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