BBA-PT XXXIV Business Management Chapter 3
40 Questions
8 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Which of the following best defines the formal economy?

  • Economic activities not monitored or taxed by the government.
  • All jobs recognized as income sources on which income taxes must be paid. (correct)
  • Economic activities that only affect microeconomics.
  • The change in the general level of economic activity.

    • The informal economy is included when calculating a country's GDP.

    False (B)

    What is one impact of strong economic growth on a company's profits?

    Relatively high profits

    The study of large-scale economies, like a country, is known as ________.

    <p>macroeconomics</p> Signup and view all the answers

    Match the economic term with its definition:

    <p>Economic Growth = Change in the general level of economic activity. Macroeconomics = Study of large-scale economies. Informal Economy = Economic activities not monitored or taxed by the government. Microeconomics = Focuses on the business or industry.</p> Signup and view all the answers

    When the economy is weak, what generally happens to demand for a company's products?

    <p>Demand is typically low. (C)</p> Signup and view all the answers

    Microeconomics focuses on the economy of an entire country.

    <p>False (B)</p> Signup and view all the answers

    What is another name for the informal economy?

    <p>Grey economy</p> Signup and view all the answers

    Economic conditions reflect the level of ________ and production for a particular area or industry.

    <p>consumption</p> Signup and view all the answers

    Which economic factor directly affects the income levels of consumers?

    <p>Economic growth. (B)</p> Signup and view all the answers

    Which of the following best defines a recession?

    <p>A period of two or more consecutive quarters of negative economic growth. (A)</p> Signup and view all the answers

    A low unemployment level is considered an indicator of economic decline.

    <p>False (B)</p> Signup and view all the answers

    What is the term for unemployment that results from people being between jobs?

    <p>frictional unemployment</p> Signup and view all the answers

    What occurs when the quantity supplied exceeds the quantity demanded?

    <p>Surplus (D)</p> Signup and view all the answers

    The market value of all final products and services in a country is known as the ______.

    <p>Gross Domestic Product (GDP)</p> Signup and view all the answers

    A shortage occurs when the quantity supplied by firms is more than the quantity demanded by customers.

    <p>False (B)</p> Signup and view all the answers

    What does CPI measure?

    <p>The change in prices for a market basket of consumer products (D)</p> Signup and view all the answers

    What term describes the price at which the quantity supplied and demanded are equal?

    <p>Equilibrium price</p> Signup and view all the answers

    ______ policy affects the amount of funds available at commercial banks and therefore affects interest rates.

    <p>Monetary</p> Signup and view all the answers

    Match the type of unemployment with its definition:

    <p>Frictional unemployment = People who are between jobs Seasonal unemployment = People whose services are not needed during some seasons Cyclical unemployment = People who are unemployed because of poor economic conditions Structural unemployment = People who are unemployed because they do not have adequate skills</p> Signup and view all the answers

    Which of the following is primarily impacted by Fiscal policy?

    <p>Government spending and taxes (B)</p> Signup and view all the answers

    Which of the following is a cause of cost-push inflation?

    <p>Higher costs of supplies and materials (C)</p> Signup and view all the answers

    What is a potential effect of strong consumer demand?

    <p>Pressure on wages and reduced unemployment (A)</p> Signup and view all the answers

    Reduced personal income tax rates generally decrease the demand for products and services.

    <p>False (B)</p> Signup and view all the answers

    Demand-pull inflation occurs when prices increase due to increased supply.

    <p>False (B)</p> Signup and view all the answers

    When market interest rates decrease, a company's cost of borrowing increases.

    <p>False (B)</p> Signup and view all the answers

    What is one consequence of a government budget deficit?

    <p>Government borrowing</p> Signup and view all the answers

    If a firm anticipates shortages, what action might they take that contributes to inflation?

    <p>increase prices</p> Signup and view all the answers

    _____ taxes are imposed on specific products, such as tobacco, increasing prices for consumers.

    <p>Excise</p> Signup and view all the answers

    What is one factor that can discourage consumers from purchasing products on credit?

    <p>High interest rates</p> Signup and view all the answers

    A change in the price of oil that impacts gasoline prices and transportation costs is an example of ______ inflation.

    <p>cost-push</p> Signup and view all the answers

    How does decreasing corporate taxes generally affect a company?

    <p>Increases after-tax earnings (B)</p> Signup and view all the answers

    Market prices are determined by the interaction of supply and ______.

    <p>demand</p> Signup and view all the answers

    Match the following terms with their descriptions:

    <p>Demand = The willingness and ability of a person to buy a product Supply = The willingness and ability of a supplier to produce a product Market Price = Determined by the interaction of supply and demand Equilibrium = The point where supply and demand intersect</p> Signup and view all the answers

    Match the following concepts with their definitions:

    <p>Surplus = Quantity supplied exceeds quantity demanded Shortage = Quantity demanded exceeds quantity supplied Equilibrium = Quantity supplied equals quantity demanded Fiscal Policy = Government spending and taxation</p> Signup and view all the answers

    How does higher consumer income generally affect demand?

