buisness – Flashcards
Unlock all answers in this set
Unlock answersquestion
Any organization that provides goods or benefits for profit.
answer
Business chapter 1
question
The setting in which business operates. The five key components are economic environment, Competetive environment , Technological environment, Social environment, Golbal environemnt
answer
Business environment Chapter 1
question
Any tools, especially computers, telecommunications, and other digital producats that buisnesses can use to bcome more efficient and effecttive.
answer
Business technology Chapter 1
question
The measurable characteristivs of a population. Includes populations size and density as well as specific traits such as age gender and race.
answer
Demographics Chapter 1
question
Business transactions that are conducted online, typically via the internet.
answer
E-commerce chapter 1
question
People who risk their time, money and resources to start and manage a buisness.
answer
entrepreneurs chapter 1
question
Four fundamental elements-natural resources, capital human resources, and entrepreneurship - that business needs to achieve their objectives.
answer
Factors of production chapter 1
question
any international economic and politcal movement designed to help goods and services flow more freely accross international boundaries
answer
Free trade - chapter 1
question
any international trade agreement that has taken bold steps to lower tariffs and promote free trade worldwide.
answer
GATT - General agreement on tariffs and trade chapter 1
question
when a business incurs expenses that exceed its revenue.
answer
Loss - chapter 1
question
business like establishments that employ people and produce goods and services with the fundamental goal of contributing to the community rather than generating financial gain. examples: health, art, culture, and religion
answer
nonprofits - chapter 1
question
The money that a business earns in sales (or revenue) minus the expenses such as the cost of goods and the cost of salaries. revenue-expenses = profit-loss.
answer
Profit - Chapter 1
question
the verall sense of well-being experienced by either an individual or groupof people.
answer
Quality of life chapter 1
question
The rate at which a new product moves from conception to commercialization.
answer
Speed-to-market - chapter 1
question
the quality and quantity of goods and services available to a population.
answer
standard of living chapter 1
question
the relationship between the price of a giid or a service abd tge benefits that it offers to its customers.
answer
value - chapter 1
question
the service that allows computer users to access and share information easily on the internet in the form of texts, graphics, video, apps and animatin.
answer
WWW - World wide web
question
shifting the balance of power away from producers and toward consumers.
answer
The Great Depression and World War II greatly impacted American business by
question
Businesses began to develop brands to help consumers distinguish between various products.
answer
Which of the following was a characteristic of the marketing era?
question
value
answer
The relationship between the price of a good or a service and the benefits that it offers its customers is known as _____.
question
Abilities such as creativity, communication, and caring
answer
Sameer, a graduate student, is in a dilemma as to what would be the right career for him. Which of the following abilities must Sameer try to acquire for a rewarding career in today's environment?
question
Speed-to-market
answer
_____ is the rate at which a firm transforms concepts into actual products.
question
Mass production emerged, creating a huge demand for semiskilled workers.
answer
Which of the following is true of the business era between the mid-1700s to the mid-1800s?
question
Increase in quality and decrease in prices of products as a result of global competition
answer
Which of the following indicates an impact of the renegotiation of the General Agreement on Tariffs and Trade?
question
They focus primarily on contributing to the community.
answer
Which of the following is a characteristic of nonprofit organizations?
question
Gender
answer
Which of the following factors do demographics include?
question
It is the money a business earns in sales minus the expenses.
answer
Which of the following best defines a profit?
question
standard of living
answer
The quality and quantity of goods and services available to a population is referred to as the _____.
question
He detects opportunities and uses his own resources to capitalize on that potential.
answer
Pascal has started his own company, Labzone. Being an entrepreneur, which of the following statements is most likely to be true of Pascal?
question
Computers
answer
Which of the following is best classified as capital for a business?
question
Business titans created enormous wealth and dominated their markets.
answer
Which of the following characterized the entrepreneurship era?
question
the markets being flooded with many enticing choices.
answer
The shift in the balance of power away from producers and toward the consumers after WWII resulted in:
question
value
answer
The relationship between the price of a good or a service and the benefits that it offers its customers is known as _____.
question
It will escalate recruitment costs as the increase in retirement will force businesses to hire new employees.
answer
Which of the following is most likely to be an impact of the rapidly aging population on businesses?
question
The best measure of value is the size of the gap between product benefits and price.
answer
Which of the following is true of the value of a product?
question
They must be extracted, purified, or harnessed.
answer
Which of the following is true of natural resources as a factor of production?
question
It represents the measurable characteristics of a population, such as age or gender.
answer
Which of the following best defines demographics?
question
It helps companies to streamline production and create new efficiencies
answer
Which of the following is true of the impact of digital technology on business?
question
A company that provides short-term financiing to firms by purchasing their account receivables at a discount.
answer
factor
question
Anything that an organization offers to satisfy consumer needs and wants incding both goods and services
answer
Product
question
taxes levied against imports
answer
tariffs
question
head in the clouds, food lasts forever High-status stress privacy in public Nature is over Niche Living.
answer
Time magazines 10 ideas that are changing your life page 2-3
question
mid 1700-1800's factories replaced workshops and large numbers of semi-skilled workers were hired who specialized in a limited number of tasks. the result was unprecedented production efficiency but also a loss of individual ownership and personal pride in the production process.
