Chapter 3

Assessing Economic
Conditions

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Learning Objectives

Growth Inflation

Assessing Economic
Conditions
Government Interest Rates

Portion of Graphic
from pg 72 will go Market Prices
here

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
The Key Decisions in Running
Conditions a Business

Portion of Graphic
from pg 72 will go
here

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Economic Growth

Growth
Inflation
Interest Rates
Market Prices

Strong
Government

Weak

Portion of Graphic
from pg 72 will go
here
Recession

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Growth Indicators

Growth Spending Production

Inflation
Interest Rates
Market Prices
Government

Portion of Graphic Aggregate

from pg 72 will go
here Expenditures G.D.P.

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Unemployment

Growth
Inflation
Interest Rates Frictional
Market Prices
Government
Seasonal

Cyclical

Portion of Graphic
from pg 72 will go Structural
here

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Inflation

$$$$$
Growth
Inflation
Interest Rates
Market Prices
Government

Portion of Graphic
from pg 72 will go $
here 1985 1995 2005

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Types of Inflation

Growth
Inflation
Interest Rates
Market Prices
Government

Cost-Push Demand-Pull
Portion of Graphic
from pg 72 will go
here

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Interest Rates

Growth
Inflation
Interest Rates
Market Prices
Government

Portion of Graphic
from pg 72 will go
here

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Interest and Revenue

Growth
Inflation
Interest Rates
Market Prices
Government

Portion of Graphic
from pg 72 will go Interest Rates (%)
here

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Determining Market Prices

Growth
Inflation
Interest Rates
Market Prices Insert Exhibit 3.4
Government
(only top portion)

Portion of Graphic
from pg 72 will go
here

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Determining Market Prices

Growth
Inflation
Interest Rates
Market Prices
Government
Insert Exhibit 3.4
(only bottom graph portion)

Portion of Graphic
from pg 72 will go
here

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Demand Schedule

Growth
Inflation
Interest Rates (S1)
Market Prices
Government
Price

P2 = $ 2,500

P1 = $ 2,000

(D2)
Portion of Graphic (D1)
from pg 72 will go
here
Quantity

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Supply Schedule

Growth
Inflation
Interest Rates (S1)
Market Prices
Government (S2)
Price

P1 = $ 2,000

P2 = $ 1,500

Portion of Graphic (D1)

from pg 72 will go
here
Quantity

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Influencing Market Prices

Growth

)
Inflation

))
Interest Rates
Market Prices Consumer Income
Government

) Consumer Preferences

Production Expenses
)
Portion of Graphic
)
from pg 72 will go
here

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Monetary Policy

Growth
Inflation The Fed
Interest Rates
Market Prices
Government Money supply

FOMC

Interest Rates
Portion of Graphic
from pg 72 will go
here

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Fiscal Policy

Growth
Inflation Personal Income Tax
Interest Rates
Market Prices
Government Corporate Tax

Excise Tax

Budget Deficits
Portion of Graphic
from pg 72 will go
here

Copyright 2007 South-Western. All rights reserved.

Assessing
Economic
Conditions
Government Influence

Growth
Inflation
Interest Rates
Market Prices
Government

Insert Exhibit 3.8

Portion of Graphic
from pg 72 will go
here

Copyright 2007 South-Western. All rights reserved.