UNDERSTANDING THE
ECONOMY
Chapter 3.2
1
ECONOMIC
INDICATORS
2
3 Goals of a
successful economy
1. Increase productivity
2. Decrease unemployment
3. Maintain stable prices
Sports, Entertainment and Recreation Marketing
3
Key Economic Measurements
Labor Productivity
 How much a worker gets done per hour over a given
amount of time (a day, month, year, etc.)
 How can a business increase their productivity?
 Invest in new equipment/technology
 Provide additional training for employees
 Provide incentives to employees
Higher productivity improves company profits
4
Specialization and Division of Labor
Part of Labor Productivity
 Ex: An assembly line
 Part of the finished product is completed
by a person who specializes in that step of
the production
 The theory is that workers are more
productive because they are specialists in
that one stage
5
Key Economic Measurements
Gross Domestic Product
 Measures the entire nation’s production output
 It is made up of
 Private investment
 Government spending
 Personal spending
 Net exports of goods and services
 Change in business inventories
6
Key Economic Measurements
Gross National Product (GNP)
 The total dollar value of goods and services
produced by a nation
 It is not where production takes place, but
who is responsible for it
 Was the primary measurement of
productivity before GDP (1991)
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THE BUSINESS
CYCLE
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What is it?
The cycle of economic growth and decline of a
given economy
There are FOUR stages:
Expansion
Recession
Depression
Recovery
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Expansion
Flourishing Economy
 Consumers have a hopeful

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outlook about business
and the economy
Good time to start a
business
Period of prosperity
Low unemployment
Increase in output of
goods and services
Higher consumer
spending
Expansion continues until it
reaches a peak
This peak signifies the end of
the expansion and the
beginning of a recession
10
Recession
Economic Slowdown
 Lasts at least 6 months
 Significant decline in
economic activity
 Companies reduce
workforce
 Consumers have less
money to spend
Recession ends once an
economy reaches its
trough (lowest point) and
then begins to rise
11
Depression
Prolonged Recession
 Becomes nearly impossible to
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
find a job
Many businesses are forced to
shut down
Consumer spending is very low
Unemployment is very high
Production of goods and
services is down
Many people cannot afford to
meet their basic needs
12
Recovery
Renewed Economic Growth
 This is where the cycle
begins again
 Business picks up
 People start to find jobs
 Demand for goods and
services increases
13
The Business Cycle
Peak
Expansion
Recession
Recovery
Depression
Trough
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