Business Essential - Fall Final Review Part 1e

Fall Final Review - Part 1 ! ! Please&a&check&mark&in&the&correct&box&to&indicate&whether&the&statement&is&true&or&false.&!! TRUE%! !! !! FALSE%! !False! !! !False! !! !False! !True! !! 4. A!bond!represents!a!loan!made!by!one!party!to!a!business!or!the! government.!! !! !True! !! !! True! !! 5. If!intermediate!goods!were!counted!in!the!GDP,!the!value!of!these!goods! would!be!counted!twice.!! !! 6. Company!A!and!Company!B!produce!a!similar!microwave.!!They!raised!the! price!and!agree!to!never!sell!below!a!certain!price.!!This!is!fair!price! competition.!!! !! !True! !! 7. The!federal!government!is!expected!to!spend!$3.95!trillion!this!year.!This! is!part!of!the!GDP!calculation.!! !! !! !False! !True! !! 8. A!high!rate!of!inflation!is!good!for!those!living!on!a!fixed!income.!! !! 9. The!government!acts!as!a!regulator!by!enforcing!laws.!!! !! !True! !! !! !! 1. If!the!United!States!sells!goods!to!Mexico,!it!will!hurt!our!GDP.!! !! 2. During!the!business!cycle,!you!may!not!know!you!are!at!the!peak!until!after! the!recession!begins.!! !! 3. Economic!expansion!is!bad!because!that!means!prices!are!getting!higher.!! !! 10. Interest!rate!typically!rise!when!the!demand!to!borrow!increases.!! !! !! &! Circle&the&correct&response&for&each&statement.&&! !! 1. A(n)!externality!is!something!that!is!not!directly!connected!to!an!economic!activity,!but!that! affects!people,!such!as!a!factory!dumping!toxic!waste.!!!! !! 2. A!period!when!the!economy!is!growing!and!the!GDP!is!rising!is!called!expansion.!! ! 3. The!Interest%Rate!!represents!the!cost!of!a!loan!and!is!expressed!as!a!percent!of!the!amount! borrowed.!! ! 4. The!inflation!!rate!is!the!rate!of!change!in!prices!calculated!on!a!monthly,!quarterly!or!yearly! basis.!! ! 5. Which!one!of!these!is!an!example!of!a!monopoly?!! B.!local!water!district!! Chapter(1(-(3(! ! !! 6. GDP!!is!the!market!value!of!all!final!products!produced!in!a!country!during!a!specific!time!period.!! ! 7. Productivity!!is!the!measure!of!a!worker's!production!in!a!specific!time.!! !! 8. Price!!competition!is!a!competitive!advantage!based!on!price.!! !! 9. When!two!or!more!businesses!work!together!to!remove!their!competition,!set!prices,!and!control! distribution,!it!is!called!Collusion.!! ! 10. Policy!that!regulates!the!supply!of!money!and!interest!rates!in!an!economy!is!called!the!! Monetary!policy.!! ! 11. A!market!structure!with!one!business!that!has!complete!control!of!a!market's!entire!supply!of! goods!or!services!is!called!a(n)!Monopoly.!! ! 12. All!the!people!in!a!nation!who!are!capable!of!working!and!want!to!work!is!called!!labor%force.! !! 13. The!percentage!of!the!civilian!labor!force!that!is!seeking!work!but!unemployed!is!called!the! unemployment%rate.!! !! &! Define:&&! !! !! • The!basic!economic!problem!! ▪ The!fundamental!economic!problem!is!the!issue!of!scarcity!and!how!best!to!produce! and!distribute!these!scarce!resources.!Scarcity!means!there!is!a!finite!supply!of!goods! and!raw!materials.!Finite!resources!mean!they!are!limited!and!can!run!out! !! • ! • Factors!of!production!and!the!types ! ▪ Inputs available to supply goods and services in an economy! • Land: Natural resources available for production! • Labor: The human input into the production process! • Enterprise: Entrepreneurs organize factors of production and take risks! • Capital: Goods used in the supply of other products! Utility!and!five!types ! ▪ The!range!of!value!and!benefits!received!by!the!consumer!from!the!acquisition!and! consumption!of!a!product.! • Form!Utility:!when!someone!makes!something,!they!assemble!a!product! from!parts!and!you!can!use!it! • Task!Utility: when!someone!does!something!for!you,!like!put!ice!cream!in! a!cone,!or!change!the!oil!in!your!car! • Time!Utility:!making!sure!the!product!is!available!when!people!need!it.! • Place!Utility:!making!sure!the!product!is!accessible,!bring!it!to!the! customer,!or!have!it!in!convenient!place! • Possession!Utility:!letting!the!customer!have!the!product,!usually!after! they!pay,!they!can!"possess"!it!and!hold!it,!transport!it!etc.! • Economic!System!and!four!types!of!economies! ▪ The!range!of!value!and!benefits!received!by!the!consumer!from!the!acquisition!and! consumption!of!a!product.! • Traditional!Economic!System:!It's!the!most!traditional!and!ancient!one!in! the!world.!These!economies!still!produce!products!and!services!that!are!a! direct!result!of!their!beliefs,!customs,!traditions,!religions,!etc.!These!areas! tend!to!be!rural,!second-!or!third-world,!and!closely!tied!to!the!land,!usually! through!farming.!However,!there!is!an!increasingly!small!population!of! nomadic!peoples.!They!never!see!profit!and!surplus! • Advantages:!! o Tradition!and!custom!are!preserved!while!it!is!virtually!nonexistent!in!market/mixed!economies!! o Each!member!of!this!economy!has!a!more!specific!and! pronounced!role,!and!these!societies!are!more!satisfied.! • Disadvantages:!! o This!system!doesn't!enjoy!the!things!other!economies!take!for! granted,!such!as!medicine,!technology,!etc.,!although!happiness!is!not! guaranteed!through!these!things.! ! • Command!Economic!System: a!large!part!of!the!economic!system!is! controlled!by!a!centralized!power;!often,!a!federal!government.!This!kind!of! economy!tends!to!develop!when!a!country!finds!itself!in!possession!of!a!very! large!amount!of!valuable!resource(s).!The!government!then!steps!in!and! regulates!the!resource(s).!The!government!in!this!economic!system!only! desires!to!control!its!most!valuable!resources,!while!other!things,!like! agriculture,!are!left!to!be!run!by!the!people.! • Advantages:!! o As!long!as!the!government!is!intelligent!in!regulations,!these! advantages!will!be!applied.!! o This!economy!is!capable!of!creating!a!healthy!supply!of!its!own! resources!and!it!generally!rewards!its!own!people!with!affordable! prices!(but!because!it!is!ultimately!regulated!by!the!government,!it!is! ultimately!priced!by!the!government).!Still,!there!is!often!no!shortage! of!jobs!as!the!government!functions!similarly!to!a!market!economy!in! that!it!wants!to!grow!and!grow!upon!its!populace.! • Market!Economic!System: Very!similar!to!a!free!market.!The!government! does!not!control!vital!resources,!valuable!goods!or!any!other!major!segment! of!the!economy.!In!this!way,!organizations!run!by!the!people!determine!how! the!economy!runs,!how!supply!is!generated,!what!demands!are!necessary,!etc.! • Advantages:!! o Separation!of!the!market!and!government.!The!government!is! prevented!from!becoming!too!powerful!this!way.! • Mixed!Economic!System:!Also!known!as!a!Dual!Economy,!this!system! refers!to!the!amalgamation!(mixture)!of!a!market!and!command!economy.! • Advantages:!! o The!market!is!more!or!less!free!of!government!ownership!except! for!a!few!key!areas!