1. 2-1Measuring Economic Activity 2-2Economic Conditions Change 2-3Other Measure of Business Activity

2.  Gross Domestic Product (GDP) –  Components of GDP 1.__________ spending on food, clothing, housing, etc. 2.__________ spending for buildings, equipment, and inventory 3.____________ spending to pay employees and to buy supplies and other goods and services 4.The _________ of a country less the imports into the country

3.  GDP ◦ Does not include value of work you do for yourself ◦ Only ______ goods are counted; goods used in manufacturing are not counted ◦ GDP growth from year to year signals an economy is growing and healthy ◦ Must also compare GDP per capita ◦ An increase in GDP per capita means that an economy is growing

4.  Employment ◦ Labor force – ◦ Unemployment rate –  Productivity ◦ Productivity – ◦ Companies place strong emphasis on ways to increase worker productivity

5.  Consumer Spending ◦ Personal Income – ◦ Retail Sales –  Increasing retail sales usually indicates economic growth

6.  Business Cycle –

7.  Business Cycle ◦ Prosperity – ◦ Recession – ◦ Depression – ◦ Recovery –

8.  Consumer Prices ◦ Inflation –  Average rate is 2-3%  Buying power of the dollar decreases  Most harmful to people living on a _______ __________  Measured by a price index – a number that compares prices in one year with prices in an earlier base year (most common is CPI – Consumer Price Index) ◦ Deflation –

9.  Interest Rates (the cost of money) ◦ Prime rate – ◦ Discount rate – ◦ Mortgage rate – ◦ Certificate of Deposit rate – High Interest Rates = Saving Low Interest Rates = Spending (Borrowing)

10.  Investment Activities ◦ Capital spending – ◦ Capital projects –  Money for capital projects comes from: 1.Personal savings 2.Stock market 3.Bond market

11.  Borrowing ◦ Governments often borrow money to fund special projects or services  Surplus –  Deficit –  National debt – ◦ ______________borrow money through loans, bonds, and mortgages ◦ _____________borrow money through credit cards, loans, and mortgages