1. Economic Activity in a Changing World
Chapter 3
Economic Activity in a Changing World
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2. Economic Indicators Figures used to measure economic performance
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3. Gross Domestic Product (GDP)
Most important economic indicator.
It represents a broad measure of economic activity and signals the direction of overall aggregate (whole) economic activity.
It measures the country’s economic health.
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4. Computed by taking the sum of four main areas
Consumer goods and services
Business goods and services
Government goods and services
Goods and services sold to other countries (Exports)
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5. Unemployment Rate
Measures the number of people who are able to work but don’t have a job during a given period of time.
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6. Inflation
An increase in the price you pay or a decline in the purchasing power of money.
In other words, inflation is when prices get higher or it takes more money to buy the same item.
Measured using the Consumer Price Index (CPI)
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7. Business Cycle
The rise and fall of economic activity over time. There are four phases.
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8. Prosperity Peak of economic activity
Unemployment is low, production of goods and services is high, and new businesses open.
1990s was a record period of prosperity in the United States.
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9. Recession Economic activity slows down
Spending decreases and so does the demand for products.
Businesses produce less so they need fewer workers.
Unemployment rate then increases so people have less to spend.
“Newspaper Definition” – decline in GDP for two or more consecutive quarters. Economics.about.com
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10. Depression
A deep recession that affects the entire economy and lasts for several years.
High unemployment and low productivity.
The state of the economy is affected by large numbers of people out of work, acute shortages, and excess capacity in manufacturing plants.
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11. Crash - Stock Market Crash of 1929
Crash Video
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12. Recovery A rise in business activity after a recession or depression.
Production starts to increase.
People start going back to work and have money to spend again.
There is a new demand for goods and services which stimulates more production.
GDP grows
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13. Four Phases of the Business Cycle
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14. Budget Deficit
When the government spends more on programs than it collects in taxes.
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15.
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16. Budget Surplus
Government’s revenue exceeds its expenditures during a one year period.
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17. Homework - Chapter 3 – “Economic Activity in a Changing World”
FAST REVIEW PAGE 39-QUESTIONS 1-2
FAST REVIEW PAGE 43-QUESTIONS 1-2
USING BUSINESS KEY WORDS PAGE 44-QUESTIONS 1-12
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