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2-1 Measuring Economic Activity2-2 Economic Conditions Change2-3 Other Measure of Business Activity
Gross Domestic Product (GDP) –
Components of GDP1. __________ spending on food, clothing, housing,
etc.2. __________ spending for buildings, equipment, and
inventory3. ____________ spending to pay employees and to
buy supplies and other goods and services4. The _________ of a country less the imports into the
country
GDP◦ Does not include value of work you do for yourself◦ Only ______ goods are counted; goods used in
manufacturing are not counted◦ GDP growth from year to year signals an economy
is growing and healthy◦ Must also compare GDP per capita
◦ An increase in GDP per capita means that an economy is growing
Employment
◦Labor force –
◦Unemployment rate –
Productivity
◦Productivity –
◦ Companies place strong emphasis on ways to increase worker productivity
Consumer Spending
◦ Personal Income –
◦ Retail Sales –
Increasing retail sales usually indicates economic growth
Business Cycle –
Business Cycle
◦ Prosperity –
◦ Recession –
◦ Depression –
◦ Recovery –
Consumer Prices
◦ Inflation – Average rate is 2-3% Buying power of the dollar decreases Most harmful to people living on a _______ __________ Measured by a price index – a number that
compares prices in one year with prices in an earlier base year (most common is CPI – Consumer Price Index)
◦ Deflation –
Interest Rates (the cost of money)◦ Prime rate –
◦ Discount rate –
◦ Mortgage rate –
◦ Certificate of Deposit rate –
High Interest Rates = SavingLow Interest Rates = Spending (Borrowing)
Investment Activities◦ Capital spending –
◦ Capital projects –
Money for capital projects comes from:1. Personal savings2. Stock market3. Bond market
Borrowing◦ Governments often borrow money to fund
special projects or services Surplus – Deficit – National debt –
◦ ______________borrow money through loans, bonds, and mortgages
◦ _____________borrow money through credit cards, loans, and mortgages