answer
Industrial Era Mid 1700-1800's page 4
question
Large scale entrepreneurs emerged during this era building business empires. Industrial titans created enormous wealth, raising the overall standard of living. they dominated the market forcing out their competitors, manipulating prices, exploiting workers, and decimating the environment. the government stepped in toward the end of the 1800's passing laws to regulate business and protect consumers and workers which created more balance in the economy.
answer
The Entrepreneurship Era; second half of the 1800's page 4
question
focused on further refining production process and creating greater efficiencies. Jobs became ever more specialized increasing productivity and lowering costs and prices. In 1913, Henry Ford introduced the assembly line which became standard across major manufacturing industries. The customer became an afterthought. But when the customers tightened their belts during the great depression and WWII businesses took notice and the "hard sell" emerged:P aggressive persuasion designed to separate consumers from their cash.
answer
The Production Era: Early part of the 1900's page 4
question
After WWII, the balance of power shifted away from producers and toward consumers flooding the market with enticing choices. To differentiate themselves from their competitors began to develop brands and distinctive identities to help consumers understand the differences in products. The marketing concept emerged: a consumer focus that permeates successful companies in every department, at every level.
answer
The Marketing Era: pg 5
question
a consumer focus that permeates successful companies in every department, at every level.
answer
marketing concept
question
aggressive persuasion designed to separate consumers from their cash.
answer
"hard sell"
question
look beyond each immediate transaction with a customer and aim to build long-term relationships. satisfies customers can become advocates for the business.
answer
The relationship era: pg 5
question
includes all inputs that offer value in their natural state, such as land, fresh water, the wind, and mineral deposits. Most natural resources must be extracted, purified and harnessed; people can't actually create natural resources.
answer
Natural resources page 6
question
includes machines, tools, buildings, information, and technology - the synthetic resources that a business needs tp produce goods and services.
answer
Capital - page 7
question
the physical, intellectual and creative contributaions of everyone who works within an economy. Education and motivation have become increasingly important to human resource developement.
answer
Human resources page 7
question
people who take the risk of launching and operating their own businesses. largely in response to the profit incentive. They tend to see opportunities where others don't and they use their own resources to capitalize on that potential.
answer
Entrepreneurship: page 7
question
as life spans increase and birth rates decrease , the American population is rapidly aging. The U.S. census bureau projects that the nations population age 65 and older will more than double between 2005 and 2060. Older Americans will represent just over 1 in5 residents, up from the one in 7 today. and the number of working aging Americans will shrink from 63% to 57% This brings opportunities but also threats to the business world. companies that cater to the elder such as healthcare, pharmaceuticals, travel, etc. will thrive.
answer
Aging population: page 12
question
is essentially a financial and social system. It represents the flow of resources through society, from production, to distribution, to consumption
answer
economy - chapter 2
question
is the study of the choices that people, companies, and governments make in allocating those resources. The field of economics falls into two core categories: macroeconomics and microeconomics
answer
Economics chapter 2
question
is the study of a country's overall economic dynamics, such as the employment rate, the gross domestic product, and taxation policies. While macroeconomic issues may seem abstract, they directly affect your day-to-day life, influencing key variables such as what jobs will be available for you, how much cash you'll actually take home after taxes, or how much you can buy with that cash in any given month.
answer
Macroeconomics chapter 2
question
focuses on smaller economic units such as individual consumers, families, and individual businesses. Both macroeconomics and microeconomics have played an integral role in the global economic crisis.
answer
Microeconomics
question
when the dot-com bubble burst in 2000, followed by the 9/11 terrorist attacks in 2001. As the stock market dropped and unemployment rose, economic experts feared that the country was hovering on the brink of a full-blown recession.
answer
Economic Crisis: How Did This Happen? chapter 2
question
In an effort to avert recession by increasing the money supply and encouraging investment, the Federal Reserve—the nation's central bank—decreased interest rates from 6.5% in mid-2000 to 1.25% by the end of 2002. As a result, the economy was awash with money, but opportunities to invest yielded paltry returns. This is when subprime mortgage loans came into play. Most experts define subprime mortgages as loans to borrowers with low credit scores, high debt-to-income ratios, or other signs of a reduced ability to repay the money they borrow.were attractive to lenders because they provided a higher return than many other investments, and—given the growth in housing prices—they seemed relatively low risk. Banks and investment houses invented a range of stunningly complex financial instruments to slice up and resell the mortgages as specialized securities. Hedge funds swapped the new securities, convinced that they were virtually risk-free. With a lack of regulation—or any other government oversight—financial institutions did not maintain sufficient reserves in case those mortgage-backed funds lost value.
answer
Subprime loans chapter 2
question
In early September 2008, the U.S. Department of the Treasury seized Fannie Mae and Freddie Mac, which owned about half of the U.S. mortgage market. A week later, the Fed bailed out tottering global insurance giant AIG with an $85 billion loan. But the bleeding continued.
