1. Business & The Economy

2. Roles of Business Consumers
Buy goods and services from other businesses
Manufacturers buy energy and raw materials, while insurance companies buy office furniture and supplies
Stores purchase computers and software to track sales
Employers
Provide jobs to millions of workers
Producers
Businesses large and small product the food, clothing, and shelter that meet people’s basic needs
As well as the cars, movies and appliances that make life more enjoyable and comfortable

3. Responsibilities of Business
To Consumers
Selling products that are safe and work as promised
Truthful in advertising
Treating all customers equally
To Owners
Especially crucial in corporations, in which the managers and owners are different groups of people
Transparency
Revealing important information, such as a corporation’s financial information, to the public
Provides investors with full disclosure before they choose to invest, or continue to invest, in the company

4. Responsibilities of Business
To Employees
Avoid Discrimination in the workplace
Cannot treat employees differently on the basis of race, religion, color, gender, age or disability
To the Community
Social Responsibility-obligation to pursue goals that benefit society as well as themselves
Gifts to charities, Target promoting community and national volunteering efforts, American Express providing assistance to disaster victims through grants to relief agencies

11. Business Cycle-What Does It Measure?
Measuring Real GDP
GDP could go up simply because prices increase, even though the country produced the same amount of goods and services from one year to another
Real GDP shows an economy’s production after the distortions of price increases have been removed
Eliminates the false impression that output has gone up when prices go up

12. The Business Cycle
Growth of the economy over time, through alternating intervals of growth and decline
Begin with expansion leading to an economic peak
Period of Prosperity
New businesses open, factories are producing at full capacity, and most people can find work
Contraction or Recession follows
Real GDP levels off and begins to decline
Business activity slows
Trough-Lowest point
Downward direction of the economy levels off in a trough
Lowest point in the business cycle that occurs when real GDP levels off and slowly begins to increase
Measured from peak-to-peak

13. Expansions Occurs when real GDP goes up
Doesn’t matter if economy grows a little or a lot
As long as it is higher from one point to the next, the economy is expanding
Normally longer than Recessions
Longest peacetime expansion-March of 1991 until March of 2001
Exactly 10 years

15. Recessions
Occurs when real GDP goes down for six straight months, although most last longer than that
Tend to be shorter than Expansions
Average length is one year
Depression
Occurs when recessions become severe
State of the economy with large numbers of people out of work, acute shortages, and excess capacity in manufacturing plants

16. The Great Recession December 2007 to June 2009
Housing Market Collapsed ($8 Trillion Industry)→Immense loss of wealth→Cutbacks in Consumer Spending→Financial Market Chaos (Lehman Brothers, Bailouts)→Collapse of Business Investments→Massive Job Loss (8.4 Million Jobs/6.1%)
Too Big To Fail (HBO) Clip; Reasons behind the Collapse-
Long Version-
Inside Job Documentary Trailer-
Financial Crisis Banking Explained-

17. Unemployment Start by identifying the Civilian Labor Force
All civilians 16 years old or older who are either working or are looking for work
Half of all people in the U.S. belong to the Civilian Labor Force
Unemployment Rate- Percentage of people in the civilian labor force who are not working but looking for jobs
Changes in Unemployment Rate are important in terms of the economy as a whole
1% drop in unemployment rate results in a 2% rise in total income in the economy
Personal impact of unemployment and lost income are catastrophic
Some cut back on luxuries, others must cut back on basic needs such as healthcare, or going into debt
Stress for many people, and high unemployment requires some government action

20. Unemployment Facts Current Rate- 5.5%
Main, or “U6” Unemployment Rate- 9.3%
Includes the Unemployed, the Underemployed and the Discouraged
Labor Participation Rate- 62.8% in 2013, lowest in 35 years
# of American Workers NOT in Labor Force -92 Million+

24. Fiscal Policy
Changes in government spending or tax policies used to combat High Unemployment
Important economic tool because of its ability to affect the total amount of output produced-Gross Domestic Product
Often not effective, due to political differences
Difficult to implement effective fiscal policies when recessions are short and political leaders have different ideas about whether to cut taxes or to increase spending

25. Fiscal Policy-Two Choices
Cutting Taxes
hope that with more money in their pockets, people will buy more goods and services
Increased demand will convince businesses to hire more workers, reducing unemployment
Increasing Spending
Buying more goods and services itself, the government tries to convince businesses to hire more workers to boost production

27. Inflation & Value of Money
Sustained increase in the general level of prices
Reduces the purchasing power of money and may alter the decisions people market
Inflation is particularly hard on people who have fixed incomes (pensions or other fixed amounts of money)
Prices provide the signals that help individuals and businesses make the economic decisions that allocate the factors or production
High rates of Inflation distort this process because people begin to speculate, or buy things such as land or works of art they think will go up in value
When speculation takes place of investment in capital goods or services, the economy suffers

29. Consumer Price Index
Every month, the government samples prices for about 400 products commonly used by consumers
Change in the average level of prices as measured by the CPI defines the rate of inflation
Inflation Rate- inflation-rates/

30. Review Come draw the Business Cycle on the Board! What is real GDP?
What qualifies an Expansion? Recession?
How does Unemployment influence our Economy?
What is Fiscal Policy? What two main options do we use in the U.S.?
Is it effective?
How does Inflation influence our Economy?