Economic Performance

1
Economic Performance

• Chapter 3, Business Foundations

2
The Business Cycle

• Rise and fall of economic activity over time
• Expansionrise in business activity
• Peakhighest level of economic activity
• Contractionnoticeable drop in activity
• Troughlowest level of business activity

3
Long Trends of Economic Conditions

• Recessionperiod of severe economic decline.
  Spending decreases, so fewer goods/services are
  demanded, unemployment rises
• DepressionSevere recession that lasts for
  several years
• Recoverygrowth following the above

4
US History

• 1929 to 1939
• US was in a depression
• Black Thursday, Oct 24, 1929 stock prices
  collapsed
• Factories shut down, business/banks failed,
  people lost their jobs
• 15 million people unemployed

5
US History

• World War II
• Production increased/people were employed to
  support war
• 1960s trough/downturn
• 1990-1991 recession

6
Measuring Economic Activity

• Look at economic indicators
• Leading indicators change before the rest of the
  economy
• More than 250 economic indicators
• Examples
• Gross Domestic Product
• Inflation
• Unemployment

7
Gross Domestic Product

• Goods and services are the result of all economic
  activity in this country
• GDP is the dollar value of all final
  goods/services produced in the nation in a single
  year

8
Calculating GDP

• 4 main areas to calculate
• Consumer goods/services
• Business goods/services
• Government goods/services
• Goods/services sold to other countries
• Change from year to year indicates growth or slow
  down

9
GDP Measures Standard of Living

• Standard of Livinghow well people live in a
  country
• Depends on amount of goods/services enjoyed in
  that country

10
Inflation

• Prolonged rise in level of prices for goods and
  services
• Reduces purchasing power
• Buying things you need costs more
• Inflation rate by which average level of
  prices in economy rises

11
Unemployment

• Number of people who are unemployed during a
  given period of time
• Unemployment rate-- of unemployed workforce
  looking for jobs

12
Ways Government tries to provide Stability

• Fiscal policy
• how it collects taxes and spends money
• Monetary policy
• controlling the supply of money
• controlling the cost of borrowing money

13
Review

• Business cycle (4 possible trends)
• Economics fluctuations
• depression, recession, recovery
• Economic indicators
• GDP, inflation, unemployment
• Government maintenance
• fiscal and monetary policy