answer
Fannie Mae and Freddie Mac chapter 2 (seizure of)
question
President Obama proposed, and Congress passed, an $825 billion economic stimulus package called the American Recovery and Reinvestment Act, designed to turn the economy around over the next two years. The plan included cutting taxes, building infrastructure, and investing $150 billion in green energy. By late 2011, the economy had begun to turn around at a very slow pace, although unemployment remained high, and economists predicted that the jobless rate would remain painfully high through the middle of the decade.Footnote
answer
American Recovery and Reinvestment Act: chapter 2
question
refers to government efforts to influence the economy through taxation and spending decisions that are designed to encourage growth, boost employment, and curb inflation. Clearly, fiscal strategies are closely tied to political philosophy.
answer
Fiscal Policy - chapter 2
question
The debt ceiling is the maximum amount Congress lets the government borrow. In theory, this is meant to limit the amount that the government can borrow, but in practice, voting on the debt ceiling happens separately from voting on taxes and spending, so the debt ceiling ends up being mostly about whether or not the federal government can pay for debts that it has already incurred.
answer
Debt Ceiling/Fiscal Cliff - chapter 2
question
The fiscal cliff was a package of draconian across-the-board spending cuts and sharp tax hikes scheduled to hit at the same time that could dramatically decrease the U.S. budget deficit. Going over the fiscal cliff could potentially cripple the U.S. economy, and possibly even cause the U.S. to default on some of its debt, which could send world markets into a tailspin. The federal government actually did shut down for 16 days in October 2013 after much Congressional squabbling failed to produce a budget agreement.
answer
fiscal cliff chapter 2
question
If revenue is higher than spending, the government incurs a budget surplus (rare in recent years, but usually quite welcome!).
answer
Budget Suprlus - chapter 2
question
If spending is higher than revenue, the government incurs a budget deficit and must borrow money to cover the shortfall.
answer
budget deficit -chpter 2
question
The sum of all the money borrowed over the years and not yet repaid is the total federal debt As of January, 2014, the total U.S. federal debt stood at more than $17 trillion, a staggering $54,463.85 for every U.S. citizen
answer
federal debt - chapter 2
question
Monetary policy refers to actions that shape the economy by influencing interest rates and the supply of money. The Federal Reserve—essentially the central bank of the United States—manages U.S. monetary policy.
answer
Monetary Policy chapter 2
question
In addition to setting monetary policy, the Board of Governors oversees the operation of the 12 Federal Reserve Banks that carry out Fed policies and perform banking services for commercial banks in their districts.
answer
Board of governors - chapter 2
question
All currency—paper bills and metal coins—plus checking accounts and traveler's checks. As of December 2013, the M1 money supply totaled about $2.65 billion
answer
M1: chapter 2
question
All of M1 plus most savings accounts, money market accounts, and certificates of deposit (low-risk savings vehicles with a fixed term, typically less than one year). and the M2 version of the money supply totaled about $10.99 billion. In practice, the term "money supply" most often refers to M2. (Note that credit cards are not part of the money supply, although they do have an unmistakable impact on the flow of money through the economy.)Footnote
answer
M2: chatper 2
question
the total amount of money within the overall economy
answer
money supply: chatper 2
question
This is the Fed's most frequently used tool. Open market operations involve buying and selling government securities, which include treasury bonds, notes, and bills. These securities are the IOUs the government issues to finance its deficit spending. How do open market operations work? When the economy is weak, the Fed buys government securities on the open market. When the Fed pays the sellers of these securities, money previously held by the Fed is put into circulation. This directly stimulates spending. In addition, any of the additional funds supplied by the Fed that are deposited in banks will allow banks to make more loans, making credit more readily available. This encourages even more spending and further stimulates the economy. Open market operations are set by the aptly named Federal Open Market Committee, which consists of the seven members of the Board of Governors and five of the twelve presidents of the Federal Reserve district banks. Each year, the Federal Open Market Committee holds eight regularly scheduled meetings to make decisions about open market operations, although they do hold additional meetings when the need arises. Both businesses and markets closely watch Open Market Committee rate setting and outlook statements in order to guide decision making.
answer
Open Market Operations : chapter 2
question
The discount rate is the interest rate the Fed charges on its loans to commercial banks. When the Fed reduces the discount rate, banks can obtain funds at a lower cost and use these funds to make more loans to their own customers.
answer
Discount Rate Changes: chatper 2
question
The Fed requires that all of its member banks hold funds called "reserves," equal to a stated percentage of the deposits held by their customers. This percentage is called the reserve requirement (or required reserve ratio). The reserve requirement helps protect depositors who may want to withdraw their money without notice. Currently, the reserve requirement stands at about 10%, depending on the size and type of a bank's deposits.
answer
Reserve Requirement Changes: chapter 2
question
The FDIC insures deposits in banks and thrift institutions for up to $100,000 per customer, per bank. In the wake of the banking crisis, the FDIC temporarily increased its coverage to $250,000 per depositor at the end of 2008. Since the FDIC began operations on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a bank failure.Footnote
answer
Federal Deposit Insurance Corporation (FDIC): chapter 2
question
The total amount of money within the overall economy.
answer
money supply: chapter 2
question
Anything generally accepted as a medium of exchange, a measure of value, or a means of payment.
