1. 2 Economic Activity 2-1 Measuring Economic Activity
C H A P T E R 2
Economic Activity
2-1 Measuring Economic Activity
2-2 Economic Conditions Change
2-3 Other Measures of Business Activity

2. 2-1 Measuring Economic Activity
Goal 1 Define gross domestic product.
Goal 2 Describe economic measures of labor.
Goal 3 Identify economic indicators for consumer spending.

3. KEY TERMS Gross Domestic Product (GDP) GDP per capita
unemployment rate
productivity
personal income
retail sales

4. GROSS DOMESTIC PRODUCT (GDP)
Components of GDP
Comparing GDP

5. COMPARISON OF GDP IN SELECTED COUNTRIES

6. COMPARING GROSS DOMESTIC PRODUCT

7. Checkpoint 
What types of economic activities are not included in GDP?
GDP only applies to reported final goods and services.
Money earned for goods or services that are not reported would not be included.
Goods and services used in the manufacture of other products are only counted once—in the final product.

8. LABOR ACTIVITIES
Employment
Productivity

9. Checkpoint  How can productivity be increased?
Productivity can be increased by improvements in capital resources (equipment and technology), worker training, and management techniques.

10. CONSUMER SPENDING
Personal income
Retail sales

11. Checkpoint  What are the main sources of personal income?
Sources of personal income include wages, salaries, investment income, and government payments.

12. 2-2 Economic Conditions Change
Goal 1 Describe the four phases of the business cycle.
Goal 2 Explain causes of inflation and deflation.
Goal 3 Identify the importance of interest rates.

13. KEY TERMS business cycle prosperity recession depression recovery
inflation
price index
deflation

14. THE BUSINESS CYCLE
Prosperity
Recession
Depression
Recovery

15. Checkpoint  What are the four phases of the business cycle?
Prosperity
Recession
Depression
Recovery

16. CONSUMER PRICES Inflation Causes of inflation Measuring inflation
Deflation

17. Checkpoint  What are the main causes of inflation?
Inflation is an increase in the general level of prices that occurs when the demand for goods and services is greater than supply.

18. INTEREST RATES
Types of interest rates
Changing interest rates

19. Checkpoint 
How do interest rates affect business activities in our economy?
Interest rates can encourage or discourage borrowing and spending.
Lower interest rates allow consumers greater spending power, which increases demand, productivity, and employment.
Businesses often pass on the cost of higher interest rates to consumers.

20. 2-3 Other Measures of Business Activity
Goal 1 Discuss investment activities that promote economic growth.
Goal 2 Explain borrowing activities by government, business, and consumers.
Goal 3 Describe future concerns of economic growth.

21. KEY TERMS capital project stock bond budget surplus budget deficit
national debt

22. INVESTMENT ACTIVITIES
Personal savings
The stock market
The bond market

23. Checkpoint  Name some examples of capital projects.
Capital projects include the purchase of any item a business will use over an extended period of time such as land, buildings, and equipment.

24. BORROWING
Government debt
Business debt
Consumer debt

25. Checkpoint  What is the cause of a budget deficit?
A budget deficit occurs when a government or organization spends more than it takes in.

26. FUTURE ECONOMIC CHALLENGES
Emerging markets
Weak economies
Consumer preferences and behavior

27. Checkpoint  What economic challenges do countries face in the future?
Future economic concerns for any country include the ability to increase its output and provide a means for its citizens to meet the basic needs of food and shelter, adequate health care, education, transportation, employment, and safety.