Textbook Notes (270,000)
CA (160,000)
UTSC (20,000)
MGT (800)
MGTA01H3 (600)
Chapter 2

MGTA01H3 Chapter Notes - Chapter 2: Genuine Progress Indicator, Gross Domestic Product, Purchasing Power Parity

Management (MGT)
Course Code

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The Economic Environment
External environment- Everything outside an organization’s
boundaries that might affect it.
Management needs to have a better understanding of the
environment facing their company and strive to operate and
compete within in.
Economic environment- Refers to the conditions of the
economic system in which an organization operates.
The Canadian economic system has 3 goals: Economic growth,
economic stability, and full employment
Economic Growth
The pattern of short term ups and downs in an economy is
called the business cycle.
Business Cycle- Pattern of short term ups and downs
(expansions and contractions) in an economy.
There are 4 stages in this cycle:
- Peak, recession, trough, and recovery
Recession- Period in which aggregate output as measured by
real GDP, declines.

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Depression- Particularly severe and long-lasting recession
Aggregate Output and Standard of Living
Aggregate output- Total quantity of goods and
services produced by an economic system during a
given period
When output grows quickly than the population two
things can follow:
- Output per capita goes up
- Output per capita- the quantity of goods and
services per person goes up
- System provides relatively more of the goods
and services they want
When these two things happen, people in the
economic system can benefit from a higher standard
of living
Standard of Living- Total quantity and quality of
goods and services that a country’s citizens can
purchase with the currency used in their economic

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Gross Domestic Product- Totally value of all goods
and service produced within a given period by a
national economy through domestic factors of
- IF GDP goes up, the nation is experiencing
economic growth
- Canada’s GDP in 2005 was $1.3 trillion
Gross National Product- Total value of all goods and
service produced by a national economy within a given
period regardless of where the factors of production are
- The profits earned by a Canadian company
abroad are included in GNP but not in the
- Profits earned by foreign firms in Canada are
included in the GDP
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