answer
money: chapter 2
question
A structure for allocating limited resources.
answer
economic system: chatper 2 page 24
question
An economic system—also known as the private enterprise or free market system—based on private ownership, economic freedom, and fair competition. Brought to prominence by Adam Smith in the 1700s, capitalism is based on private ownership, economic freedom, and fair competition. One core capitalist principle is the paramount importance of individuals, innovation, and hard work. In a capitalist economy, individuals, businesses, or nonprofit organizations privately own the vast majority of enterprises (with only a small fraction owned by the government). These private-sector businesses are free to make their own choices regarding everything from what they will produce, to how much they will charge, to whom they will hire and fire. Correspondingly, individuals are free to choose what they will buy, how much they are willing to pay, and where they will work.
answer
capitalism: page 24
question
The right to own a business and keep after-tax profits: The right to private property: The right to free choice: The right to fair competition:
answer
The Fundamental Rights of Capitalism page 24
question
Pure competition: a market structure with many competitors selling virtually the same product. There is no control over the pricing Monopolistic competition: is a market structure with many competitors selling different products. Producers have SOME control over the price of their wares, depending on the value that they offer their customers. Oligopoly: a market structure with only a handful of competitors selling products that can be similar or different. - the gasoline industry and the car manufacturing industry are oligopolies Monopoly: A market structure with just a single producer completely dominating the industry, leaving no room for significant competitors. These usually are not good for anyone but the company and they can charge whatever they want in price and you would have to pay it considering that they are the only company that makes it.
answer
The four degrees of compettion: page 25
question
The quantity of products that producers are willing to offer for sale at different market prices.
answer
Supply: page 26
question
The graphed relationship between price and quantity from a supplier standpoint. The supply curve maps quantity on the x-axis (or horizontal axis) and price on the y-axis (or vertical axis). In most categories, as the price rises, the quantity produced rises correspondingly, yielding a graph that curves up as it moves to the right. Exhibit 2.3 shows a possible supply curve for pizza.
answer
supply curve page 26
question
The quantity of products that consumers are willing to buy at different market prices.
answer
Demand page 27
question
The graphed relationship between price and quantity from a customer demand standpoint. Like the supply curve, the demand curve maps quantity on the x-axis and price on the y-axis. But different from the supply curve, the demand curve for most goods and services slopes downward as it moves to the right since the quantity demanded tends to drop as prices rise. Exhibit 2.4 shows how a demand curve for pizza could look.
answer
demand curve page 27
question
The price associated with the point at which the quantity demanded of a product equals the quantity supplied.
answer
equilibrium price page 27
question
Socialism is an economic system based on the principle that the government should own and operate key enterprises that directly affect public welfare, such as utilities, telecommunications, and healthcare. Although the official government goal is to run these enterprises in the best interest of the overall public, inefficiencies and corruption often interfere with effectiveness. Socialist economies also tend to have higher taxes, which are designed to distribute wealth more evenly through society. Tax revenues typically fund services that citizens in free enterprise systems would have to pay for themselves in countries with lower tax rates. Examples range from free childcare to free university education to free public healthcare systems. Critics of the recent government intervention in the U.S. economy believe that the new moves have pushed us too far in a socialist direction.
answer
Socialism: page 27
question
Is an economic and political system that calls for public ownership of virtually all enterprises, under the direction of a strong central government. The communist concept was the brainchild of political philosopher Karl Marx, who outlined its core principles in his 1848 Communist Manifesto. The communism that Marx envisioned was supposed to improve a lot of the worker dramatically at the expense of the super-rich.
answer
Communism page 28
question
Economies that embody elements of both planned and market-based economic systems. Even the United States—one of the most market-oriented economies in the world—does not have a pure market economy. The various departments of the government own a number of major enterprises, including the postal service, schools, parks, libraries, entire systems of universities, and the military. In fact, the federal government is the nation's largest employer, providing jobs for more than 4 million Americans
answer
mixed economies page 28
question
The process of converting government-owned businesses to private ownership. Socialist governments have reduced red tape, cracked down on corruption, and created new laws to protect economic rights. Extravagant human services—from free healthcare to education subsidies—have shrunk. And far-reaching tax reform has created new incentives for both domestic and foreign investment in once-stagnant planned economies.
answer
privatization page 29
question
(GDP) The total value of all final goods and services produced within a nation's physical boundaries over a given period of time. or GDP, measures the total value of all final goods and services produced within a nation's physical boundaries over a given period of time, adjusted for inflation. (Nominal GDP does not include an inflation adjustment.) All domestic production is included in the GDP, even when the producer is foreign-owned. The U.S. GDP, for instance, includes the value of Hyundai Sonatas built in Alabama, even though Hyundai is a Korean firm. Likewise, the Indonesian GDP includes the value of Gap clothing manufactured in Indonesian factories, even though Gap is an American firm.
answer
Gross Domestic Product (gdp) page 29
question
Raising a child born in 2012 from birth to age 17 costs about $241,000 (not including college!)—$301,970 if you include projected inflation.
