Intro to business 2 2
This presentation is the property of its rightful owner.
Sponsored Links
1 / 16

Intro to Business 2-2 PowerPoint PPT Presentation


  • 76 Views
  • Uploaded on
  • Presentation posted in: General

Economic Conditions Change. Intro to Business 2-2. The Business Cycle. All economies experience good and bad economic periods This economic shift between good and bad economic conditions is called the business cycle . Business cycles have four phases Prosperity Recession Depression

Download Presentation

Intro to Business 2-2

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Intro to business 2 2

Economic Conditions

Change

Intro to Business

2-2


The business cycle

The Business Cycle

  • All economies experience good and bad economic periods

  • This economic shift between good and bad economic conditions is called the business cycle.

  • Business cycles have four phases

    • Prosperity

    • Recession

    • Depression

    • Recovery


Prosperity

Prosperity

  • Prosperity is a period in which most people who want to work are working, wages are high, and the rate of GDP growth increases.

  • Demand for goods and services is high.

  • Prosperity is usually the high point of the business cycle.


Recession

Recession

  • Occurs when the economy slows down from the prosperity phase.

  • A recession is a period in which demand begins to decrease as production decreases, unemployment begins to rise, and GDP growth slows for two or more quarters,

  • May not be serious, but often signals trouble for workers in related businesses.

  • Eventually weakens economy and total output declines in the next quarter.


Depression

Depression

  • Occurs when a recession deepens and spreads throughout the entire economy.

  • Depression is a phase marked by a prolonged period of high unemployment, weak consumer sales, and business failures.

  • GDP falls rapidly.

  • Has not occurred in the US since the 1930’s.


Recovery

Recovery

  • Recovery is the phase in which unemployment begins to decrease, demand increases, and GDP begins to rise.

  • Can occur quickly or slowly

  • Consumer confidence increases

  • Returns the country to the prosperity phase.


Consumer prices

Consumer Prices

  • Buying power of money changes over time.

  • Technology becomes less expensive over time

  • Amounts of an item may be sold for the same price in smaller quantities.

  • Changes may occur as either inflation or deflation.


Inflation

Inflation

  • An economic issue that all developed nations must deal with.

  • Inflation is an increase in the general level of prices

  • Decreases buying power of the nation’s currency.

  • Most harmful to families living on fixed incomes.

  • Retirees and others on fixed income cannot afford as many goods or services.


Causes of inflation

Causes of Inflation

  • When demand for goods or services in greater than supply.

  • Wages tend to rise during inflation, but prices usually rise faster.

  • Typically considered harmful, as consumers must earn more money to maintain the same standard of living.

  • If wages increase too quickly, business tend to hire fewer workers, raising unemployment.


Measuring inflation

Measuring Inflation

  • Inflation rates vary.

  • Mild inflation (around 2 or 3 percent) can stimulate economic growth as prices increase faster than wages, allowing the producer to hire more workers.

  • The most watched measure of inflation in the US is the Consumer Price Index (CPI).

  • A price index is a number that compares prices in one year with prices in some earlier base year.

  • Cost of living inflation may change differently than the products used to calculate inflation with the CPI.


Deflation

Deflation

  • Deflation is the opposite of inflation.

  • Deflation means a decrease in the general level of prices.

  • Usually occurs in recession and depression.

  • Even though prices drop, people tend to have less money to afford them.

  • Occurred most significantly during the Great Depression

  • Many technological products are deflating in price as technology advances.


Cool web resources

Cool Web Resources

  • http://www.westegg.com/inflation/

  • http://www.aier.org/research/worksheets-and-tools/cost-of-living-calculator

  • http://inflationdata.com/Inflation/Consumer_Price_Index/HistoricalCPI.aspx

  • http://www.homefair.com/real-estate/salary-calculator.asp?type=to

  • http://www.foodtimeline.org/foodfaq5.html#cocacola

  • http://www.msnbc.msn.com/id/19332035/ns/us_news-summer_of_love_40/

  • http://www.westegg.com/inflation/

  • http://www.aier.org/research/worksheets-and-tools/cost-of-living-calculator

  • http://inflationdata.com/Inflation/Consumer_Price_Index/HistoricalCPI.aspx

  • http://www.homefair.com/real-estate/salary-calculator.asp?type=to

  • http://www.foodtimeline.org/foodfaq5.html#cocacola


Interest rates

Interest Rates

  • Interest rates represent the “cost of money.”

  • Interest rates have a strong influence on business activities.

  • Companies and governments that borrow money are affected by interest rates.

  • Consumers are affected by interest rates.

  • Interest on loans reflects current interest rates, as to earnings from savings and investments.


Types of interest rates

Types of Interest Rates

  • There are many different types of interest rates that represent the cost of money in different settings.

    • The prime rate is the rate banks make available for their best customers, such as large corporations

    • The discount rate is the rate financial institutions are charged to borrow funds from Federal Reserve banks.

    • The T-bill rate is the yield on short-term (13 week) U.S. government debt obligations.


Types of interest rates cont

Types of Interest Rates (cont.)

  • The treasury bond rate is the yield on long-term (20 year) U.S. government debt obligations.

  • The mortgage rate is the amount individuals pay to borrow for the purchase of a new home.

  • The corporate bondrateis the cost of borrowing for large U.S. corporations.

  • The certificate of deposit rate is the rate for time deposits at savings institutions.


Changing interest rates

Changing Interest Rates

  • The cost of money changes every day due to various factors.

  • The supply and demand for money is the major influence on the level of interest rates.

  • As amounts saved increase, interest rates tend to decline.

  • When borrowing by consumers, businesses, and government increases, interest rates are likely to rise.

  • See assignment in G:drive (Banks)


  • Login