Textbook Notes (380,974)
CA (168,304)
UTSC (19,296)
MGT (1,095)
MGTA01H3 (583)
Chapter

Ch 2 Notes

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

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Wednesday, September 23, 2009
TN: Chapter 2 [MGTA03]
The Economic Environment
External Environment: everything outside an organization’s boundaries that might affect it
Therefore, managers have to be proactive and react to the environment changes
Economic Environment: conditions of the economic system in which an organization operates
Economic Growth
I. The Business Cycle: pattern of short-term ups and downs in an economy which show growth
1. Recession: period where aggregate output declines
2. Depression: long-lasting recession
II. Aggregate Output and Standard of Living
1. Aggregate output: total quantity of
goods/services produced by an economic
system
2. When aggregate output increases, output
per capita increases, which increases the
standards of living
III. GDP & GNP
1. Gross Domestic Product: total value of all goods/services produces within a given period by a
national economy through domestic factors of production
2. Gross National Product: total value of all goods/services produced by a national economy
within a given period regardless of where the factors of production are located
3. Genuine Progress Indicator: treats activities that harm the environment or quality of life as
costs and gives them negative values
4. Real Growth Rates: GDP which was adjusted for inflation and changes in the value of
currency (since growth depends on output not a rise in price or currency)
5. Nominal GDP: GDP measured in current dollars or components valued at current price
6. GDP per Capita: GDP per person, the higher the amount the higher the standards of living
7. Purchasing Power Parity: ?
IV. Productivity: measure of economic growth that compares how much the system produces with the
resources needed to produce it
Standard of living improves only thorough increases in productivity
1. Balance of Trade: total countries exports minus its imports, called trade of deficit if value -ve
2. National Debt:total amount that the government owns its creditors
(a) Budget deficit: government spends more than it earns
Economic Stability
Stability: when the amount of money available in an economic system and the quantity of goods/services
produced in it are growing at about the same rate (there are factors that threaten stability-)
I. Inflation: increase in price throughout an economic system
a) Occurs when amount of money injected into an economy outstrips the increase in output
b) Measure inflation using CPI (consumer price index) which measures cost of a basket of
goods and services that a typical family might buy
II. Deflation: period of falling prices
a) Occurs because industrial productivity is increasing and cost savings is passed to
consumers or consumers have debt and unwilling to buy
III. Unemployment: level of joblessness of people actively seeking work in an economic system
a) Frictional: people out of work temporarily while looking for a new job
b) Season: people out of work because of the seasonal nature of there job
c) Cyclical: people out of work because of downturn in an economy
d) Structural: people out of work because they lack skill needed to perform for jobs
1
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Description
Wednesday, September 23, 2009 TN: Chapter 2 [MGTA03] The Economic Environment External Environment: everything outside an organizations boundaries that might affect it Therefore, managers have to be proactive and react to the environment changes Economic Environment: conditions of the economic system in which an organization operates Economic Growth I. The Business Cycle: pattern of short-term ups and downs in an economy which show growth 1. Recession: period where aggregate output declines 2. Depression: long-lasting recession II. Aggregate Output and Standard of Living 1. Aggregate output: total quantity of goodsservices produced by an economic system 2. When aggregate output increases, output per capita increases, which increases the standards of living III. GDP & GNP 1. Gross Domestic Product: total value of all goodsservices produces within a given period by a national economy through domestic factors of production 2. Gross National Product: total value of all goodsservices produced by a national economy within a given period regardless of where the factors of production are located 3. Genuine Progress Indicator: treats activities that harm the environment or quality of life as costs and gives them negative values 4. Real Growth Rates: GDP which was adjusted for inflation and changes in the value of currency (since growth depends on output not a rise in price or currency) 5. Nominal GDP: GDP measured in current dollars or components valued at current price 6. GDP per Capita: GDP per person, the higher the amount the higher the standards of living 7. Pur
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