answer
raising a child (2012) page 30
question
The overall level of employment is another key element of economic health. When people have jobs, they have money, which allows them to spend and invest, fueling economic growth. Most nations track employment levels largely through the unemployment rate, which includes everyone age 16 and older who doesn't have a job and is actively seeking one. The U.S. unemployment rate climbed precipitously through the Great Recession, rising from 5.8% in 2008 to 9.3% in 2009, to then dropping to 8.1% in 2012, as the economy began its glacially slow turnaround. Unemployment didn't move below 8% until September of 2012, and then it dropped slowly throughout 2013 to end the year at an annual average of 7.4% as the recovery began to take hold. But unfortunately, about half of the 8 million jobs lost during the recession were middle-income jobs, and about half of the new jobs created since have been in low-wage sectors of the economy, leading to stagnant household incomes.Footnote
answer
Employment Level: page 30
question
The percentage of people in the labor force over age 16 who do not have jobs and are actively seeking employment.
answer
unemployment rate: page 30
question
The periodic contraction and expansion that occur over time in virtually every economy. The business cycle is the periodic contraction and expansion that occurs over time in virtually every economy. But the word "cycle" may be a little misleading, since it implies that the economy contracts and expands in a predictable pattern. In reality, the phases of the cycle are different each time they happen, and
answer
business cycle page 30
question
A period of economic downturn, marked by rising unemployment and falling business production. Contraction is a period of economic downturn, marked by rising unemployment. Businesses cut back on production, and consumers shift their buying patterns to more basic products and fewer luxuries. The economic "feel-good factor" simply disappears. Economists declare an official recession when GDP decreases for two consecutive quarters
answer
Contraction: page 30
question
An economic downturn marked by a decrease in the GDP for two consecutive quarters.
answer
recession: page 30
question
An especially deep and long-lasting recession. A depression is an especially deep and long-lasting recession. Fortunately, economies seldom spiral into severe depressions, thanks in large part to proactive intervention from the government. The last depression in the United States was the Great Depression of the 1930s. Whether a downturn is mild or severe, the very bottom of the contraction is called the "trough," as shown in
answer
depression page 30
question
A period of rising economic growth and employment. is a period of rising economic growth and increasing employment following a contraction. Businesses begin to expand. Consumers start to regain confidence, and spending begins to rise. The recovery is essentially the transition period between contraction and expansion.
answer
Recovery page 31
question
A period of robust economic growth and high employment.
answer
Expansion page 31
question
A period of rising average prices across the economy. The rate of price changes across the economy is another basic measure of economic well-being. Inflation means that prices, on average, are rising. Similar to unemployment, a low level of inflation is not so bad. It reflects a healthy economy—people have money, and they are willing to spend it. But when the Federal Reserve—the nation's central bank—manages the economy poorly, inflation can spiral out of control,
answer
Inflation: page 31
question
An average monthly inflation rate of more than 50 percent. when average prices increase more than 50% per month. In Hungary, for example, inflation in its unstable, post-World War II economy climbed so quickly that prices doubled every 15 hours from 1945 to 1946. More recently, prices in the war-torn former Yugoslavia doubled every 16 hours between October 1993 and January 1994.
answer
hyperinflation
question
A period of slowing average price increases across the economy. When the rate of price increases slows down, the economy is experiencing disinflation, which was the situation in the United States in the mid-1990s and more recently in the second half of 2008.
answer
disinflation: page 31
question
A period of falling average prices across the economy. typically a sign of economic trouble that goes hand-in-hand with very high unemployment. People don't have money and simply won't spend unless prices drop.
answer
deflation: page 31
question
The basic relationship between the production of goods and services (output) and the resources needed to produce them (input) calculated via the following equation: output/input = productivity. refers to the relationship between the goods and services that an economy produces and the resources needed to produce them. The amount of output—goods and services—divided by the amount of input (e.g., hours worked) equals productivity. The goal, of course, is to produce more goods and services, using fewer hours and other inputs. A high level of productivity typically correlates with healthy GDP growth, while low productivity tends to correlate with a more stagnant economy.
answer
Productivity: page 32
question
Economics—the study of how people, companies, and governments allocate resources—offers vital insights regarding the forces that affect every business on a daily basis. Understanding economics helps businesspeople make better decisions, which can lead to greater profitability, both short-term and long-term. Macroeconomics is the study of broad economic trends. Microeconomics focuses on the choices made by smaller economic units, such as individual consumers, families, and businesses.
answer
Define Economics and Discuss the Evolving Global Economic Crisis:
question
Fiscal policy and monetary policy refer to efforts to shape the health of the economy. Fiscal policy involves federal government taxation and spending decisions designed to encourage growth and boost employment. Monetary policy refers to decisions by the Federal Reserve that influence the size of the money supply and the level of interest rates. Both the federal government and the Federal Reserve attempted to play a pivotal role in mitigating the impact of the recent financial crisis and establishing a framework for recovery via fiscal and monetary policy. These tools can also help sustain economic expansions.