    <p>It generally results in a higher demand for products or services. (C)</p> Signup and view all the answers

    Quantity demanded is higher when the price is higher.

    <p>False (B)</p> Signup and view all the answers

    What is one factor that influences a firm's decision to supply products to the market?

    <p>Market price</p> Signup and view all the answers

    Companies may postpone expansion when ______ are too high.

    <p>interest rates</p> Signup and view all the answers

    What happens to the quantity supplied when the price is higher?

    <p>Quantity supplied is higher (A)</p> Signup and view all the answers

    Study Notes

    BBA-PT XXXIV Business Management

    • Course title: Introduction to Business
    • Edition: 4e
    • Instructor: Milaika Capella Ras, MBA
    • Email: [email protected]
    • Session date: January 20, 2025
    • University: Inter-Continental University of the Caribbean
    • Accreditation: ACBSP, ACCREDITED

    Chapter 3: Prepare for the Road Ahead - Assessing Economic Conditions

    • Chapter Topics:
      • Formal vs. informal economy
      • Economic growth
      • Inflation
      • Interest rates
      • Supply and demand
      • Government policy (monetary + fiscal)

    Economic Conditions

    • Reflect level of consumption and production in a country, area, or industry
    • Affect business revenues and expenses, impacting business value

    Two Main Divisions in Economics

    • Macroeconomics: Study of large-scale economies (e.g., a country)
    • Microeconomics: Focuses on individual businesses or industries

    Formal vs. Informal Economy

    • Formal economy: Recognized jobs, income sources with paid taxes, included in GDP
    • Informal economy: Economic activities not monitored or taxed by the government (grey economy)

    Economic Growth

    • Change in overall economic activity (e.g., total worker income)
    • High volumes of spending result in higher revenues for businesses selling products/services
    • Strong growth leads to strong demand, higher business profits
    • Weak growth leads to lower demand, lower business profits

    Recession

    • Two or more consecutive quarters of negative economic growth
    • Lowers demand for goods/services
    • Reduces business revenue
    • May cause businesses to shut down facilities

    Economic Growth Indicators

    • Gross Domestic Product (GDP): Market value of all final products and services in a country
    • Aggregate Expenditures: Total amount of spending in the economy
    • Unemployment level: Low unemployment indicates stronger growth

    Alternative Economic Growth Indicators

    • Unemployment level
    • Industrial production level
    • New housing starts
    • Personal income level

    Unemployment Types

    • Frictional unemployment: People in-between jobs
    • Seasonal unemployment: Jobs not needed during certain seasons
    • Cyclical unemployment: Unemployed due to poor economic conditions
    • Structural unemployment: Lack of adequate job skills

    Inflation

    • Increase in general level of product/service prices over time
    • Measured by percentage changes in the Consumer Price Index (CPI)
    • CPI tracks a basket of prices across many consumer products (groceries, housing, gasoline, etc.)

    Types of Inflation

    • Cost-push inflation: Higher prices charged to firms due to increased costs (e.g., oil price change impacting gasoline, aluminum prices impacting packaging costs)
    • Demand-pull inflation: Increased demand for products/services leading to shortages and price increases (e.g., strong consumer demand creating shortages in production)

    Interest Rates

    • Represent cost of borrowing money
    • Higher interest rates increase borrowing costs for businesses, potentially reducing profits
    • High interest rates may discourage consumer borrowing for certain products/services
    • Businesses might postpone expansion during high interest rate periods

    Market Price Determination

    • Determined by supply and demand interaction
    • Total demand for a product by all customers
    • Supply of that product from businesses

    Demand

    • Willingness and ability of someone to buy a product
    • Influenced by consumer income and preferences
    • Higher income generally leads to higher demand
    • Quantity demanded is higher when the price is lower

    Supply

    • Willingness and ability of a supplier to produce a product
    • Influenced by production expenses, competition, government policy
    • Quantity supplied is higher when the price is higher

    Supply and Demand Interaction

    • Surplus: Quantity supplied by firms is more than customers demand
    • Shortage: Quantity supplied by firms is less than customers demand
    • Equilibrium price: Quantity supplied equals quantity demanded

    Government Policy

    • Monetary policy: Affects the availability of funds at commercial banks, influencing interest rates
    • Fiscal policy: Affects taxes on consumers, impacting consumer spending, affecting business performance, also used to tax firm earnings

    Fiscal Policy Considerations

    • Sets tax rates and government spending
    • Budget deficit occurs when government spending exceeds revenue
    • Government borrowing is used to cover budget deficits, potentially driving up interest rates

    How Government Policies Affect Business Performance

    • Affects revenue, operating expenses, interest expenses, earnings, taxes, and after-tax earnings

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Related Documents

    Description

    This quiz assesses your understanding of Chapter 3 of the Introduction to Business course, focusing on preparing for economic conditions. Key topics include the formal and informal economy, economic growth, inflation, interest rates, and government policies. Test your knowledge of how these factors influence business operations and values.

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser