BF10 - Principals of Business and Finance Measuring Economic Activity

1. UNDERSTANDING
BusinessIn a Global Economy
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2. Part1:
Measuring
Economic Activity
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Gross Domestic Product

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GDPA 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
SpendingSpending by normal people for their everyday needs and wants such as:
food, clothing, housing, and other spending.

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Business
SpendingSpending from all types of businesses to continue their operation such as:
includes buildings, equipment, and inventory items..

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Government
SpendingSpending from government entities such as:
paying employees and buying supplies and other goods and services.

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Exports-ImportsGoods and services sold between countries.

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GDPperCapitaThe 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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EmploymentThe 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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ProductivityThe measure of output per unit of input.

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Consumer
Spending
Measurements of

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PersonalIncomeThe total wages and salaries plus investment income and government payments to
individuals.

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RetailSalesThe sales of goods and services purchased to indicate the spending patterns.

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Investment
Activity

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PersonalSavingsBusinesses 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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StockMarketHigher earnings for businesses increases their value, which causes a demand for people
wanting to buy the businesses stock.

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BondMarketBusinesses and governments issue bonds to borrow money.
Bondholders earn interest on money loaned to businesses and government.