Back to Table of Contents pp. 34-47 Chapter 3 Economic Activity in a Changing World.
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Transcript of Back to Table of Contents pp. 34-47 Chapter 3 Economic Activity in a Changing World.
Back to Table of Contents
pp. 34-47
Chapter 3 Economic Activity in aChanging World
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Why It’s ImportantWhy It’s Important
Economic activity affects everyday life. The history of the economy affects industries and people of today and tomorrow.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Key WordsKey Wordsgross domestic product (GDP) standard of living inflationdeflationbudget deficitnational debt budget surplusbusiness cycleprosperityrecessiondepressionrecovery
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Measuring Economic Activity Measuring Economic Activity
Economic indicators measure things like how much a country is producing, whether its economy is growing, and how it compares to other countries.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Gross Domestic Product (GDP) Gross Domestic Product (GDP)
The total value of the goods and services produced in a country in a given year is called its gross domestic product (GDP).
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Graphic OrganizerGross Domestic ProductGross Domestic Product
Graphic OrganizerGraphic Organizer
ConsumerConsumergoods goods
andandservicesservices
BusinessBusinessgoodsgoodsandand
servicesservices
GovernmentGovernmentgoodsgoodsandand
servicesservices
GoodsGoodsandand
servicesservicessold tosold tootherother
countriescountries
+ =++GrossGross
DomesticDomesticProductProduct
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Gross Domestic Product (GDP) Gross Domestic Product (GDP)
The standard of living is the amount of goods and services the average citizen can buy.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Figure3.1 GROSS DOMESTIC PRODUCT
The gross domestic product (GDP) is the output of goods and services produced in a country.
What percentage did the GDP increase from the end of Year 2 to the beginning of Year 3?
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Unemployment Rate Unemployment Rate The unemployment rate measures the number of people who are able to work but don’t have a job during a given period of time.
Changes in the unemployment rate show whether an economy is picking up or slowing down.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Unemployment Rate Unemployment Rate
There are different reasons for being unemployed, including:
• Temporary• Seasonal• Changes in industry• Economic slowdown
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Rate of Inflation Rate of Inflation Inflation is a general increase in the cost of goods and services.
If this cycle continues, it can lead to hyperinflation.
As the demand for goods goes up, producers raise their prices. To pay the higher prices, workers demand higher wages.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Rate of Inflation Rate of Inflation
Deflation is a general decrease in the cost of goods and services.
When an economy produces more goods than people want, it has to lower prices and cut production.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Rate of Inflation Rate of Inflation
The United States tries to maintain a slow but steady rate of economic growth to avoid both inflation and deflation.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
National Debt National Debt
When the government spends more on programs than it collects in taxes, the difference in the amount is called the budget deficit.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
National Debt National Debt
The total amount of money a government owes is its national debt.
If the debt gets too large, a nation can become dependent on other nations or unable to borrow any more money.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
National Debt National Debt
If a nation spends less than its income, it has a budget surplus.
The government will probably use a surplus to cut taxes, reduce the national debt, or increase spending for certain programs.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
The Business Cycle The Business Cycle The rise and fall of economic activity over time is called the business cycle. The four phases are:
• Prosperity • Recession• Depression• Recovery
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Figure3.2 BUSINESS CYCLE MODEL
The repeated rise and fall of economic activity over time is called a business cycle.
What are the four phases of the cycle?
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
The Business Cycle The Business Cycle
In a global economy, in which several countries are trading goods and services with one another, one country’s economy can affect its trading partners’ economies.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Recession – more infoRecession – more info
There is a general drop in the total production of goods and services, so the GDP declines.
A recession can affect only one industry, related industries, or spread to the entire economy.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
Depression – an exampleDepression – an exampleThe stock market crash on October 29, 1929, or “Black Tuesday,” marked the beginning of the Great Depression.• Between 1929 and 1933, GDP fell from approximately $103 billion to $55 billion.• The number of people out of work rose nearly 800 percent.• Many banks failed.• The money supply fell by one-third.• The Recovery - During World War II 1941+, the US recovered from the Great Depression much faster because of the demand for war production.
ChapterChapter 33
Introduction to Business, Economic Activity in a Changing World
How has the Internet changed the way people do business?