2-3 Other Measures of Business Activity

Goals

Discuss investment activities that promote economic growth.

Explain borrowing activities by government, business, and consumers.

Describe future concerns of economic growth.

Investment ActivitiesCapital Spending – refers to the money spent by a business for an item that will be used over a long period.

Capital Projects – involved spending by businesses for items such as land, buildings, equipment, and new products

The money for capital projects comes from 3 sources: Personal savings, stock investments and bonds

Personal Savings

– A major source of investment funds– It’s the money you deposit in a bank– You receive interest

Savings rate for the country is an important factor for economic growth– It is, unfortunately, decreasing!– Below 1%

Saving by Nation

The Stock Market

– Invest by becoming a part owner of a corporation

– Stock represents ownership or equitywww.yahoo.com

– Value of stock affected by:Supply and demand

Earnings of the company

The Bond Market

– A Bond represents debt for a company/government

– If you purchase a bond you are a creditor (you have lent $ to the company or govt.

– In return, you get interest

Borrowing

Government Debt– The government uses borrowing to finance projects

such as new schools or highways. – Budget surplus – when a government spends less

than it makes.– Budget deficit - when a government spends more

than it makes.

Borrowing (cont.)

Business Debt– Loans, bonds, and mortgages are common borrowing

methods businesses use. – Debt can positively help a business or negatively.

Consumer Debt– The use of credit cards can cause debt and trouble

for individuals. (www.chasecreditcards.com)

Future Economic Challenges

The ability for an economy to produce output determines its growth.

The U.S government strives to develop solutions to problems and new technologies.

Key Terms

Capital project

Stock

Bond

Budget Surplus

Budget Deficit

National Debt

Now it’s time to……….

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