1. Economic Activity in a Changing World
Chapter 3
Economic Activity in a
Changing World

2. Learning Objectives IDENTIFY how economic activity is measured
EXPLAIN how inflation and deflation work
DISCUSS the four phases of the business cycle

3. Why Is This Important? Economic activity affects everyday
life. The history of the economy affects industries and people today and tomorrow.

4. Figures are used to measure economic performance.
A major purpose of an economic system is to produce the services wanted by people.
Figures are used to measure economic performance.
These figures are called economic indicators. They measure:
How much a country is producing
Whether its economy is growing
How it compares to other countries

5. Goods and services that satisfy your wants and needs are the FINAL output of an economy. They are the result of all the activity in the country.

6. Measuring Economic Activity
GDP
Unemployment Rate
Rate of Inflation
National Debt

7. GDP
The total value of the goods and services produced in a country in a given year is called its gross domestic product
The US has a very high GDP.
Zimbabwe has a very low GDP

8. How To Calculate GDP Consumer goods and services
Business goods and services
Government goods and services
Goods and services sold to other countries

9. Unemployment Rate
Measures the number of people of are able to work but don’t have a job during a given period of time.
Changes in the unemployment rate show whether an economy is picking up or slowing down.
Measures the number of people of are able to work but don’t have a job during a given period of time.
Changes in the unemployment rate show whether an economy is picking up or slowing down.

10. Types of Unemployment See

11. Rate of Inflation An increase in the cost of goods and services
CAN happen when an economy is too productive.
The more people are employed, the more they spend.

12. Rate of Inflation Cont’d.
As demand goes up producers raise their prices.
To pay the higher prices, workers demand higher wages.
Wages go up, producers raise their prices to pay the wages.

13. When an economy produces more goods than people want, it has to lower prices and cut production. As a result, people have less money to buy goods so the demand continues to go down.
SUPPLY > DEMAND = DEFLATION

14. National Debt
Main source of government income is TAXES which pays for social programs.
Amount of money a government owes is national debt.
GOVN’T REVENUE > EXP. = SURPLUS
GOVN’T REVENUE > INCOME = BUDGET DEFICIT

15. PHASES OF THE BUSINESS CYCLE
Prosperity (Boom/Peak)
Recession
Depression
Recovery

16. Characteristics of Prosperity
Low unemployment
Production is high
New businesses open

17. Characteristics of Recovery
Production starts to increase
People go back to work
Spending increases

18. Characteristics of Recession
Spending decreases
Demand increases
Unemployment rate increases

19. Characteristics of depression
High unemployment
Low productivity
2 consecutive quarterly declines in GDP

20. Changes in the business cycle affect the economy, industries, and working people.
Depressions are rare – Example: Great Depression/Stock Market Crash
Activity: You will read an article on the Great Depression, then with a partner, answer the Article Questions.