1. Successful Economy
How do you measure?

2. Goals of an Economy 1) Increase Productivity 2) Decrease Unemployment
3) Maintain Stable Prices
All nations analyze their economies to see how well they are doing the goals above.

3. Economic Measurements
How do they measure their goals??
Productivity
Gross Domestic Product (GDP)
Gross National Income (GNI)
Standard of Living
Inflation Rate
Unemployment Rate

4. Economic Measures
Productivity

5. Productivity Measures output of a country, business or individual
How much “product” is made per hour
OUTPUT
WORKER HOURS
usually weeks, month or year

6. Productivity (cont) Tootsie Rolls Individual Company Country
10,000 pcs - wk
700,000 pcs - wk
9,000,000 tons - yr
40 hrs
10 w X 40 hrs
150 w X 40 hrs X 52
250 pieces
per hour
1750 pieces
per hour
28.8 tons per hour

7. Do Question 1 of “Measuring Productivity”

8. Productivity (cont) How can businesses increase productivity?
1. Invest in new equipment
2. Provide additional training or incentives
3. Reduce work force through efficiency

9. Productivity (cont) Invest in New Equipment 700,000 pieces
10 w X 40 hrs
10 w X 40 hrs
1750 pieces
per hour
2250 pieces
per hour

10. Do Question 2 of “Measuring Productivity”

11. Productivity (cont) Provide Training or Incentives 700,000 pieces
10 w X 40 hrs
10 w X 40 hrs
1750 pieces
per hour
2250 pieces
per hour

12. Productivity (cont) Reduce Workforce through Efficiencies
700,000 pieces
700,000 pieces
10 w X 40 hrs
8 w X 40 hrs
1750 pieces
per hour
2188 pieces
per hour

13. Do Question 3 of “Measuring Productivity”

14. Gross Domestic Product
Economic Measures
Gross Domestic Product
GDP

15. Gross Domestic Product (GDP)
Finished Goods and Services Produced Inside a Country
Finished Goods for Sale to End Consumers
Intermediate Goods for Sale to Industry
Cars
Window Glass for Car
- Dresses
- Cloth for Dress
- Cruise Missiles
- Screws for Missile

16. Gross Domestic Product (GDP)
Finished Goods and Services Produced Inside a Country
Inside Country
Includes Toyota in Nashville
Ford Plant in Mexico
Includes Canadian workers
in Michigan
GDP World Ranking

17. Economic Measures
Gross National Income
GNI

18. Gross National Income (GNI)
Formally known as GNP
Finished Goods and Services Produced Domestically and Abroad by a Country’s Nationals (Citizens)
By a Country’s Nationals
Toyota in Nashville
Includes Ford Plant in Mexico
GNI Global Ranking

19. Economic Measures
Standard of Living

20. Standard of Living
Amount of Goods and Services a nation’s people have.
“QUALITY OF LIFE”
Human Development Index
GNP
Education
Pollution
Health
Poverty
Population
HDI Rank

21. Economic Measures
Inflation Rate

22. Inflation Rate A Rise in the General Level of Prices
Over time, the price of goods increases.
Ex.
Bread (2) 1.99
Paper
Car $ $ $15,786
1956 Prices
1986 Prices
2006 Prices

23. Inflation Rate If 2% inflation: $1.00 $1.02 (price)
(Money is worth less over time)
If you put $1000 in your mattress in 2000 and took it
out in 2006 it would only be worth $920
What causes inflation?
The supply of money goes up.
The supply of goods goes down.
3. Demand for money goes down.
4. Demand for goods goes up.

24. Inflation Rate Rising Prices - What money is worth
3-5% Good: Stable Economy (not in recession)
10% Bad: Money is worth little (no buying power)
Current Inflation Rate
FED tries to control inflation through interest rates
Raise interest rates = Lower borrowing (money worth more)
Inflation goes down
Lower interest rates = More borrowing (money worth less)
Inflation goes up (get out of recession)

25. Economic Measures
Unemployment Rate

26. Unemployment Rate Unemployment Rate History Currently at 8.1%
Unemployment Rate by State

27. Economic Measures
The Business Cycle

28. The Business Cycle Why keep all of these statistics ?!?
To determine stage economy is in
Prosperity
Recession
Recovery
Recovery
Depression

29. Business Cycle - Prosperity
Period of Economic GROWTH
Increase in output (goods/services)
Low Unemployment
High Consumer Spending

30. Business Cycle - Recession
Period of Economic SLOWDOWN
Consumer spending decreases
Fewer goods and services produced
Unemployment BEGINS to rise
(this is LAST characteristic)

31. Business Cycle - Depression
Period of PROLONGED and DEEP Recession
Consumer spending VERY LOW
Goods and services down significantly
Unemployment VERY HIGH
POVERTY RESULTS

32. Business Cycle - Recovery
Period of Economic UPTURN
(Renewed Growth)
Consumer spending increases
Moderate expansion by business
Unemployment begins to fall
(this is LAST characteristic)

33. Business Cycle FACTORS THAT AFFECT THE BUSINESS CYCLE:
Businesses (react by expanding or
curtailing operation)
Consumers (react by spending or not)
Government (taxing and interest rates)