Intro to Business Chapter 2

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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.


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