MGTA01H3 Chapter Notes - Chapter 2: Genuine Progress Indicator, Gross Domestic Product, Business Cycle

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Management I, C2
THE ECONOMIC ENVIRONMENT
[1]
EXTERNAL ENVIRONMENT = eth outside organization's boundaries that may have
an influence on it
- all businesses operate w/in this larger envirnmt, regardless of their size, loc, or
mission
- is major determinant as to whether an organization will succeed or fail
- no single company can control envirnmt
-
managers
- should be proactive; taking a'xn by causing change, & not merely reacting t
change when it occurs
- should attempt to influence enivnrmt
- must have accurate comprehension of envirnmt their company is situated here,
and aim to operate and compete in it
[2]
ECONOMIC ENVIRONMENT = condition of economic sys in which organization runs
- ex. McDonalds Canada
- runs in economic envirnmt w/ the following characteristics
- moderate growth
- moderate unemployment
=> most ppl can eat out at this restaurant, but restaurant has to
pay higher wages to attract employees
- low inflation
=> for supplies it offers, the restaurant pays relatively constant
prices
=> can't incr. prices charged to consumers
[3]
Recall: ECONOMIC SYSTEM = way by which nation distributes its resrouces among
its civilians
- 3 key goals of Canada's economic system
1) economic growth
2) economic stability
3) full employment
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- tools to measure economic growth
ex.
- aggregate output
- standard of living
- GDP (gross domestic product)
- productivity
- main threats to economic stability
- inflation
- unemployment
ECONOMIC GROWTH
[1]
(ex) Agriculture
- at one period, over 50% of Canadian popn involved in some way at producing food
- today, less than 2.5% do
- why has agricultural efficiency improved though?
- have better technology to incr. total output
[2]
The Business Cycle
- how do we know whether or not economic sys is growing or not?
- can depict via BUSINESS CYCLE = pattern of ST-ups (expansions) and downs
(contractions) in economy
4 Recognizable Phases of Business Cycle
1. PEAK
2. RECESSION
= interval where aggregate output (summed up amt of output), which is measured by
real GDP, declines
- DEPRESSION = prolonged and particularly severe recession
3. TROUGH
4. RECOVERY
- intervals for contraction and expansion vary for how long they occur
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- ex. during end of 1990s, CA Economy continually expanded, and ppl started to ignore
the business cycle as being outdated, typically for those ppl who invested high-tech
stocks
- in 2000, the economy went "down" as tech stocks crashed in 2000
[3]
Aggregate Output & Standard of Living
AGGREGATE OUTPUT = total amt of goods & services prod'ed by economic sys.
during given interval
- main measure of growth in business cycle
- if AO incr's => growth (aka economic growth) has occurred
- two things usually come after an output grows faster than popn
1) output per capita = amt of goods and services per individual
- this incr's
2) system provides more goods & services that ppl demand
^- when the above 2 happenl, ppl living in economic sys benefit from higher
STANDARD OF LIVING = total amt & quality of goods &
services that country's civilians can buy with currency used in
economic sys.
[4]
One thing that makes possible higher standards of living
= growth
=> need to know to what extent nation's economic sys. is growing to find out how
much standard of living is improving
[5]
Gross Domestic Product
GDP = total val. of goods & services prod'ed in given interval by
national economy thro. domestic factors of prod'ion
- nation is experiencing economic growth if GDP incr's
- includes profits earned by foreign companies that're situated in Canada
- ex. CA GDP - in 2005, 1.3 trillion
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Document Summary

Should be proactive; taking a"xn by causing change, & not merely reacting t. Must have accurate comprehension of envirnmt their company is situated here, External environment = eth outside organization"s boundaries that may have an influence on it. All businesses operate w/in this larger envirnmt, regardless of their size, loc, or mission. Is major determinant as to whether an organization will succeed or fail. Managers change when it occurs and aim to operate and compete in it. Economic environment = condition of economic sys in which organization runs. Recall: economic system = way by which nation distributes its resrouces among its civilians. 3 key goals of canada"s economic system: economic growth, economic stability, full employment. Runs in economic envirnmt w/ the following characteristics. => most ppl can eat out at this restaurant, but restaurant has to. Moderate unemployment pay higher wages to attract employees. => for supplies it offers, the restaurant pays relatively constant.

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