1. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE1 CHAPTER 2 2-1 2-1Measuring Economic Activity 2-2 2-2Economic Conditions Change 2-3 2-3Other Measures of Business Activity Economic Activity

2. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE2 Measuring Economic Activity Goals Define gross domestic product. Describe economic measures of labor. Identify economic indicators for consumer spending. 2-1

3. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 3 Key Terms Gross Domestic Product (GDP) GDP per capita unemployment rate productivity personal income retail sales

4. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 4 GROSS DOMESTIC PRODUCT (GDP) Components of GDP Comparing GDP

5. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 5 Comparison of GDP in Selected Countries Source: CIA World Factbook

6. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 6 What types of economic activities are not included in GDP? Answer 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. Checkpoint >>

7. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 7 LABOR ACTIVITIES Employment Productivity

8. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 8 How can productivity be increased? Answer Productivity can be increased by improvements in capital resources (equipment and technology), worker training, and management techniques. Checkpoint >>

9. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 9 CONSUMER SPENDING Personal income Retail sales

10. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 10 What are the main sources of personal income? Answer Sources of personal income include wages, salaries, investment income, and government payments. Checkpoint >>

11. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE11 Economic Conditions Change Goals Describe the four phases of the business cycle. Explain causes of inflation and deflation. Identify the importance of interest rates. 2-2

12. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 12 Key Terms business cycle prosperity recession depression recovery inflation price index deflation

13. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 13 THE BUSINESS CYCLE Prosperity Recession Depression Recovery

14. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 14 What are the four phases of the business cycle? Answer The four phases of the business cycle are prosperity, recession, depression, and recovery. Checkpoint >>

15. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 15 CONSUMER PRICES Inflation Causes of inflation Measuring inflation Deflation

16. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 16 What are the main causes of inflation? Answer Inflation is an increase in the general level of prices that occurs when the demand for goods and services is greater than supply. Checkpoint >>

17. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 17 INTEREST RATES Types of interest rates Changing interest rates

18. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 18 How do interest rates affect business activities in our economy? Answer 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. Checkpoint >>

19. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE19 Other Measures of Business Activity Goals Discuss investment activities that promote economic growth. Explain borrowing activities by government, business, and consumers. Describe future concerns of economic growth. 2-3

20. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 20 Key Terms capital project stock bond budget surplus budget deficit national debt

21. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 21 INVESTMENT ACTIVITIES Personal savings The stock market The bond market

22. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 22 Name some examples of capital projects. Answer Capital projects include the purchase of any item a business will use over an extended period of time such as land, buildings, and equipment. Checkpoint >>

23. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 23 BORROWING Government debt Business debt Consumer debt

24. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 24 What is the cause of a budget deficit? Answer A budget deficit occurs when a government or organization spends more than it takes in. Checkpoint >>

25. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 25 FUTURE ECONOMIC CHALLENGES Limited access to health care Need for proper housing for many people Traffic and crime Unemployment

26. Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 2 26 Checkpoint >> What economic challenges do countries face in the future? Answer 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.