Lesson 2-1

Rate of employment ◦ high rate of employment is good sign

Rate of business failure◦ low rate of failure is good sign

Rate of production or output of our nation◦ Increasing growth is a good sign

GDP = total dollar value of all final goods and services produced in our country during one year.◦ Final goods – goods sold directly to consumers.

Example: car GDP tells us how the economy is performing

GDP Components1. What consumers spend for food,

clothing, housing, and other spending;2. What businesses spend for buildings,

equipment, and supplies; and2. What government agencies spend to

pay employees and to buy supplies.3. The exports of a country less the

imports into the country.

Base year - the year chosen to compare an item, such as price, to any other year.

Constant dollar GDP = value of gross domestic product after taking out the effect of price changes.(Also called real GDP or GDP in real terms)

GDP per capita = GDP ÷ total population

÷

GDP Population

Employment ◦ Labor force consists of all people above age 16

who are actively working or seeking work.

Unemployment Rate – portion of people in the labor force who are not working but are looking for work and willing to work.

Productivity – production output in relation to a unit of input.

How do we increase productivity?Capital resource improvementImproved worker trainingImproved management techniques

Personal income refers to salaries and wages, including investments.

Retail Sales – sales of durable and nondurable goods bought by consumers.Indicates level of consumer spending.

Main items measured = automobiles, building materials, furniture, gasoline & clothing

Lesson 2-2

RECOVERY

PROSPERITY

RECESSION

DEPRESSION

Most people who want to work are working Businesses produce goods and services in

record numbers Wages are good Rate of GDP growth increases Demand for goods and services are high

This boom period is the peak of the cycle

Economy begins to slow down. Demand begins to decrease businesses lower production of goods and

services unemployment begins to rise GDP growth slows for two or more quarters

Phase marked by a prolonged period of high unemployment

weak sales of goods and services businesses begin to fail GDP falls rapidly during depression.

Unemployment begins to decrease Demand for goods and services increases GDP begins to rise again. People gain employment Consumers regain confidence

Inflation - sustained increase in the general level of prices.

Deflation - decrease in the general level of prices. Occurs usually in periods of recession and depression. Prices are lower, but people have less money to buy them.

“To maintain or increase our existing standard of living and to prevent unemployment from rising, we must increase our economic growth continuously. Economic growth is important because it provides jobs and enables people to better meet their needs and wants.”

Introduction to Business Textbook

Lesson 2-3

Personal Savings◦ Major source of investment funds◦ Savings rate of a country important for economic

growth The Stock Market

◦ Stock = ownership in a corporation The Bond Market

◦ Bond = debt for an organization◦ Creditor = somebody who loans money◦ If you purchase a bond, you loan the corporation

money which will be repaid with interest.

Government Debt◦ Government uses borrowed funds for major

projects

◦ Budget Surplus = government spends less than it takes in. (Money left over)

◦ Budget Deficit = government spends more than it takes in. (Debt)

◦ National Debt =amount owed by federal government

Business Debt◦ Loans, bonds, and mortgages are methods used

by businesses Consumer Debt

◦ Credit cards, auto loans, home mortgages