NAME_______________________________ DATE_______________________ Pd_________ CHAPTER 2 POWER POINT - ECONOMIC ACTIVITY NOTES 2-1 Measuring Economic Activity Goal 1 Define gross domestic product: The total value of all final goods and services produced in a country during one year. ● What types of economic activities are NOT included in GDP? ● GDP only applies to reported final ____________________________. ● __________ earned for goods or services that are not reported would not be included. ● Goods and services used in the _____________of other products are only counted once—in the final product. Goal 2 Describe economic measures of labor. Labor Activity: Employment and Productivity How can productivity be increased? o Productivity can be increased by _______________ in capital resources (equipment and technology), worker training, and _______________ techniques. Goal 3 Identify economic indicators for consumer spending ● What are the main sources of personal income? o Sources of personal income include _________, salaries, investment income, and _________________________________. 2-1 Measuring Economic Activity Goal 1 Describe the four phases of the business cycle. ● Prosperity – period in which most people who want to work are working, businesses produce goods and services in record numbers, wages are good, and the rate of GDP growth increases ● Recession- the phase of the business cycle in which demand begins to decrease ● Depression- the phase of the business cycle that is marked by a prolonged period of high unemployment, weak consumer sales and business failures. ● Recovery- the phase in the business cycle in which unemployment begins to decrease, demand for goods and services increases, and GDP begins to rise again. NAME_______________________________ DATE_______________________ Pd_________ Goal 2 Explain causes of inflation and deflation. ● What are the main causes of inflation? ● Inflation is an increase in the _________________________ that occurs when the demand for goods and services is greater than _______________. Goal 3 Identify the importance of interest rates. ● How do interest rates affect business activities in our economy? ● Interest rates can encourage or discourage ___________________________. ● Lower interest rates allow consumers greater __________ power, which increases demand, pr_______________, and employment. ● Businesses often pass on the _________of higher interest__________ to consumers. 2-3 Other Measures of Business Activity Goal 1 Discuss investment activities that promote economic growth. ● Personal savings- _________________________________. Companies use money you deposit in the bank or other financial institutions to provide the money necessary for buying expensive equipment or creating new products. In return, savers are paid interest on the money deposited. The savings rate of a country is an important factor for economic growth. ● The stock market- Many people invest by becoming part ____________________________. ● The bond market- Another investment activity involves the ________________ which represents debt for an organization. If you purchase a corporate or government bond, you are a creditor. In other words, you lent money and will be paid interest for the use of your money. ● Name some examples of capital projects: Capital projects include the purchase of any item a business will use over an extended period of time such as land, buildings, and _____________. Goal 2 Explain borrowing activities by government, business, and consumers. ● Government debt- often the government uses borrowing to finance various projects like building _____________, public buildings, highways, and _________. A government may spend less than it takes in taxes. When this occurs, a _________________ happens. A government may spend more than it takes in causing a ______________ to occur. The total amount owed by the federal government is called the _________________________. NAME_______________________________ DATE_______________________ Pd_________ ● Business debt- loans, bonds, and mortgages are common borrowing methods used by businesses. Most companies, large and small, use debt at some time. Poor debt management can result in a company going out of business. ● Consumer debt- people commonly use credit cards, auto loans, and home mortgages to finance their purchases. Careful use of credit can be important for economic growth. Goal 3 Describe future concerns of economic growth. What is the cause of a budget deficit? A budget deficit occurs when a ____________________________________ spends more than it takes in. What are future economic challenges? o Emerging markets- places where consumer incomes and buying power are ______________ because of economic expansion. Quality of life improves with more jobs and income for workers. o Weak economies- Some countries lack technology, ________, and business systems needed for economic resources. Today, businesses and organizations exist to help _______________ the situations in weak economies. o Consumer preferences and behavior- Researching the culture, economic conditions, and _____________ environment is the foundation for successful business activities. To maintain or increase a country’s standard of living and to prevent unemployment, government, businesses, workers, and consumers must coordinate their efforts. This cooperation can result in creating _________ and providing for the needs and wants of ____________.
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