answer
Analyze the Impact of Fiscal and Monetary Policy on the Economy
question
Capitalism, also known as the free market system, is based on private ownership, economic freedom, and fair competition. In a capitalist economy, individuals, businesses, or nonprofit organizations privately own the vast majority of enterprises. As businesses compete against each other, quality goes up, prices remain reasonable, and choices abound, raising the overall standard of living. The interplay between the forces of supply and demand determines the selection of products and prices available in a free market economy. Supply refers to the quantity of products that producers are willing to offer for sale at different market prices at a specific time. Demand refers to the quantity of products that consumers are willing to buy at different market prices at a specific time. According to economic theory, markets will naturally move toward the point at which supply and demand are equal: the equilibrium point.
answer
Explain and Evaluate the Free Market System and Supply and Demand
question
In planned economies, the government—rather than individual choice—plays a pivotal role in controlling the economy. The two main types of planned economies are socialism and communism. While planned economies are designed to create more equity among citizens, they tend to be more prone to corruption and less effective at generating wealth than market-based economies.
answer
Explain and Evaluate Planned Market Systems
question
Most of today's nations have mixed economies, falling somewhere along a spectrum that ranges from pure planned at one extreme to pure market at the other. Over the past 30 years, most major economies around the world have moved toward the market end of the spectrum, although recently—in the wake of the global financial crisis—the United States has added more planned elements to the economy.
answer
Describe the Trend toward Mixed Market Systems
question
Since economic systems are so complex, no single measure captures all the dimensions of economic performance. But each measure yields insight on overall economic health. Gross domestic product (GDP): The total value of all goods and services produced within a nation's physical boundaries over a given period of time. Unemployment rate: The percentage of the labor force reflecting those who don't have jobs and are actively seeking employment. Business cycle: The periodic expansion and contraction that occur over time in virtually every economy. Inflation rate: The rate at which prices are rising across the economy. The government tracks the consumer price index and the producer price index. Productivity: The relationship between the goods and services that an economy produces and the inputs needed to produce them.
answer
Discuss Key Terms and Tools to Evaluate Economic Performance
question
ACCESS TO FACTORS OF PRODUCTION: International trade offers a valuable opportunity for individual firms to capitalize on factors of production that simply aren't present in the right amount for the right price in each individual country REDUCED RISK : Global trade reduces dependence on one economy, lowering the economic risk for multinational firms. INFLOW OF INNOVATION: International trade can also offer companies an invaluable source of new ideas. Japan, for instance, is far ahead of the curve regarding cell phone service
answer
Key reasons for international trade: page 36
question
The opportunity of giving up the second-best choice when making a decision. When a country produces more of one good, it must produce less of another good (assuming that resources are finite). The value of the second-best choice—the value of the production that a country gives up in order to produce the first product—represents the opportunity cost of producing the first product.
answer
opportunity cost: page 37
question
The benefit a country has in a given industry when it can produce more of a product than other nations using the same amount of resources.
answer
absolute advantage: page 37
question
The benefit a country has in a given industry if it can make products at a lower opportunity cost than other countries. meaning that they tend to turn out those goods that have the lowest opportunity cost compared to other countries. The United States, for instance, boasts a comparative advantage versus most countries in movie and television program production; Germany has a comparative advantage in the production of high-performance cars; and South Korea enjoys a comparative advantage in electronics.
answer
comparative advantage: page 37
question
After a decade of robust growth, global trade began slowing in 2007, due largely to turbulence in the worldwide financial markets. In 2008, the rate of growth in world trade slid below 5%, as the global recession tightened its grip. In 2009, global trade plummeted nearly 25% in U.S. dollar terms, and 12% in terms of overall volume from the 2008 level, the largest single-year drop since World War II. In 2010, global trade volume surged 13.8%, but expanded a more modest +5.0% in 2011. In 2012, the growth rate dropped to +2.3%, and economists anticipated an increase to +2.5% in 2013 and +4.5% in 2014, which would still lag behind the turbo-charged growth rates of much of the past two decades. Measuring the impact of international trade on individual nations requires a clear understanding of balance of trade, balance of payments, and exchange rates
answer
Global Trade: page 37
question
A basic measure of the difference in value between a nation's exports and imports, including both goods and services.
answer
balance of trade: page 38
question
Overage that occurs when the total value of a nation's exports is higher than the total value of its imports.
answer
trade surplus page 38
question
Shortfall that occurs when the total value of a nation's imports is higher than the total value of its exports. The United States has had an overall trade deficit since 1976, and as the American appetite for foreign goods has grown, the trade deficit has ballooned. But that growth may slow over the next few years if demand remains sluggish in response to the global economic crisis.
answer
trade deficit: page 38
question
A measure of the total flow of money into or out of a country.
answer
Balance of payments: page 38
question
Overage that occurs when more money flows into a nation than out of that nation.
answer
balance of payments surplus: page 38
question
Shortfall that occurs when more money flows out of a nation than into that nation.
answer
balance of payments deficit page 38
question
A measurement of the value of one nation's currency relative to the currency of other nations. measure the value of one nation's currency relative to the currency of other nations. While the exchange rate does not directly measure global commerce, it certainly has a powerful influence on how global trade affects individual nations and their trading partners. The exchange rate of a given currency must be expressed in terms of another currency
answer
Exchange rates page 38
question
International trade that involves the barter of products for products rather than for currency.
