1. Understand the role of business in the global economy.
Essential Standard 1.00
Understand the role of business in the global economy.

2. Understand economic conditions
Objective 1.02
Understand economic conditions

3. Topics
Measuring economic activities
Classifying economic conditions

4. Measuring Economic Activities

5. Gross Domestic Product (GDP)
Major categoriesof 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?
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.

6. GDP per capita GDP per capita – output per person
Total Population

7. Labor Activities Unemployment rate Productivity means …
What can help you be more productive in a computer lab?
What can contribute to employees increasing their production?
Unemployment rate includes the people of the labor force that are unemployed.
Productivity: Answers will vary. The core responses should include equipment, technology, training, and management.

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

9. Investment Activities
The money used for capital projects comes from three main sources:
Personal savings
The stock market
The bond market
How does each investment activity impact economic growth?
What are some examples of investment activities?
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.
Higher earnings for businesses increases their value, which causes a demand for people wanting to buy the businesses stock.
The bond market make available for businesses and government to borrow money. Bondholders earn interest on money loaned to businesses and government.

10. Borrowing Activities …by
Government
Businesses
How can government borrowing lead to a budget deficit?
How can using borrowed money wisely impact businesses?
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.
Companies may borrow money to start up or expand. Using borrowed fund efficiently can result in an increase in sales and profits.

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

12. Classification of
Economic Conditions

13. Prosperity Recession Recovery Depression
Employment rate and demand for products and services are high.
Recession
Unemployment rate is increasing and demand for products and services are lowering.
Recovery
Unemployment rate is lowering and demand for products and services is increasing.
Depression
Unemployment rate is high and demand for products and services is lowering.

14. Over a three-year period, how has the1 2 3
Income
Income percent change from year 1
$36,000
n/a
$38,000
5.6%
$21,000
-42%
Gallon of milk cost
Gallon of milk cost percent change from year 1
$2.49
$2.99
20%
$3.19
28%
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.

15. Consumer Prices Inflation Causes of inflation
Consumer Price Index (CPI)
Deflation
Causes of deflation
During an inflation, the demand for products and services exceeds the supply, which may cause an increase in prices.
During deflation, the prices of products and services are lowered, but people have less money for purchases.

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