UNDERSTANDING

Business I n a G l o b a l E c o n o m y

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Part 1:

Measuring E c o n o m i c A c t i v i t y

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Gross Domestic Product

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GDP A country’s total dollar value of all final goods and services produced in one year.

GDP is the highly used measurement to determine a country’s overall economic output.

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Categories

OF

GDP

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Individual

Spending Spending by normal people for their everyday needs and wants such as:

food, clothing, housing, and other spending.

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Business

Spending Spending from all types of businesses to continue their operation such as:

includes buildings, equipment, and inventory items..

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Government

Spending Spending from government entities such as:

paying employees and buying supplies and other goods and services.

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Exports - Imports Goods and services sold between countries.

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GDP per Capita The value of goods produced per person in the country.

This is equal to the country's GDP divided by the total number of people in the country.

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Labor

Activities

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Employment The unemployment rate includes the people of the labor force that are unemployed, are

looking for work, willing to work, and unable to find work.

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Productivity The measure of output per unit of input.

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Consumer

Spending

Measurements of

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Personal Income The total wages and salaries plus investment income and government payments to

individuals.

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Retail Sales The sales of goods and services purchased to indicate the spending patterns.

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Investment

Activity

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Personal Savings Businesses and individuals use money deposited in personal saving accounts to buy

equipment and/or products. Savers earn interest on money used by companies and other

individuals. The savings rate of a country is an important factor for economic growth.

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Stock Market Higher earnings for businesses increases their value, which causes a demand for people

wanting to buy the businesses stock.

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Bond Market Businesses and governments issue bonds to borrow money.

Bondholders earn interest on money loaned to businesses and government.