Textbook Notes (369,160)
Canada (162,427)
MGTA01H3 (583)
Chapter 2

Chapter 2 Notes

2 Pages
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Department
Management (MGT)
Course Code
MGTA01H3
Professor
Chris Bovaird

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Description
Chapter 2 Understanding the Environments of Business Notes The Economic Environment N external environment : everything outside an organizations boundaries that might affect it N managers must therefore have an accurate understanding of the environment facing the company, and then strive to operate and compete within in, they should also be proactive and at least try to influence the environment N economic environment : conditions of the economic system in which an organization operates Economic Growth The Business Cycle N business cycle : pattern of short-term ups and downs (expansions and contractions) in an economy N it has four recognizable phases: peak, recession, trough, and recovery N recession : period during which aggregate output, as measured by real GDP, declines N depression : particularly severe and long-lasting recession N periods of expansion and contraction can vary from several months to several years Aggregate Output and the Standard of Living N aggregate output : total quantity of goods and services produced by an economic system during a given period N an increase in aggregate output is growth (or economic growth) N when output grows more quickly than the population, two things usually follow: output per capitathe quantity of goods and services per persongoes up and the system provides relatively more of the goods and services that people want N standard of living : total quantity and quality of goods and services that a countrys citizens can purchase with the currency used in their economic system Gross Domestic Product N gross domestic product (GDP) : total value of all goods and services produced within a given period by a national economy through domestic factors of production N gross national product (GNP) : total value of all goods and services produced by a national economy within a given period regardless of where the factors of production are located N GDP and GNP are useful measures of economic growth because they allow us to track an economys performance over time N an organization called Redefining Progress has proposed a more realistic measure to assess economic activitythe Genuine Progress Indicator (GPI), which treats activities that harm environment or quality of life as costs and gives them negative values N the real growth rate of GDPthe growth rate of GDP adjusted for inflation and changes in the value of the countrys currency is what counts as growth depends on output increasing at a faster rate than population N if growth rate of GDP exceeds the rate of population growth, then standard of living
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