(education,!transportation,!USPS,!etc.).! • Disadvantages:!! o It!can!suffer!from!downfalls!suffered!in!other!economies.!For! example,!the!last!hundred!years!in!America!has!seen!a!rise!in! government!power.!Not!just!in!imposing!laws!and!regulations,!but!in! actually!gaining!control,!becoming!more!difficult!to!access!while! simultaneously!becoming!less!flexible. ! ! ! • !! • GDP!and!its!components ! ▪ the!market!value!of!all!final!products!produced!in!a!country!during!a!specific!time! period.! • Personal!consumption!expenditures! • Investment! • Net!exports! • Government!expenditure! Business!cycle!and!its!stages!! • Alternating!increases!and!decreases!in!the!level!of!economic!cycle.!Four!stages:!recession,! trough,!expansion,!peak.! ▪ Peak:!In!a!business!cycle,!this!is!a!temporary!maximum!where!the!economy!is!at! or!near!full!employment.!Real!output!is!at!or!near!capacity.! ▪ Recession:!In!a!business!cycle,!this!is!a!period!of!decline!in!output,!income,!and! employment.!There!is!widespread!contraction!of!the!economy.!Real!GDP!decreases,! while!unemployment!increases.! ▪ Trough:!In!a!business!cycle,!this!is!where!output!and!employment!is!at!its!lowest! levels. ▪ Expansion:!In!a!business!cycle,!this!is!a!period!where!real!GDP,!income,!and! employment!rises!as!the!economy!approaches!full!employment.! !! • • Market!Structure!and!the!four!basic!structures!! ▪ Perfect!Competition:!Many!firms,!identical!product,!high!ease!of!entry.!Examples!-! growing!apples,!growing!wheat! ▪ Monopolistic!Competition:!Many!firms,!different!product,!high!ease!of!entry.! Examples!-!clothing!stores,!restaurants! ▪ Oligopoly:!Few!firms,!identical!or!differentiated!product,!low!ease!of!entry.! Examples!-!manufacturing!computers!or!automobiles! ▪ Monopoly:!One!firm,!unique!product,!no!entry!to!market.!Examples!-!first-class! mail!delivery,!tap!water! ! Monetary!and!fiscal!policy!! ▪ Monetary!policy:!the!actions!the!Federal!Reserve!takes!to!influence!the!level!of! real!GDP!and!the!rate!of!inflation!in!the!economy! ▪ Fiscal!Policy:!government!use!of!taxing!and!spending!to!stabilize!the!economy! ! • Contracts!and!the!necessary!elements!! ▪ Contract:!A!binding!agreement!between!two!or!more!persons!that!is!enforceable! by!law.! • Offer:!A!proposal!by!one!party!to!another!intended!to!create!a!legally! binding!agreement.! • Acceptance:!A!second!party's!unqualified!willingness!to!go!along!with!the! first!party's!proposal.! • Consideration:!the!bargained!for!exchange!that!induces!current! performance,!offers!detriment,!and!is!binding.! ! ! ! ! ! • Consumer!Bill!of!Rights!! • The Right to Be Informed ! • The Right to Choose ! • The Right to Safety ! • The Right to Be Heard ! • The Right to Have Problems Corrected ! • The Right to Consumer Education ! • The Right to Service! • Ethics,!Integrity,!and!Morals!! ▪ Ethics:!leans!towards!decisions!based!upon!individual!character,!and!the!more! subjective!understanding!of!right!and!wrong!by!individuals! ▪ Morals:!emphasizes!the!widely-shared!communal!or!societal!norms!about!right! and!wrong.! ▪ Integrity:!the!quality!of!having!strong!ethical!principles!that!are!followed!at!all! times.! • Code!of!Ethics!and!Code!of!Conduct!! ▪ Code!of!Ethics:!Governs!decision!making! ▪ Code!of!Conduct:!Governs!actions! !! ! !! • ! !! !! ! Corporate!Social!Responsibility!and!Philanthropy!! ▪ Corporate!Social!Responsibility:!is!the!commitment!of!business!to!contribute!to! sustainable!is!the!commitment!of!business!to!contribute!to!sustainable!economic! development!-!working!with!employees,!their!families,!the!local!community!and! society!at!large!to!improve!the!quality!of!life,!in!ways!that!are!both!good! for!business!and!good!for!development.! ▪ Philanthropy:!the practice of helping the poor and those in need especially by giving money! !