Download - Understand economic conditions 1. Measuring economic activities Classifying economic conditions 2
GDP: a country’s total dollar value of all newly produced goods and services inside our boarders
Major categories included in GDP◦Consumer spending◦Business spending◦Government spending◦Exports & imports:
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Gross Domestic Product (GDP)
Consumer Spending
Measurements of consumer spending:
Personal Income: includes the total wages and salaries plus investment income and government payments to individuals.
Retail Sales: sales of durable and non durable goods and services purchased by consumers (autos, building materials, furniture, gas, $ spent at restaurants, etc)
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Investment (for the future)
The money used for capital projects (land, buildings, equipment, research) comes from three main sources:• Personal savings:◦Banks lend this money to businesses which use
the borrowed money to buy equipment or products for their businesses.
◦Savers, in turn, earn interest on money used by companies and other individuals.
◦What happens if people don’t save??
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Investment (for the future)
The money used for capital projects (land, buildings, equipment, research) comes from three main sources:• The stock market:◦Stock represents ownership in a company. If a
company wants to expand, it can sell stock to raise money.
◦ Higher earnings for businesses increases their value, which causes a demand for people wanting to buy the businesses stock.
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Investment (for the future)
The money used for capital projects (land, buildings, equipment, research) comes from three main sources:• The bond market:◦Bonds represent debt for a company. If a company
wants to expand, it can sell bonds to raise money.
Bondholders purchase the bonds, and earn interest on the money they have loaned to businesses and the government.
Eventually, the company pays the bondholders back their money, with interest.
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Borrowing Activities …
How does the government make money?What happens if they spend more than they make?
This overspending is known as a budget deficit. U.S. National Debt
Companies may borrow money to start up or expand. Using borrowed funds efficiently can result in an increase in sales and profits.
Unemployment rate: people that are not working, but are willing to work, are looking for work, but can’t find a job.
People that have given up DO NOT COUNT
Productivity How much output can one unit of input create? (Measured in hours)
If Productivity increases, do we need to hire more or less people?
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Labor Activities
◦U.S. Dec 2010 rate=9.4% represents over 14,500,000 people
◦North Carolina’s Dec 2010 rate=9.8% North Carolina’s July 2010 rate=9.8%
◦ U.S. lowest: North Dakota 3.8% Lowest area unemployment: Lincoln, Nebraska 3.5%
◦ U.S. highest: Nevada 14.5% Highest area unemployment: El Centro, CA 28.3%
◦What is considered NORMAL Unemployment?
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Labor Activities
PROSPERITY
RECESSION
DEPRESSION
RECOVERY
Situation PROSPERITY RECESSION DEPRESSION RECOVERY
Employment
GDP
Actions of businesses