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Chapter 2

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


Department
Management (MGT)
Course Code
MGTA01H3
Professor
Mc Conkey& Bovaird
Chapter
2

Page:
of 21
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
- 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
- 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