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Understanding Economic Indicators: Key Factors in Today's Economy

Learn about GDP, unemployment rate, inflation, business cycles, and more in Chapter 3 of "Economic Activity in a Changing World." Explore the impact of budget deficits and surpluses on economic performance.

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Understanding Economic Indicators: Key Factors in Today's Economy

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  1. Chapter 3 Economic Activity in a Changing World

  2. Economic Indicators Figures used to measure economic performance

  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.

  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)

  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.

  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)

  7. Business Cycle The rise and fall of economic activity over time. There are four phases.

  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.

  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

  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.

  11. Crash - Stock Market Crash of 1929 • Crash Video

  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

  13. Four Phases of the Business Cycle

  14. Budget Deficit When the government spends more on programs than it collects in taxes.

  15. http://www.brillig.com/debt_clock/

  16. Budget Surplus Government’s revenue exceeds its expenditures during a one year period.

  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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