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Canada (508,934)
MGTA01H3 (348)


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Management (MGT)
Chris Bovaird

oReal GDP means that GDP has been adjusted For instance assume that 1000 pizzas are made in both 2005 and 2006 However in 2005 one pizza cost 10 and in 2006 one cost 11 So in 2005 the GDP was 10 000 and in 2006 the GDP was 11 000 The economy has NOT grown since 1000 pizzas were produced in both years aggregate output remains same Thus if GDP is not adjusted it is nominal GDPNominal GDP is GDP measured in current dollars or with all components valued at current pricesReal GDP is GDP calculated to account for changes in currency values and price changesWhen we make this adjustment we account for both GDP and purchasing power paritypurchasing power parity is the principle that exchange rates are set so that the prices of similar products in different countries are about the sameproductivity is a measure of economic growth that compares how much a system produces with the resources needed to produce itstandard of living improves only through increases in productivityotwo of several factors that can help or hinder the growth of an economic system are balance of trade and the national debt1 Balance of trade is the total of a countrys exports sales to other countries minus its imports purchases from other countriesA positive balance of trade results when a country exports more than it imports A positive balance of trade helps economic growth Countries with these balances are creditor nationsA negative balance of trade results when a country imports more than it exports A negative balance of trade inhibits economic growth A negative balance of trade is called a trade deficit and countries with these balances or debtor nations2National debt is the total amount of money that the government owes its creditorsBudget deficit is the result of the government spending more in one year than it takes in during that yearWe know that we can measure growth and productivity in terms of GDP and standard of living in terms of the purchasing power parity of a systems currency Living standards are stable when the purchasing power parity remains stableStability chief goal of an economic system is a condition in an economic system in which the amount of money available and the quantity of goods and services produced are growing at about the same rateFactors that threaten stability include inflation deflation and unemploymentInflation is the occurrence of widespread price increases throughout an economic systemInflation can be harmful to you as a consumer because inflation decreases the purchasing power of your money see table 21 page 27measuring inflation Consumer price index CPI is a measure of the prices of typical products purchased by consumersDeflation is a period of generally falling pricesPrices may fall because industrial productivity is increasing and cost savings can be 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 badUnemployment is the level of joblessness among people actively seeking work in an economic systempage 28 paragraph When unemployment is low there is a shortage of labour available for businessesoThe government acts to manage the Canadian economic system through two sets of policies fiscal and monetaryFiscal policies are policies by means of which governments collect and spend revenues tax increasesdecreasesMonetary policies are policies by means of which the government controls the size of the nations money supply working through the banks and their willingness to lend money by prompting interest rates to go updownStabilization policy is a government economic policy embracing both fiscal and monetary policies whose goal is to smooth out fluctuations in output and unemployment to stabilize pricesoOne of the most popular tools to analyze competitive situations in an industry is Michael Porters five sources model which includes Rivalry among existing competitors threat of potential entrants suppliers buyers and substitutes not impt page 3132CH 3Small business is an ownermanaged business with less than 100 employees
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