answer
countertrade page 38
question
(also contract manufacturing) Contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production. means contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production. Gap, for instance, relies on a network of manufacturers in 50 different countries, mostly in less-developed parts of the world, from Asia, to Africa, to Central America. Apple depends on firms in China and Taiwan to produce the iPhone. And countless small companies contract with foreign manufacturers as well. The key benefit, of course, is dramatically lower wages, which drive down the cost of production. But while foreign outsourcing lowers costs, it also involves significant risk. Quality control typically requires very detailed specifications to ensure that a company gets what it actually needs. Another key risk of foreign outsourcing involves social responsibility.
answer
Foreign outsourcing: page 39
question
Buying products domestically that have been produced or grown in foreign nations. means buying products from overseas that have already been produced, rather than contracting with overseas manufacturers to produce special orders. Imported products, of course, don't carry the brand name of the importer, but they also don't carry as much risk. Pier 1 Imports, a large retail chain, has built a powerful brand around the importing concept, creating stores that give the customer the sense of a global shopping trip without the cost or hassle of actually leaving the country.
answer
Importing page 40
question
Selling products in foreign nations that have been produced or grown domestically. is the most basic level of international market development. It simply means producing products domestically and selling them abroad. Exporting represents an especially strong opportunity for small and mid-sized companies.
answer
Exporting page 40
question
Authority granted by a domestic firm to a foreign firm for the rights to produce and market its product or to use its trademark/patent rights in a defined geographical area. oreign licensing and foreign franchising, the next level of commitment to international markets, are quite similar. Foreign licensing involves a domestic firm granting a foreign firm the rights to produce and market its product or to use its trademark/patent rights in a defined geographical area. The company that offers the rights, or the licensor, receives a fee from the company that buys the rights, or the licensee.
answer
Foreign licensing: page 40
question
A specialized type of foreign licensing in which a firm expands by offering businesses in other countries the right to produce and market its products according to specific operating requirements. is a specialized type of licensing. A firm that expands through foreign franchising, called a franchisor, offers other businesses, or franchisees, the right to produce and market its products if the franchisee agrees to specific operating requirements—a complete package of how to do business. Franchisors also often offer their franchisees management guidance, marketing support, and even financing. In return, franchisees pay both a start-up fee and an ongoing percentage of sales to the franchisor. One key difference between franchising and licensing is that franchisees assume the identity of the franchisor.
answer
Foreign franchising: page 40
question
(or foreign direct investment) When firms either acquire foreign firms or develop new facilities from the ground up in foreign countries.
answer
Direct investment page 40
question
When two or more companies join forces—sharing resources, risks, and profits, but not actually merging companies—to pursue specific opportunities.
answer
Joint ventures page 41
question
A voluntary agreement under which two or more people act as co-owners of a business for profit.
answer
partnership page 41
question
An agreement between two or more firms to jointly pursue a specific opportunity without actually merging their businesses. Strategic alliances typically involve less formal, less encompassing agreements than partnerships.
answer
strategic alliance: page 41
question
Differences among cultures in language, attitudes, and values. include differences among countries in language, attitudes, and values. Some specific, and perhaps surprising, elements that affect business include nonverbal communication, forms of address, attitudes toward punctuality, religious celebrations and customs, business practices, and expectations regarding meals and gifts. Understanding and responding to sociocultural factors are vital for firms that operate in multiple countries. But since the differences often operate at a subtle level, they can undermine relationships before anyone is aware that it's happening. The best way to jump over sociocultural barriers is to conduct thorough consumer research, cultivate firsthand knowledge, and practice extreme sensitivity.
answer
Sociocultural differences: page 41
question
A country's physical facilities that support economic activity. should be another key economic consideration when entering a foreign market. Infrastructure refers to a country's physical facilities that support economic activity. It includes basic systems in each of the following areas: Transportation (e.g., roads, airports, railroads, and ports) Communication (e.g., TV, radio, Internet, and cell phone coverage) Energy (e.g., utilities and power plants) Finance (e.g., banking, checking, and credit)
answer
Infrastructure: page 42
question
National policies designed to restrict international trade, usually with the goal of protecting domestic businesses.
answer
protectionism: page 44
question
are taxes levied against imports. Governments tend to use protective tariffs either to shelter fledgling industries that couldn't compete without help, or to shelter industries that are crucial to the domestic economy. As part of an ongoing trade dispute in this growing industry. In 2009, Egypt imposed tariffs on sugar and the U.S. levied new tariffs on Chinese goods—including mattress springs and electrodes—that it contended were being dumped on the market at below-cost prices. In 2013, China imposed heavy tariffs on imports of U.S. raw materials used to make solar panels Quotas, VERs, and embargoes are relatively rare compared to tariffs, and tariffs are falling to new lows. But as tariffs decrease, some nations are seeking to control imports through nontariff barriers such as: Requiring red-tape-intensive import licenses for certain categories Establishing nonstandard packaging requirements for certain products Offering less-favorable exchange rates to certain importers Establishing standards on how certain products are produced or grown Promoting a "buy national" consumer attitude among local people Nontariff barriers tend to be fairly effective because complaints about them can be hard to prove and easy to counter.
