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Essential Standard 1.00

Essential Standard 1.00. Understand the role of business in the global economy. Objective 1.02. Understand economic conditions. Topics. Measuring economic activities Classifying economic conditions. Measuring Economic Activities. Gross Domestic Product (GDP). GDP

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Essential Standard 1.00

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  1. Essential Standard 1.00 Understand the role of business in the global economy.

  2. Objective 1.02 Understand economic conditions

  3. Topics • Measuring economic activities • Classifying economic conditions

  4. Measuring Economic Activities

  5. Gross Domestic Product (GDP) • GDP • GDP is the highly used measurement to determine a country’s overall economic output. GDP is a country’s total dollar value of all final goods and services produced in one year. • Major categories of GDP • Individual spending • Business spending • Government spending • Exports & imports • Name some products or services you have purchased or from which you have received benefits. • Which component of GDP would you classify the product or service you named?

  6. GDP per capita GDP per capita – output per person =_________GDP__________ Total Population An increase in GDP per capita means than an economy is growing.

  7. Labor Activities • Unemployment rate • includes the people of the labor force that ARE unemployed or ACTIVELY seeking employment. • Productivity means … • What can help you be more productive in a computer lab? • What can contribute to employees increasing their production?

  8. Consumer Spending Measurement of consumer spending: • Personal Income • Retail Sales

  9. Investment Activities • The money used for capital projects comes from three main sources: • Personal savings • The stock market • The bond market • What are some examples of investment activities?

  10. Investment Activitiescontinued • How does each investment activity impact economic growth? • Businesses use money deposited in personal saving accounts to buy equipment or products for their businesses. Saversearn interest on money used by companies and other individuals. • Higher earnings for businesses increases their value, which causes a demand for people wanting to buy the businesses stock.

  11. Borrowing Activities … • By • Government • Businesses • How can government borrowing lead to a budget deficit? • Governments borrow money to finance projects like schools, public highways, and parks. If the government spend more money than it collects, then a budget deficit is resulted. • How can using borrowed money wisely impact businesses?

  12. Borrowing Activities … • By • Government • Businesses How can using borrowed money wisely impact businesses? • Companies may borrow money to start up or expand. Using borrowed fund efficiently can result in an increase in sales and profits.

  13. Measuring Economic Activities GDP Per capita GDP Labor Activities Consumer Spending Investment Activities Borrowing Activities

  14. Classification of Economic Conditions

  15. Prosperity Employment rate and demand for products and services are high. Recession Unemployment rate is increasing and demand for products and services are lowering. Recovery Unemployment rate is lowering and demand for products and services is increasing. Depression Unemployment rate is high and demand for products and services is lowering.

  16. Consumer Prices • Inflation • Causes of inflation • Consumer Price Index (CPI) • Deflation • Causes of deflation

  17. Over a three-year period, how has the income been impacted by the cost of a gallon of milk? Year two income increased as well as the cost of a gallon of milk during years two and three; but the income did not keep up with the rate of increases of the cost of a gallon of milk. Therefore the buying power for this income for years three was decreased.

  18. Interest Rates Types: Prime rate Discount rate T-bill rate Treasury bond rate Mortgage rate Corporate bond rate Certificate of deposit rate What is the primary purpose of each? • How do interest rates impact businesses?

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