Class Notes (1,100,000)
CA (650,000)
UTSC (30,000)
MGT (300)
MGTA01H3 (400)


Management (MGT)
Course Code
Chris Bovaird

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o"Real 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 GDP
Nominal GDP is GDP measured in current dollars or with all components valued at
current prices
Real GDP is GDP calculated to account for changes in currency values and price
When we make this adjustment, we account for both GDP and purchasing power
purchasing power parity is the principle that exchange rates are set so that
the prices of similar products in different countries are about the same
productivity is a measure of economic growth that compares how much a system
produces with the resources needed to produce it
standard of living improves only through increases in productivity
otwo of several factors that can help or hinder the growth of an economic system are:
balance of trade and the national debt
1. Balance of trade is the total of a country's exports (sales to other countries)
minus its imports (purchases from other countries.)
A 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 nations
A 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 nations
2. National debt is the total amount of money that the government owes its
Budget deficit is the result of the government spending more in one year than it
takes in during that year
We 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 system's currency: Living standards
are stable when the purchasing power parity remains stable

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Stability (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 rate
Factors that threaten stability include inflation, deflation, and unemployment
Inflation is the occurrence of widespread price increases throughout an economic
Inflation can be harmful to you as a consumer because inflation decreases the
purchasing power of your money (see table 2.1 page 27)
(measuring inflation) Consumer price index (CPI) is a measure of the prices of
typical products purchased by consumers
Deflation is a period of generally falling prices
Prices 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 bad).
Unemployment is the level of joblessness among people actively seeking work in an
economic system
(page 28 paragraph) When unemployment is low, there is a shortage of labour
available for businesses
oThe government acts to manage the Canadian economic system through two sets of
policies: fiscal and monetary
Fiscal policies are policies by means of which governments collect and spend revenues
(tax increases/decreases)
Monetary policies are policies by means of which the government controls the size of
the nation's money supply (working through the banks and their willingness to lend
money by prompting interest rates to go up/down)
Stabilization 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 prices
oOne of the most popular tools to analyze competitive situations in an industry is Michael
Porter's five sources model which includes: Rivalry among existing competitors, threat of
potential entrants, suppliers, buyers, and substitutes (not impt: page 31-32)
CH 3
Small business is an owner-managed business with less than 100 employees

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A goods-producing business in the register is considered small if it has fewer
than 100 employees, while a service-producing business is considered small if it
has fewer than 50 employees
New venture/firm is a recently formed (previous 12 months) commercial organization
that provides goods and/or services for sale
New ventures exclude businesses without employees. If a business operated for
several years prior to hiring employees it would only be classified as a new
business when the employees were acquired
Entrepreneurship is the process of identifying an opportunity in the marketplace and
accessing the resources needed to capitalize on it
Entrepreneurs are people who recognize and seize opportunities
oIntrapreneurs are people who exhibit entrepreneurial characteristics and create
something new within an existing large firm or organization
The key difference between intrapreneurs and entrepreneurs is that
intrapreneurs typically don't have to concern themselves with getting the
resources needed to bring the new product to market since their employer
provides the resources
oClose to 98% of all businesses in Canada are small (having less than 100 employees).
The majority of small businesses (57%) have fewer than 5 employees
Private sector is the part of the economy that is made up of companies and
organizations that are not owned or controlled by the government
49% of these employees work for small businesses, 16% for medium-sized, and
35% for large. The majority of private sector businesses have 5-19 employees
oThe entrepreneurial process has three key elements: the entrepreneur, the opportunity,
and resources
1. The two main things that entrepreneurs need to do are to identify an opportunity
access resources
2. Identifying opportunities involve generating ideas (for new/improved products,
processes, or services), screening those ideas (so that the one that presents the
best opportunity can be developed), and then developing the opportunity
Screening involves:
The idea creates or adds value for the customer
The idea provides a competitive advantage that can be sustained
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