capital Projects)- spending by businesses for items such as land, buildings, equipment, and new products  The money for these kinds of purchases come from three types of investments: 1.Personal Savings 2.Stock Investments 3.Bonds

20.  This is a major source of investment capital  Companies use the money you put into your savings accounts and other financial institutions to buy expensive equipment and other things  In return, you are paid interest on the amount of money you deposit and leave in your savings account

21.  Companies get capital to spend by selling very small pieces of their company in the form of stock  The value of the stock can go up or down depending on many factors, but it is essentially tied to how the company does financially

22.  This is a debt owed by a company.  The company borrows money from you and in return pays you back, plus interest when the bond matures  The Government has used this quite a bit when they need money