Marketing Chapter 3: Political and Economic Analysis

3 goals of a healthy economy
Increasing productivity, decrease unemployment, and maintain stable prices
Labor productivity
Measure of output divided by input of worker hours
Gross domestic product
The output of goods and services produced by labor and property within a country
Expanding inventories
Shows that businesses are producing goods that are being stored in warehouses adds to the GDP
Shrinking inventories
Indicates that people are buying more than what is produced
Calculate GDP
Private investment+govt spending+personal spending+trade surplus+expanding inventories
Gross national product
Total dollar value of goods and services produced by a nation, including items produced abroad by the nation’s citizens and companies
Standard of living
Measurement of the amount and quality of goods and services that a nation’s people have
Calculate standard of living
GDP(or GNP) divided by population
Rising prices
Low inflation rate
1-5% per year shows an economy is stable
High inflation rate
10% and over devestates an economy
When inflation increases, interest rates
Are increased to discourage people from borrowing money
Measures of inflation in the United States
Consumer price index and producer price index
Consumer price index
Measures change in price over a period of time of some 400 specific retail goofs and services used by the average urban household
Producer price index
Measures wholesale price levels in economy
Unemployment rate
Percentage of total workforce that is not working but is actively seeking paying jobs
Business cycle
Recurring changes in economic activity (expansion and contraction)
4 parts of business cycle
Expansion, recession, trough (depression), recovery
Economy is flourishing, time of prosperity, low unemployment
Period of economic slowdown (minimum of 2 quarters). Increase in unemployment, less spending, can cause depression
Depression (trough)
Low point in business cycle, marks t he transition from recession to recovery
Period of economic growth following a recession or depression. Business picks up, more jobs available, GDP increases
Factors that increase the business cycle
Actions of businesses, consumers, and government

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