Economic, Political And Business Forces Flashcards
Major components of economics
- Allocation and management of income and expenditures of a household, business, community or government
- Production, distribution and consumption or wealth
- Satisfaction of material needs or people
- Study of the world economy- macroeconomic survey
- Societal establishment of economic systems that serve as means of achieving society’s economic goals
Consumer price index (CPI)
Measures price changes of goods consumed by an urban family of four on a moderate income
Disposable income (DI)
The gross national product (GNP) minus depreciation, business and personal taxes and transfer payments (such as social security or welfare)
“The money in people’s pockets” to spend as they want
Federal Reserve discount rate
The rate at which the Federal Reserve Bank lends funds to its member banks
Gross domestic product
Measures value of all goods and services produced within a nation’s borders regardless of the nationality of the producer
Gross national product (GNP)
- Primary inductor of national economy
- Measures production in the economy by aggregating all goods and services produced by their current prices
- Measures only goods and services that have a market
- International comparisons are difficult
- Does not measure quality of life
Microeconomics
Deals with the economic behavior of individual units such as consumers, firms and resource owners
Macroeconomics
Concerned with behaviors of economic aggregates
Items considered macroeconomics
- GNP
- GDP
- Consumption
- Level of employment
- Investment
- Money supply
- Innovation
- International trade and production relationships
Net national product
GNP less capital consumption allowance
Capital consumption allowance
Allocated costs for depreciation of capital equipment
Political economy
Term used to describe the influence of political and social institutions on the aggregate economy
Prime rate
Interest rate that banks charge to their commercial customers (those with good credit ratings and lowest risk) for short term loans
Producer price index (PPI)
Measures the wholesale price of goods
Major economic systems
- Capitalism
- Communism
- Socialism
Capitalism
- Allows private ownership of property
- Income from property or capital accrues to the individual or firms that accumulate it and own it
- Firms are relatively free to compete with others for their own economic gain
- Profit motive is basic to economic life
Communism
- Production systems are government or state owned
2. Production decisions are made by official policy and not directed by market action
Socialism
- An economic system in which government owns or controls many major industries
- May allow markets to set prices in many areas
Economic indicators
Measure the relative standing of one economic system versus that of another
Economic indicators include
- GNP
- Net national product
- DI
Price indicators
Reflect a nation’s economic standing
Examples of price indicators
- CPI
2. PPI
Labor force statistics
Measure how many noninstituionalized people are currently working at paid jobs or are willing to work
Labor force
Employable population of the economy
Persons excluded in calculations of labor force
- Military
- Jails
- Hospitals/sanitariums (patients)
- Full time students
Unemployment statistics
- Indicate the number of people looking for paid work
2. Point to changes in the labor market
Interest rates
A percentage of a sum of money charged for its use
Two important interest rates
- Prime rate
2. Federal Reserve discount rate
Balance of trade
Refers to the net value of a country’s imports and exports of merchandise
Favorable balance of trade
- Country exports more than it imports
2. Surplus
Unfavorable balance of trade
- Country’s imports predominate
2. Deficit
Reasons American economy grew during the 1980s
- Decreased taxation (tax cuts) on businesses and citizens
- Deregulation of businesses
- Increased consumer spending, investment and construction
- Beginning trend of privatizing government services
Examples of businesses deregulated in the 1980s
- Telecommunications
- Air travel
- Banking
- Many others
Longest period of peacetime growth
1980s
Tax cuts had a —– impact of government revenue
Negative
Planned spending and reform of national entitlement programs such as ——– and ——– were not politically supported
Medicare/Medicaid
Social security
American government continued to spend —– than it took in; this ——- deficit spending by the government, resulting in —– deficits
More
Increased
High
The United States went from the —– creditor nation to the ——- debtor nation in the global economy
Largest
Largest
Negative effects on Americans living with high national budget deficits
- Higher interest rates
- Less money for investment
- Lower economic growth rates
- Less revenue to pay interest on debt
- Debtor status to foreign countries
- Lower sales of exports
- Long term decrease in the standard or living
By the end of the 1980s the US government was….
In a recession
Economic state of the nation in the 1990s
- Inflation rate fell
- US became more competitive in the worldwide marketplace
- Period of expansion and economic growth
Current economic trends
- Competition will increase worldwide
- Competition will be augmented by the use of the Internet
- Increase of multinational corporations
- Expansion of career and investment opportunities aroud the world
Unstable, poorly functioning economies produce the following results:
- Have greater difficulty finding jobs that match abilities and education
- Continually rising prices reduce the value of savings, affecting ability of people particularly retirees to retire
- Company managers have difficulty obtaining enough resources at reasonable prices
- Companies have difficulty distributing products and finding buyers to purchase
- Investment opportunities are hard to find
- Expending accumulated personal assets may be difficult because available goods and services may be limited and of poor quality
In a thriving economy individuals and societies benefit in the following ways:
- People are working
- Families are receiving income and consuming goods and services
- Economic progress= access to technologically advanced products
- Strong market for technologically advanced products stimulates research and further progress
- Attractive to foreigners for investment of capital or purchasing goods
- Aids social progress
A thriving economy aids social progress in the following ways:
- More students pursue a higher level of education
- Students then enter the workforce with a higher level of skill and knowledge
- Well educated workers function at a higher productivity level and this benefit the economy
A thriving economy allows managers to accomplish the following:
- Plan production and personnel programs and services with reasonable confidence they will reap the benefits of the economy
- Evaluate company and individual performance factors that have an impact on their bottom line without being hindered by an unstable economy
- Expand business and add personnel
- Provide benefits and services to employees while still meeting shareholder expectations for profit or return on investment
A well run economy facilitates….
