Intro to Business Chapter 2
price index
A number that compares prices in one year with prices in some earlier base year.
recession
A period in which demand, production, and GDP growth decrease and unemployment begins to rise.
prosperity
A period in which unemployment is low, businesses produce many goods and services, and wages are good.
budget surplus
Government spends less than it takes in.
budget deficit
Government spends more than it takes in.
2.3 Review Borrowing
Governments, businesses, and consumers commonly use borrowing to finance various purchases. Careful borrowing can be important for economic growth. In contrast, unwise borrowing can result in legal action and other problems.
2.1 Review GDP and GDP per Capita
Gross domestic product (GDP) is the total market value of all final goods and services produced in a country during one year. GDP per capita is calculated by dividing GDP by the total population.
2.3 Review Investment Activities
Investment activities that promote economic growth include personal savings, buying stock as ownership in a corporation, and purchasing bonds from businesses and government.
2.3 Review Economic Growth
Most economic growth is likely to occur in emerging markets. Growth will require improved technology, education, and business systems in these markets. Efforts must also be made to solve various economic problems such as hunger, disease, unsafe water, and poverty.
2.2 Review Business Cycle
The movement of the economy from good times to bad and back again is called a business cycle. A business cycle has four phases: prosperity, recession, depression, and recovery.
recovery
The phase in which unemployment decreases, demand for goods and services increases, and GDP begins to rise.
gross domestic product (GDP)
The total value of all final goods and services produced in a country in one year.
2.1 Review Economic Indicators for Spending
There are several economic indicators for consumer spending. Personal income refers to salaries and wages, as well as investment income and government payments to individuals. Retail sales measure the sales of durable and nondurable goods bought by consumers.
2.1 Review Economic Measures of Labor
There are several economic measures of labor. The labor force of an economy consists of all people above age 16 who are actively working or seeking work. The unemployment rate is the portion of people in the labor force who are not working. People are considered to be unemployed if they are looking for work and willing to work but unable to find a job. Productivity is the production output in relation to a unit of input, such as a worker
deflation
A decrease in the general price level
depression
A phase marked by a long period of high unemployment, weak consumer sales, and business failures.
inflation
An increase in the general price level.
2.2 Review Inflation
Inflation is a general rise in the level of prices. Inflation can occur when the demand for goods and services is greater than the supply. Deflation is a decrease in the general price level. Deflation can occur when prices of products are lower, but people have less money to buy them.
2.2 Review Interest Rates
Interest rates represent the cost of money. The level of interest rates in an economy are affected by the supply and demand for money. Interest rates affect both consumer and business activities.
productivity
Production output in relation to a unit of input, such as a worker.
bond
Represents debt for an organization.
stock
Represents ownership in a corporation.
personal income
Salaries and wages as well as investment income and government payments to individuals.
capital project
Spending by businesses for items such as land, buildings, and equipment.
GDP per capita
The GDP divided by the total population of a country.
business cycle
The movement of an economy from one condition to another and back again.
unemployment rate
The portion of people in the labor force who are not working.
retail sales
The sales of durable and nondurable goods bought by consumers.