answer
Tariffs: page 44
question
are limitations on the amount of specific products that may be imported from certain countries during a given time period. Russia, for instance, has specific quotas for U.S. meat imports. Quotas, VERs, and embargoes are relatively rare compared to tariffs, and tariffs are falling to new lows. But as tariffs decrease, some nations are seeking to control imports through nontariff barriers such as: Requiring red-tape-intensive import licenses for certain categories Establishing nonstandard packaging requirements for certain products Offering less-favorable exchange rates to certain importers Establishing standards on how certain products are produced or grown Promoting a "buy national" consumer attitude among local people Nontariff barriers tend to be fairly effective because complaints about them can be hard to prove and easy to counter.
answer
Quotas: page 44
question
are limitations on the amount of specific products that one nation will export to another nation. Although the government of the exporting country typically imposes VERs, they usually do so out of fear that the importing country would impose even more onerous restrictions. As a result, VERs often aren't as "voluntary" as the name suggests. The United States, for instance, insisted on VERs with Japanese auto exports in the early 1980s (which many economists believe ultimately precipitated the decline of the U.S. auto industry). Quotas, VERs, and embargoes are relatively rare compared to tariffs, and tariffs are falling to new lows. But as tariffs decrease, some nations are seeking to control imports through nontariff barriers such as: Requiring red-tape-intensive import licenses for certain categories Establishing nonstandard packaging requirements for certain products Offering less-favorable exchange rates to certain importers Establishing standards on how certain products are produced or grown Promoting a "buy national" consumer attitude among local people Nontariff barriers tend to be fairly effective because complaints about them can be hard to prove and easy to counter.
answer
Voluntary export restraints (VERs): page 44
question
is a total ban on the international trade of a certain item, or a total halt in trade with a particular nation. The intention of most embargoes is to pressure the targeted country to change political policies or to protect national security. The U.S. embargo against trade with Cuba offers a high-profile example. Quotas, VERs, and embargoes are relatively rare compared to tariffs, and tariffs are falling to new lows. But as tariffs decrease, some nations are seeking to control imports through nontariff barriers such as: Requiring red-tape-intensive import licenses for certain categories Establishing nonstandard packaging requirements for certain products Offering less-favorable exchange rates to certain importers Establishing standards on how certain products are produced or grown Promoting a "buy national" consumer attitude among local people Nontariff barriers tend to be fairly effective because complaints about them can be hard to prove and easy to counter.
answer
embargo: page 45
question
An international economic and political movement designed to help goods and services flow more freely across international boundaries.
answer
Free trade: page 45
question
An international trade agreement that has taken bold steps to lower tariffs and promote free trade worldwide. is an international trade accord designed to encourage worldwide trade among its members. Established in 1948 by 23 nations, GATT has undergone a number of revisions. The most significant changes stemmed from the 1986-1994 Uruguay Round of negotiations, which took bold steps to slash average tariffs by about 30% and to reduce other trade barriers among the 125 nations that signed.
answer
General agreemen on tariffs and trade (GATT) page 45
question
A permanent global institution to promote international trade and to settle international trade disputes. A permanent global institution to promote international trade and to settle international trade disputes. The WTO monitors provisions of the GATT agreements promotes further reduction of trade barriers and mediates disputes among members. The decisions of the WTO are binding, which means that all parties involved in disputes must comply to maintain good standing in the organization.
answer
World Wide Organization (WTO): page 45
question
An international cooperative of 188 member countries, working together to reduce poverty in the developing world. The World Bank influences the global economy by providing financial and technical advice to the governments of developing countries for projects in a range of areas, including infrastructure, communications, health, and education. The financial assistance usually comes in the form of low-interest loans. But to secure a loan, the borrowing nation must often agree to conditions that can involve rather arduous economic reform.
answer
World bank: page 45
question
An international organization of 188 member nations that promotes international economic cooperation and stable growth. Supports stable exchange rates Facilitates a smooth system of international payments Encourages member nations to adopt sound economic policies Promotes international trade Lends money to member nations to address economic problems
answer
International Monetary Fund (IMF) page 46
question
A group of countries that have reduced or even eliminated tariffs, allowing for the free flow of goods among the member nations.
answer
trading blocks: page 46
question
The treaty among the United States, Mexico, and Canada that eliminated trade barriers and investment restrictions over a fifteen-year period starting in 1994. is the treaty that created the free-trading zone among the United States, Mexico, and Canada. The agreement took effect in 1994, gradually eliminating trade barriers and investment restrictions over a 15-year period.
answer
North Amrican free trade agreement (NAFTA): page 46-47
question
A group of countries that have eliminated tariffs and harmonized trading rules to facilitate the free flow of goods among the member nations. goes even further than a trading bloc by attempting to harmonize all trading rules. The United States, Mexico, and Canada have formed the largest trading bloc in the world, and the 28 countries of the European Union have formed the largest common market.
answer
Common Market page 46
question
The world's largest common market, composed of twenty-eight European nations. Composed of 28 nations and more than half a billion people, and boasting a combined GDP of just over $15 trillion, the European Union (EU) is the world's largest common market. Exhibit 3.3 shows a map of the 2014 EU countries plus six countries which have applied to join.
answer
European Union (EU) page 47
