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General Business

In this chapter, we explore essential economic measurements like Gross Domestic Product (GDP) and its significance in assessing economic performance. We examine the major categories of GDP expenditures—consumer spending, business investments, and government spending—and clarify what is included in GDP calculations. The chapter discusses the business cycle's four phases: prosperity, recession, depression, and recovery, along with concepts such as inflation and deflation. This comprehensive review emphasizes the importance of GDP and productivity in evaluating economic health.

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General Business

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  1. General Business Unit 1 – Economic Roles Chapter 4 Economic Measurements

  2. Book Time • Page 41 • Read aloud

  3. Classwork • Hand-Out CW-4-1 • Individual work • Check if done • Review

  4. Economic Growth • Steady increase in production in an economic system • High rate of employment • Low rate of business failure

  5. GDP • Gross Domestic Product • Total $ value of all final goods/services produced during 1 year • Measure of how economy is performing

  6. GDP • 3 major categories of expenditures • 1. What consumers spend for food, clothing & housing • 2. What businesses spend for buildings, equipment & supplies

  7. GDP • 3 major categories (cntd.) • What government agencies spend to pay employees and to buy supplies

  8. GDP • Doesn’t include: • Value of work we do for selves • Mowing lawn • Cleaning house

  9. ? GDP ? • Why is the value of the work we do for ourselves not included as part of the GDP?

  10. GDP • Includes only final goods • Intermediate goods not counted • Manufacturing goods • Raw materials – steel, iron ore

  11. GDP • End of 1990’s: • GDP = >$8.5 trillion • Comparison year to year • Prices must be adjusted to be “equal value”

  12. Classwork • Hand-Out CW-4-2 • Individual Work • Check if done • Review

  13. Base Year • Year chosen to compare an item / price, to another year

  14. Constant Dollar GDP • Value of GDP after removing effect of price changes • Also called “Real GDP or GDP in Real Terms”

  15. Determine Real GDP for the Following years 6883.3 7066.3 7348.2 7543.8 7813.2. 8163.3 8517.6 8873.3

  16. GDP Per Capita • Output per person • Divide GDP by total population • Increase = growing economy • Decrease = economic trouble

  17. Productivity Increase • Increase in goods/services from same # of workers • Improved quality of capital resources (equip.) • Worker training • Management techniques

  18. Classwork • CW-4-3 • Individual work • Check if done • Review

  19. Business Cycle • Recurring ups & downs of GDP • Movement of economy from 1 condition to another & back again • Cyclical pattern

  20. Business Cycle • 4 phases • Prosperity • Recession • Depression • Recovery

  21. Prosperity • High point of cycle • Want to work = job • Businesses produce record amounts • Wages good • GDP grows • Boom period

  22. Recession • Economy slows • Demand decreases • Businesses lower production • Unemployment rises • GDP slows for 2+ qtrs. • Drop in related businesses • Ripple effect

  23. Depression • Recession deepens & spreads thru out country • Prolonged period of high unemployment • Weak sales • Business failures • GDP falls rapidly

  24. Depression • Great Depression • 1930-1940 • 25% of labor force unemployed • Couldn’t afford basic needs

  25. Recovery • Nation moves into prosperity • Unemployment decreases • Increased demand for goods/services • Businesses produce more

  26. Inflation • Sustained increase in prices • Greater demand than supply • Prices rise faster than wages • Pay higher prices

  27. Inflation • Sustained increase (cntd.) • Mild inflation (2-3%) stimulated economic growth • Companies sell goods higher prices, profits increase, hire more workers who then spend money in economy

  28. Deflation • Decrease in prices • Usually during recession or depression • Prices lower, but people have less money to buy

  29. Book Time • Read pg. 47 • Global Perspectives • Hyperinflation • Answer 2 ?’s • Check if done • Review

  30. Read • Chapter 4 – entire • Communicating for Success – pg. 51 • Answer 2 ?’s

  31. Study Guide • Pgs. 15-18 • Groups 2-3 • Turn in 1 S.G. for group • Review in class

  32. Computer Time • Web-Site: • http://stats.bls.gov/ • At a Glance Tables: right • U.S. Economy at a Glance: look at unemployment rates • Go to: other avail. @ a glance • Go to PA: look at data

  33. The End Unit 1 Chapter 4

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