Chapter 2

Question 1

External environment

Answer 1

Everything outside an organization that might affect it.

Question 2

Organizational boundary

Answer 2

Boundary that separates the organization from its environment

Question 3

Economic environment

current state of the economic environment

Answer 3

Condition of the economic system in which an organization operates.
(low growth, low unemployment rates, and low inflation)

Question 4

Aggregate output

Answer 4

Way to measure economic growth. Total quantity of goods and serviced produced by an economic system in a given period.

Question 5

Standard of living

Answer 5

Total quantity of goods and services people can purchase with the given currency.

Question 6

Business cycle

Answer 6

short term ups and downs in an economy. Recognizable phases include peak, recession, trough, and recovery.

Question 7

Gross domestic products (GDP)

Answer 7

Total value of all goods/services produced by a national through DOMESTIC factors of production.

Question 8

Gross national products (GNP)

Answer 8

Total value of all goods/services produced by a nation, regardless of where the factors of production is located.

Question 9

Real growth rates

Answer 9

Growth rate of GDP that has been adjusted for inflation and changes in value of country’s currency.

Question 10

GDP per capita

Answer 10

GDP/total population. Measures economic well-being of an average person.

Question 11

Real GDP

Answer 11

GDP that has been adjusted

Question 12

Purchasing power parity (PPP)

Answer 12

Principle on which exchange rates are set so prices of similar products are about the same in different countries. Compares economic productivity and the standards of living between countries.

Question 13

Productivity

Answer 13

How much a system produces with the resources needed to produce it. Higher productivity&fewer factors of production = improved standard of living

Question 14

Balance of trade

Answer 14

Economic value of country’s exports - Economic value of country’s imports

Question 15

National debt 
(how does it affect economic growth)

Answer 15

Amount of money the government owes its creditors.
(Government is forced to compete with individual borrowers, for the loanable money. Less money for individuals means less investments being done to increase productivity)

Question 16

Stability

Answer 16

Key goal in any economic system. Condition where amount of money available in a system is growing at the same rate as the quantity of goods/services in the system.

Question 17

Inflation

Answer 17

Occurs when money injected into an economic system is more than the output. =people have too much to spend but the quantity of available products remain the same. It is the increase in prices of the same “basket” of goods/services over time.

Question 18

Consumer Price Index (CPI)

Answer 18

Way to measure inflation. Measures the average change in prices over the “basket of goods/services” over time.

Question 19

Deflation

Answer 19

Occurs when amount of money injected into an economic system is less than the actual output. This can either be good or bad for the consumers.

Question 20

Four types of unemployment

Answer 20

Frictional: Jobless while searching for a job.
Seasonal: Jobless due to the seasonal nature of their jobs.
Cyclical: Jobless due to the business cycle
Structural: Jobless due to people’s incompetence in the skills required for available jobs

Question 21

Fiscal Policies

Answer 21

Way federal government manage the Canadian economic system. Collecting/spending of government revenues.

Question 22

Monetary policies

“tight” and “easy”?

Answer 22

Way federal government manage the Canadian economic system. Works primarily through Bank of Canada, influencing their willingness/ability to loan out money.
Tight monetary policy is when the interest rate is high, thus companies/consumers spend less.
Easy monetary policy is when the interest rate is low, increasing spending by both the companies/consumers.

Question 23

Research and development (R&D) (two types of R&D)

Answer 23

The innovation process of technological improvement, providing new ideas for products, services and processes.
(Basic/Pure: R&D in an area without considering its marketability.
Applied: Focusing on how a tech could be used to sell products/services)

Question 24

Technology Transfer

Answer 24

The process of getting a new tech from the lab into the market for profit.

Question 25

Political-legal environment

Answer 25

The relationship between business and government, including government regulations.

Question 26

Socio-cultural environment

Answer 26

Customs, values, attitudes, and demographic characteristics of the society a company operates in.

Question 27

Porter’s five forces model

Answer 27

A popular tool to analyze the competitive situation in an industry 
(Rivalry among existing competitors 
Threat of potential entrants 
Suppliers 
Buyers
Substitutes)