Chapter 2 Study Guide and Review Notes

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University of Toronto Scarborough
Management (MGT)
Ingrid L.Stefanovic

CHAPTER TWO UNDERSTANDING THE ENVIROMENT OF BUSINESS The Economic Environment N All businesses operate within a larger external environment N The external environment is everything outside of the organizations boundaries that might affect it ; this determines the success or failure of the business N Economic environment is the conditions of the economic system in which an organization operates N Three Key goals of Canadian Economic System: economic growth, economic stability, full employment The Business Cycle N Business cycle are the ups and downs in an economy N Recession is a period when aggregate output, measured by GDP, declines N Depression is a severe long lasting recession N Aggregate output is the total quantity of goodsservices produced by an economic sys. Aggregate Output and the Standard of Living N Main measure of growth in business cycle is the aggregate output N When aggregate output grows quicker than population then output per capita (the quantity of gs per person goes up and the system provides more of the gs people want) N This leads to a higher standard of living: the total quantity and quality of gs they can purchas
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