CHAPTER
2
SLIDE 1
CHAPTER
2
Economic Activity
2-1
Measuring Economic Activity
2-2
Economic Conditions Change
2-3
Other Measures of Business Activity
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
2-1
Measuring
Economic Activity
Goal 1 Define gross domestic product.
Goal 2 Describe economic measures of
labor.
Goal 3 Identify economic indicators for
consumer spending.
© 2012 Cengage Learning. All Rights Reserved.
SLIDE 2
CHAPTER
2
SLIDE 3
KEY TERMS
● Gross Domestic Product (GDP)
● GDP per capita
● unemployment rate
● productivity
● personal income
● retail sales
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Principles of Business, 8e
CHAPTER
GROSS DOMESTIC
PRODUCT (GDP)
2
SLIDE 4
● Components of GDP
● Comparing GDP
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Principles of Business, 8e
CHAPTER
COMPARISON OF GDP IN
SELECTED COUNTRIES
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2
SLIDE 5
Principles of Business, 8e
CHAPTER
COMPARING GROSS
DOMESTIC PRODUCT
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2
SLIDE 6
Principles of Business, 8e
CHAPTER
2
SLIDE 7
Checkpoint 
● What types of economic activities are not
included in GDP?
● GDP only applies to reported final goods and
services.
● Money earned for goods or services that are not
reported would not be included.
● Goods and services used in the manufacture of
other products are only counted once—in the final
product.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
2
SLIDE 8
LABOR ACTIVITIES
● Employment
● Productivity
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Principles of Business, 8e
CHAPTER
2
SLIDE 9
Checkpoint 
● How can productivity be increased?
● Productivity can be increased by
improvements in capital resources
(equipment and technology), worker
training, and management techniques.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
2
SLIDE 10
CONSUMER SPENDING
● Personal income
● Retail sales
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Principles of Business, 8e
CHAPTER
2
SLIDE 11
Checkpoint 
● What are the main sources of personal
income?
● Sources of personal income include wages,
salaries, investment income, and
government payments.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
2-2
Economic
Conditions Change
Goal 1 Describe the four phases of the
business cycle.
Goal 2 Explain causes of inflation and
deflation.
Goal 3 Identify the importance of interest
rates.
© 2012 Cengage Learning. All Rights Reserved.
SLIDE 12
CHAPTER
2
SLIDE 13
KEY TERMS
● business cycle
● prosperity
● recession
● depression
● recovery
● inflation
● price index
● deflation
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
2
SLIDE 14
THE BUSINESS CYCLE
● Prosperity
● Recession
● Depression
● Recovery
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Principles of Business, 8e
CHAPTER
Checkpoint 
2
SLIDE 15
● What are the four phases of the
business cycle?
● Prosperity
● Recession
● Depression
● Recovery
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Principles of Business, 8e
CHAPTER
2
SLIDE 16
CONSUMER PRICES
● Inflation
● Causes of inflation
● Measuring inflation
● Deflation
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Principles of Business, 8e
CHAPTER
2
SLIDE 17
Checkpoint 
● What are the main causes of inflation?
● Inflation is an increase in the general level
of prices that occurs when the demand for
goods and services is greater than supply.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
2
SLIDE 18
INTEREST RATES
● Types of interest rates
● Changing interest rates
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Principles of Business, 8e
CHAPTER
2
SLIDE 19
Checkpoint 
● How do interest rates affect business
activities in our economy?
● Interest rates can encourage or discourage
borrowing and spending.
● Lower interest rates allow consumers greater
spending power, which increases demand,
productivity, and employment.
● Businesses often pass on the cost of higher
interest rates to consumers.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
2-3
Other Measures
of Business Activity
Goal 1 Discuss investment activities that
promote economic growth.
Goal 2 Explain borrowing activities by
government, business, and consumers.
Goal 3 Describe future concerns of economic
growth.
© 2012 Cengage Learning. All Rights Reserved.
SLIDE 20
CHAPTER
2
SLIDE 21
KEY TERMS
● capital project
● stock
● bond
● budget surplus
● budget deficit
● national debt
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Principles of Business, 8e
CHAPTER
2
SLIDE 22
INVESTMENT ACTIVITIES
● Personal savings
● The stock market
● The bond market
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Principles of Business, 8e
CHAPTER
2
SLIDE 23
Checkpoint 
● Name some examples of capital
projects.
● Capital projects include the purchase of
any item a business will use over an
extended period of time such as land,
buildings, and equipment.
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Principles of Business, 8e
CHAPTER
2
SLIDE 24
BORROWING
● Government debt
● Business debt
● Consumer debt
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Principles of Business, 8e
CHAPTER
2
SLIDE 25
Checkpoint 
● What is the cause of a budget deficit?
● A budget deficit occurs when a government
or organization spends more than it takes in.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
FUTURE ECONOMIC
CHALLENGES
2
SLIDE 26
● Emerging markets
● Weak economies
● Consumer preferences and behavior
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e
CHAPTER
2
SLIDE 27
Checkpoint 
● What economic challenges do countries
face in the future?
● Future economic concerns for any country
include the ability to increase its output and
provide a means for its citizens to meet the
basic needs of food and shelter, adequate
health care, education, transportation,
employment, and safety.
© 2012 Cengage Learning. All Rights Reserved.
Principles of Business, 8e