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CA (168,463)
UTSC (19,325)
MGT (1,095)
MGTA01H3 (583)
H Laurence (25)
Chapter 2

Chapter 2 Study Guide

2 Pages
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Department
Management (MGT)
Course Code
MGTA01H3
Professor
H Laurence

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Chapter 2: Understanding the Environments of Business
External Environment: everything outside an organizations boundaries that might affect it.
Economic Environment: condi tions of the economic system in which an organization operates.
Business Cycle: pattern of shor t term ups and downs (expansions and contractions) in an
economy.
Four recognizable phases: peak, recession, trough, and recovery
Recession: period during which aggregate output, as measured by real GDP, declines.
Depression: particularly severe and long lasting recession.
Aggregate Output: total quantity of goods and services produced by an economic system during
a given period.
Standard of Living: total quanti ty and quality of goods and services that a coun trys cit izens can
purchase w ith the cur rency used in their economic system.
Gross Domesti c Product (GDP): total value of all goods and services produced within a given
period by a national economy through domestic factors of production.
Gross National Product (GNP): tot al value of all goods and services produced by a national
economy within a given period regardless of where the factors of production are located.
Nominal GDP: GDP measured in cur rent dollars or with all components valued at cur rent
pr ices.
Real GDP: GDP calculated to account for changes in currency values and price changes.
Purchasing Power Parity: principle that exchange rates are set so that t he prices of similar
products in different countries are about the same.
Productivity: measure of economic growth that compares how much a system produces with the
resources needed to produce it.
Balance of Trade: the total of countries expor ts (sales to other countries) minus its exports
(purchases from other countries)
National Debt: t he total amount of money that the government owes its creditors.
Budget D eficit: the result of the government spending more in one year than it earns in one year.
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Description
1 Chapter 2: Understanding the Environments of Business External Environment: everything outside an organizations boundaries that might affect it. Economic Environment: conditions of the economic system in which an organization operates. Business Cycle: pattern of short term ups and downs (expansions and contractions) in an economy. Four recognizable phases: peak, recession, trough, and recovery Recession: period during which aggregate output, as measured by real GDP, declines. Depression: particularly severe and long lasting recession. Aggregate Output: total quantity of goods and services produced by an economic system during a given period. 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 (GDP): total value of all goods and services produced within a given period by a national economy through domestic factors of production.
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