Other Measures of Business Activity

Chapter 2-3

Investment Activities Capital Spending: money spent by a

business for an item that will be used over a long period.

Capital Projects: spending by businesses for items such as land, buildings, equipment, and new products.

Investment Activities The money for capital projects comes

from three sources: Personal Savings Stock Investments Bonds

Personal Savings Companies use money you deposit in a

bank or other financial institution. In return, savers are paid interest on the money they deposit.

In recent years, the personal savings rate of the United states has been quite low, often below one percent.

Stock Market Stock represents ownership in a

corporation. Stock ownership is often called equity

which means ownership. Many people invest by becoming part

owner.

What Influences Stock Price Supply and demand State of the economy The company’s earnings The confidence of the investors

Bond Market Bonds represent debt for an

organization. If you purchase government or

corporate bonds you are a creditor (the government or corporation owes you) and you receive interest for the use of your money.

Borrowing “Buy now, Pay later”

Government Debt A budget surplus occurs when the

government spends less than it takes in. A budget deficit occurs when the

government spends more than it takes in. Over time, the deficit may build up. The

total amount owed by the federal government is called the national debt.

http://www.youtube.com/watch?v=NblhUrcdrSc

Business Debt Loans, bonds, and mortgages are

common borrowing methods used by businesses.

Using the funds of others can help expand sales and profits.

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. In contrast, unwise borrowing can result in legal action and other trouble.

Future Economic Challenges Economic problems that exist and need

to be solved: Many people do not have access to

adequate health care. Some people do not have proper

housing. Traffic and crime are also matters of

concern for many. Too many workers unemployed.

Economic Growth In order to maintain or increase a

country’s standard of living and to prevent unemployment from rising, economic growth is needed.

Economic growth is important because it provides jobs and allows people an opportunity to better meet their needs and wants.