Final Exam Review/Quiz Answers

Final Exam Review Economic 1: What is an economic environment? 1. Individuals - Work - Spending Money - Paying Taxes 2. Business (Five Factors of Production) 3. Government - Creates laws (To guide/promote economy) - Promote tax credits - Ensures qualified labour Microeconomics: the study of smaller components of the Economy. Such as individuals and businesses. Macroeconomics: the study of larger economic issues involving the economy as a whole. Such as unemployment, consumption, inflation, gross domestic product Types of economic systems: 1. Market economy - a free market system in which individuals can decide to be employees or owners of their own business. - offer entrepreneurs certain rights 2. - Communism economic system that once existed under the Soviet Union government-owned Economic decisions were made centrally limit an individual’s choices 3. Socialism - government has large ownership or control over major industries that affect economy - Such as Coal mines, transportation, health care, banking, and utilities 4. Mixed Economy - Canada is a mixed economy - Today, most economies are considered mixed systems since governments usually play some role in managing the economy. Types of Competition: The Business Cycle: 1. 2. 3. 4. Expansion Peak Contraction Recovery Measuring Economic Growth: 1. Gross domestic product (GDP) - value of zgoods and services produced within a country 2. Gross national product (GNP) - all final goods and services produced by a national economy inside and outside of the country 3. Real GDP - GDP adjusted to reflect the effects of inflation 4. Nominal GDP - is not adjusted for inflation and is measured in current dollars Trade surplus: When a country exports more goods than it imports. Trade deficit: When a country imports more goods than it exports. Why is debt bad for a country? 1. Lowers country’s credit rating 2. Austerity programs 3. Less efficient use of time 4. The doctrine of Ricardian equivalence Types of Unemployment: ● ● ● - Frictional Naturally occurs when people move between jobs Cyclical out of jobs because the economy is not doing well (like during a recession) Structural can't find jobs either because they lack the skills needed for available jobs or they live in a place where jobs are scarce ● Seasonal - caused by the seasonal nature of the job Technology 2: Introduction phase: Creates a new industry or changes the old one Growth phase: Dominant, shakeout existing firm, and growing sales. Maturity phase: Slow growth, Competition intensifies, Lots of advertising, and price wars. Decline phase: Declining “industry sales” Strategies to improve in the decline stage: 1. Maintain a leadership stance - Be the leader, be the best 2. Pursue a niche strategy - Example: Tobacco – From cigarettes to cigars or e-cigarettes 3. Harvest profits - Cut costs. Such as reducing staff. 4. Exit early - Before it gets worse, exit early 5. Consolidate - combining and strengthening the business Incremental innovation means making relatively minor improvements or modifications to an existing product Disruptive innovation is when a new, simpler thing comes along and eventually replaces the old way of doing things. Global 3: Globalization: companies expanding their operations across borders, engaging in international trade, and establishing a presence in multiple countries. What motivates companies to “go global”? Pull factor: Potential for Sales Growth Push factor: The force of competition Channels of Globale Activity: Multinational Corporation: A global business that does business in at least two different countries. Pros: ● Encourage economic development. ● Introduce new technologies Cons: ● Profits are returned to the home country ● Have no allegiance to the host country Regional Economic Integration: 1. Free trade area: 2. Customs union: 3. Common market 4. Economic union - They all build on one another North American Free Trade Agreement (NAFTA): old trade agreement to make it easier to trade. U.S. Mexico Canada Agreement (USMCA): is like a new and improved version of that agreement. Political 4: Canada’s government structure: 1. Federal 2. Provincial 3. Municipal What roles do governments serve? 1. Tax Collector 2. Business Owner 3. Regulator Should the government play the role of guardian of business? *Probably short answer* Government as guardian: ● Nurture Young Industries ● Maintain a Balance of Trade Government Not a guardian: ● Benefits only a few ● Promotes a political agenda Deregulation: reduction in laws and regulations. Pro: Increased Competition and lower prices Risk: Consumer Exploitation Privatization: divesting of government involvement. ● Believed to lead to more control and efficiency Societal, Ethics, CSR 5: Business Ethics: the standards for morally right and wrong conduct in business. Models for Making Ethical Decisions: 1. Utilitarian or end-point ethics - likely consequences of an action. - Tangible and intangible outcomes 2. Rule ethics - One's values on what is wrong or right - Perspective base ** Corporate Social Responsibility (CSR): The responsibilities that an organization has. Obligation to create policy and make decisions that are desirable for society. The four components of CSR: Against and for CSR: Question to ask yourself: Why should stakeholders of a company be considered over just shareowners? Sustainability 6: Sustainable Development: Development that meets the needs of the present without compromising the ability of future Development - to progress the economy and society. Sustainability - to sustain resources. People - current and future generations. Triple Bottom Line Framework? Economic: ● Financial statement results ● Size of an organization ● # of jobs/employees Social: ● Adherence to all employment laws ● Business ethics ● Fair practices Environment: ● That does the least harm to our: - Water - Air - Land Benefits of the TBL approach: ● Improves transparency ● Allows flexibility ● Aims to satisfy more stakeholders Limits of the TBL approach: ● No measurement standards ● Too subjective ● Lack of comparability —------------------------------------------------------------------------------------------------------------- —------------------------------------------------------------------------------------------------------------- —------------------------------------------------------------------------------------------------------------- —-------------------------------------------------------------------------------------------------------------