Production and the exchange of goods and services
Low unemployment that results from a thriving economy can result in the following:
- A change in the way companies staff their workplaces
2. Increasing options available to workers
The number of outsourced temporary workers increased ——- between 1982 and 1988
580%
In 2001, ——- workers considered themselves independent contractors
8.6 million
About —— people work under alternative employment arrangements
13 million
Examples of alternative employment arrangements
- Independent contractors
- Temporary help workers
- Contract workers
- On-call workers
The transition of the national economy is from…
Protected markets to international competition
A nation’s economic competitiveness depends on these characteristics
- Financial
- Industrial
- Demographic
Examples of financial, industrial and demographic characteristics that determine an nation’s economic competitiveness
- Unemployment rate
- GNP
- Per capita income
- Average hours and conditions of work
- Distribution of wealth
The economic competitiveness of a nation also depends on the ability of individual businesses to….
Sell their goods and services at a profit in domestic (national) and foreign markets
America’s ability to prosper depends on the ability of US companies to produce and market goods and services that can compete successfully in terms of………….. when compared with those of other nations
- Price
- Quality
- Innovation
- Customization
- Serviceability
After World War II, America became the leading economic power partly because of…..
The destructive impact of the war on the economies of Japan and Europe
Postwar benefits, such as the GI Bill, provided….
Housing and educational opportunities to returning veterans
The GI Bill provided housing and educational opportunities to returning veterans, thus creating….
A competitive labor force, boosting the construction industry and encouraging local community development
National and global economies and industrialization surged from —- to —-
1953 to 1975
Between 1953 and 1975 the world industrial output increased an average of —- per year
6%
The postwar economic boom in the United States was facilitated by….
- The deregulation of industry
2. Industrial developments and manpower planning that occurred during the war
Post World War II, business, no longer hampered by wartime government constraints, returned to ——– and focused on meeting ———
Free markets
Consumers’ needs
During the immediate postwar decades, the world was divided into the following. Types of marketplaces
- Domestic
2. International
In the immediate postwar decades US companies produced primarily for…..
Domestic or regional markets
During the immediate postwar decades American companies led the industrialized markets with:
- Increasing technological advances
- Mass production
- Higher workers wages
During the immediate postwar decades, ——- and ——- added to costs of American businesses
Government regulation
Collective bargaining
Customers at home and abroad have become ——–, see,ing the best product at the mot affordable price without regard to ——–
Global shoppers
The country in which it was produced
Imports to the US grew —— between 1975 and 2003
260%
The increase in imports between 1975 and 1993 was fueled by…
Increase American purchasing power
US exports account for the following economic benefits:
- One out of every six American jobs in manufacturing
- $115 billion annually in services
- One-sixth of all US agricultural production
- Almost 25% of America’s GDP, almost one trillion per year
Declining economic competitveness means….
- Fewer jobs
- Increased unemployment
- Lower per capita income
- Larger budget deficits
The economy entered a recession and business retrenched during the 1970s, affecting manufacturing by…..
- Decreasing mass production
- Decreasing job creation
- Decreasing wages
- Decreasing employment levels
The national economy expanded in the 1980s, but American manufacturing lost its competitive edge to…..
Foreign competitors who could produce goods at a lower cost than American companies
The US is no longer primarily an ———-
Industrialized nation, a producer of manufactured goods
Now the US economy depends more and more on the production of……
Services and technlogy
Industries are looking to place the following types of jobs “offshore”:
- Manufacturing
- High tech
- Some customer service jobs
Why are some industries looking to place jobs “offshore”?
- Wages and operating costs are less
- Decrease expenses
- Increase shareholder value
Since the 1990s, the US has been the leading provider of…..
Services and technology
The recent explosion of Internet use has revolutionalized communications and….
Has fundamentally altered the way people live, work and conduct business in the national and global economies
The economic competitiveness of the US has increased through the use of…..
Internet technology
The use of Internet technology has resulted in….
A huge array of customized goods and services at increasingly affordable prices
The vast increase in the use of technogy to conduct business and communicate with others in real time increases….
Competition and the ability to generate income and wealth
Economics
Is concerned with the way in which limited resources are allocated
