Economic Activity in a Changing World Chapter 3 pp. 36-51 Mr. Manning.

Economic Activity in a Changing World

Chapter 3pp. 36-51

Mr. Manning

Chapter 3 - Economic Activity in a Changing World Slide 2

LEARNING OBJECTIVESLEARNING OBJECTIVES

1.1.DescribeDescribe how economic activity is measured (GDP, unemployment rate, rate of inflation, etc.).

2.2.Describe the 4 types of Describe the 4 types of economy the U.S. has economy the U.S. has experienced.experienced.


Why It’s ImportantWhy It’s Important

Economic activity affects everyday life. The history of the economy affects the industries of today and tomorrow.


Changing U.S. EconomyChanging U.S. Economy1600’s – Colonists traded goods 1600’s – Colonists traded goods

and services (Service-based)and services (Service-based)

1700’s – Agriculture-based 1700’s – Agriculture-based economyeconomy

181850’s – Industry-based economy

1900’s – Information-based economy


Measuring Economic ActivityMeasuring Economic Activity

Economic indicators are figures used to measure economic performance:

• how much a country is producing• whether its economy is growing• and how it compares to other countries


Gross Domestic Product Gross Domestic Product (GDP)(GDP)

Gross Domestic Product - The total value of the G&S produced in a country in a given year

• Economists compute the sum of G&S• Doesn’t include the G&S that aren’t reported to the government• standard of living is the amount of G&S the average citizen can buy


Economists include four main areas in calculating the GDP:

1. Consumer G&S2. Business G&S3. Government G&S4. G&S sold to other countries



Consumergoods

andservices

Businessgoods

andservices

Governmentgoods

andservices

Goodsand

servicessold toother

countries

+ =++Gross

DomesticProduct



Unemployment RateUnemployment Rate

unemployment rate measures the number of people who are able to work but don’t have a job during a given period of time

Different reasons for being unemployed:● Temporary ● Seasonal ●

● Changes in industry ● Economic slow down


Unemployment RateUnemployment Rate

The worst type of unemployment occurs when the entire economy slows down

This type of unemployment lasts until the economy recovers, which can take years

Changes in the unemployment rate show whether an economy is picking up or slowing down


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What are the four factors that compute the GDP?

– Consumers G&S– Business G&S– Government G&S– G&S sold to other countries


Rate of InflationRate of Inflation

Inflation - a general increase in the cost of G&S (stuff costs more) • Can happen when an economy actually becomes too productive• As the demand for goods goes , producers raise their prices• To pay the higher prices, workers demand higher wages


Rate of InflationRate of Inflation

When wages go , producers raise prices again to pay for the higher wages, and so on

If this spirals out of control, leads to hyperinflation


Rate of InflationRate of Inflation Deflation - a general decrease in the cost of G&S (stuff costs less)

Economy produces more goods than people want, it has to lower prices and cut production

United States tries to maintain a slow but steady rate of economic growth to avoid both inflation and deflation.


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What are three of the four reasons for unemployment?

– Temporary– Seasonal– Economic slowdown– Changes in industry


National DebtNational Debt When the government spends more on programs than it collects in taxes, the difference in the amount is called the budget deficit

National debt -The total amount of money a government owes

If debt gets too large, a nation can become dependent on other nations or unable to borrow any more money


National DebtNational 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.


HOMEWORK

Rd. Pgs. 43-47

Review questions on Pg. 47


Fast Review

1. Describe some of the economic indicators economists use

2. Name some of the different reasons for unemployment


LEARNING OBJECTIVESLEARNING OBJECTIVES

1.1.DescribeDescribe the four stages of the business cycle.

2.2.Explain some of the effects the Explain some of the effects the Great Depression had on our Great Depression had on our economy.economy.


The Business CycleThe Business Cycle

Economic patterns start to form over time

Business Cycle – is the rise and fall of economic activity over time

4 Phases of the Business Cycle

1) Prosperity 2) Recession3) Depression 4) Recovery


ProsperityProsperity is a peak of economic activity

• Unemployment is low• Production of G&S is high• New businesses open

Prosperity does not last• Companies produce too much• People stop buying• Inflation starts to rise


Recession

Recession – economic activity slows down

General drop in productivity; GDP declines

Can affect only one industry, related industries, or spread to the entire economy

Ripple effect - when a recession in one industry leads to a recession in other industries


Depression

A deep recession that affects the entire economy and lasts for several years is called a depression

High unemploymentLow productivityExcess capacity in manufacturing plants

Can be limited to one country but usually spreads to related countries


Depression

The stock market crash on October 29, 1929, or “Black Tuesday,” - beginning of the Great Depression

• 1929-1933: GDP $103 billion to $55 billion• Number of people out of work rose 800%• Many banks failed • The money supply fell by one-third


RecoveryRecovery - A rise in business activity after a recession or depression

• Production starts to increase• People start going back to work• People have money to spend again• New demand for G&S stimulates production• GDP grows• New businesses open


RecoveryA recovery can take a long time or it can happen quickly

During World War II, the United States recovered from the Great Depression much faster because of the demand for war production


The Business CycleThe 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


HOMEWORK

Pg. 48

Questions 2-5


How did the assembly line change American society?

How has the Internet changed the way people do business?


Did colonists develop their own industries?

How do factories influence the workplace?

continued


Making an Ethical Decision

1. Should you encourage other company executives to sell your product to countries that have an economic system you disapprove of?

continued



2. Does it matter if your product is desperately needed by the country to save lives?

continued



3. If the United States bans trade with that country, would you still discuss the topic with other executives? If the executives want to help the banned country, how else could your company get a product to those who need it?

End of Chapter 3Economic Activity in a Changing World

Economic Activity in a Changing World Chapter 3 pp. 36-51 Mr. Manning.

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