chapter 2

Question 1

external environment

Answer 1

Everything outside an organization’s boundaries that might affect it

Question 2

major elements of external environment

Answer 2

economic conditions, technology, political–legal considerations, social issues, the global environment, issues of ethical and social responsibility, the business environment itself, and emerging challenges and opportunities

Question 3

organizational boundary

Answer 3

separates the organization from its environment

Question 4

economic environment

Answer 4

Conditions of the economic system in which an organization operates.

Question 5

aggregate output

Answer 5

Total quantity of goods and services produced by an economic system during a given period.

Question 6

Business cycle

Answer 6

Pattern of short-term ups and downs (expansions and contractions) in an economy.

Question 7

When output grows more quickly than the population

Answer 7

output per capita increases and system provides more of the goods and services people want

Question 8

4 phases of business cycle

Answer 8

peak, recession, trough, and recovery

Question 9

GDP

Answer 9

Total value of all goods and services produced within a given period by a national economy through domestic factors of production

Question 10

GNP

Answer 10

Total value of all goods and services produced by a national economy within a given period regardless of where the factors of production are located

Question 11

when is it considered standard of living is increasing

Answer 11

If the growth rate of GDP exceeds the rate of population growth, then our standard of living should be improving.

Question 12

recession

Answer 12

2 consecutive quarters when an economy shrinks, starts just after a peak and ends when trough is reached

Question 13

depression

Answer 13

A depression occurs when the trough of the business cycle extends two or more years

Question 14

trough

Answer 14

a stage in the business cycle where activity is bottoming, or where prices are bottoming, before a rise

Question 15

peak

Answer 15

when the economy reaches its maximum productive output, signaling the end of the expansion. After that point, employment numbers and housing starts begin to decline, leading to a contractionary phase

Question 16

explain the business cycle

Answer 16

(expansionary), depression, recovery, peak, (contractionary), recession, trough, recovery

Question 17

Real Gdp

Answer 17

GDP calculated to account for changes in currency values and price changes.

Question 18

purchasing power parity

Answer 18

Principle that exchange rates are set so that the prices of similar products in different countries are about the same.

Question 19

Productivity

Answer 19

Measure of economic growth that compares how much a system produces with the resources needed to produce it.

Question 20

Balance of trade

Answer 20

The total of a country’s exports (sales to other countries) minus its imports (purchases from other countries)

Question 21

how does balance of trade affect economy

Answer 21

A trade deficit negatively affects economic growth because the money that flows out of a country can’t be used to invest in productive enterprises, either at home or overseas

Question 22

National Debt

Answer 22

The total amount of money that a country owes its creditors.

Question 23

Budget deficits

Answer 23

The result of the government spending more in one year than it takes in during that year

Question 24

How does the national debt affect economic growth?

Answer 24

The more money the government borrows, the less money is available for the private borrowing and investment that increase productivity. Can lead to rising interest rates, leads to higher borrowing costs in the private sector, thereby discouraging capital investment—a key driver of productivity growth.

Question 25

Inflation

Answer 25

Occurrence of widespread price increases throughout an economic system, people have more money to spend so prices go up because theres the same amount of products available

Question 26

Consumer price index (CPI)

Answer 26

Measure of the prices of typical products purchased by consumers living in urban areas. measures changes in the cost of a “basket” of goods and services that a typical family buys

Question 27

Deflation

Answer 27

A period of generally falling prices : Prices may fall because industrial productivity is increasing and cost savings are being passed on to consumers (this is good) or because consumers have high levels of debt and are therefore unwilling to buy very much (this is bad)

Question 28

Unemployment

Answer 28

The level of joblessness among people actively seeking work in an economic system.

Question 29

Four types of unemployment

Answer 29

frictional unemployment: (people are out of work temporarily while looking for a new job),
seasonal unemployment: (people are out of work because of the seasonal nature of their jobs),
cyclical unemployment: (people are out of work because of a downturn in the business cycle), and structural unemployment: (people are unemployed because they lack the skills needed to perform available jobs).

Question 30

Fiscal policies

Answer 30

Policies whereby governments collect and spend revenues

Question 31

Monetary policies

Answer 31

Policies whereby the government controls the size of the nation’s money supply. the government can influence the ability and willingness of banks throughout the country to lend money

Question 32

tight monetary policy

Answer 32

Bank of Canada restricts money supply: high interest rates, reduces spending

Question 33

easy monetary policy

Answer 33

Bank of Canada loosens the money supply: lower interest rates, increases spending

Question 34

technological environment

Answer 34

work methods, physical equipment, electronics and telecommunications, and various processing systems that are used to perform business activities

Question 35

political legal environment

Answer 35

Conditions reflecting the relationship between business and government, usually in the form of government regulation

Question 36

Sociocultural environment

Answer 36

Conditions including the customs, values, attitudes, and demographic characteristics of the society in which an organization operates.

Question 37

the five forces model

Answer 37

Industry rivalry: threat of new entrants, bargaining power of consumers, threat of substitutes, bargaining power of suppliers

Question 38

Outsourcing

Answer 38

Strategy of paying suppliers and distributors to perform certain business processes or to provide needed materials or services.

Question 39

Business process management

Answer 39

Approach by which firms move away from department-oriented organization and toward process-oriented team structures that cut across old departmental boundaries

Question 40

Acquisition

Answer 40

The purchase of a company by another, larger firm that absorbs the smaller company into its operations

Question 41

Merger

Answer 41

The union of two companies to form a single new business

Question 42

Poison pill

Answer 42

A defence that management adopts to make a firm less attractive to an actual or potential hostile suitor in a takeover attempt.

Question 43

Divestiture

Answer 43

Occurs when a company sells part of its existing business operations to another company.

Question 44

Spinoff

Answer 44

Strategy of setting up one or more corporate units as new, independent corporations.

Question 45

strategic alliance

Answer 45

An enterprise in which two or more persons or companies temporarily join forces to undertake a project also called joint venture

Question 46

ESOP plan

Answer 46

allows employees to own a significant share of a corporation through trusts established on their behalf.