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697 Terms
barriers to entry
Factors, such as technological or legal conditions, that prevent new firms from competing equally with an existing firm.
business
An organization that strives for a profit by providing goods and services desired by its customers.
capitalism
An economic system based on competition in the marketplace and private ownership of the factors of production (resources); also known as the private enterprise system.
communism
An economic system characterized by government ownership of virtually all resources, government control of all markets, and economic decision-making by central government planning.
consumer price index (CPI)
An index of the prices of a “market basket” of goods and services purchased by typical urban consumers.
contractionary policy
The use of monetary policy by the Fed to tighten the money supply by selling government securities or raising interest rates.
cost-push inflation
Inflation that occurs when increases in production costs push up the prices of final goods and services.
demand-pull inflation
Inflation that occurs when the demand for goods and services is greater than the supply.
gross domestic product (GDP)
The total market value of all final goods and services produced within a nation’s borders each year.
macroeconomics
The subarea of economics that focuses on the economy as a whole by looking at aggregate data for large groups of people, companies, or products.
microeconomics
The subarea of economics that focuses on individual parts of the economy, such as households or firms.
monetary policy
A government’s programs for controlling the amount of money circulating in the economy and interest rates.
fiscal policy
The government’s use of taxation and spending to affect the economy.
recession
A decline in GDP that lasts for at least two consecutive quarters.
socialism
An economic system in which the basic industries are owned either by the government itself or by the private sector under strong government control.
code of ethics
A set of guidelines prepared by a firm to provide its employees with the knowledge of what the firm expects in terms of their responsibilities and behavior toward fellow employees, customers, and suppliers.
corporate social responsibility (CSR)
The concern of businesses for the welfare of society as a whole; consists of obligations beyond those required by law or contracts.
deontology
A philosophy in which a person will follow his or her obligations to an individual or society because upholding one's duty is what is ethically correct.
utilitarianism
A philosophy that focuses on the consequences of an action to determine whether it is right or wrong; holds that an action that affects the majority adversely is morally wrong.
stakeholders
Individuals or groups to whom a business has a responsibility; include employees, customers, the general public, and investors.
absolute advantage
The situation when a country can produce and sell a product at a lower cost than any other country or when it is the only country that can provide the product.
balance of trade
The difference between the value of a country’s exports and the value of its imports during a specific time.
European Union
Trade agreement among 28 European nations.
G20
Informal group that brings together 19 countries and the European Union—the 20 leading economies in the world.
International Monetary Fund (IMF)
An international organization, founded in 1945, that promotes trade, makes short-term loans to member nations, and acts as a lender of last resort for troubled nations.
Mercosur
Trade agreement between Peru, Brazil, Argentina, Uruguay, and Paraguay.
North American Free Trade Agreement (NAFTA)
A 1993 agreement creating a free-trade zone including Canada, Mexico, and the United States.
principle of comparative advantage
The concept that each country should specialize in the products that it can produce most readily and cheaply and trade those products for those that other countries can produce more readily and cheaply.
protectionism
The policy of protecting home industries from outside competition by establishing artificial barriers such as tariffs and quotas.
Uruguay Round
A 1994 agreement originally signed by 117 nations to lower trade barriers worldwide.
World Trade Organization (WTO)
An organization established by the Uruguay Round in 1994 to oversee international trade, reduce trade barriers, and resolve disputes among member nations.
C corporation
A conventional or basic form of corporate organization.
S corporation
A hybrid entity that is organized like a corporation, with stockholders, directors, and officers, but taxed like a partnership, with income and losses flowing through to the stockholders and taxed as their personal income.
limited liability company (LLC)
A hybrid organization that offers the same liability protection as a corporation but may be taxed as either a partnership or a corporation.
sole proprietorship
A business that is established, owned, operated, and often financed by one person.
general partnership
A partnership in which all partners share in the management and profits. Each partner can act on behalf of the firm and has unlimited liability for all its business obligations.
limited partnership
A partnership with one or more general partners, who have unlimited liability, and one or more limited partners, whose liability is limited to the amount of their investment in the company.
horizontal merger
A merger of companies at the same stage in the same industry; done to reduce costs, expand product offerings, or reduce competition.
vertical merger
A merger of companies at different stages in the same industry; done to gain control over supplies of resources or to gain access to different markets.
conglomerate merger
A merger of companies in unrelated businesses; done to reduce risk.
angel investors
Individual investors or groups of experienced investors who provide financing for start- up businesses by investing their own funds.
intrapreneurs
Entrepreneurs who apply their creativity, vision, and risk-taking within a large corporation, rather than starting a company of their own.
small business
A business with under 500 employees that is independently managed, is owned by an individual or a small group of investors, is based locally, and is not a dominant company in its industry.
Small Business Administration (SBA)
A government agency that speaks on behalf of small business; specifically it helps people start and manage small businesses, advises them in the areas of finance and management, and helps them win federal contracts.
venture capital
Financing obtained from venture capitalists, investment firms that specialize in financing small, high-growth companies and receive an ownership interest and a voice in management in return for their money.
autocratic leaders
Directive leaders who prefer to make decisions and solve problems on their own with little input from subordinates.
consensual leaders
Leaders who encourage discussion about issues and then require that all parties involved agree to the final decision.
consultative leaders
Leaders who confer with subordinates before making a decision but who retain the final decision-making authority.
democratic leaders
Leaders who solicit input from all members of the group and then allow the members to make the final decision through a vote.
free-rein (laissez-faire) leadership
A leadership style in which the leader turns over all authority and control to subordinates.
strategic planning
The process of creating long-range (one to five years), broad goals for the organization and determining what resources will be needed to accomplish those goals.
tactical planning
The process of beginning to implement a strategic plan by addressing issues of coordination and allocating resources to different parts of the organization; has a shorter time frame (less than one year) and more specific objectives than strategic planning.
operational planning
The process of creating specific standards, methods, policies, and procedures that are used in specific functional areas of the organization; helps guide and control the implementation of tactical plans.
arbitration
Settling labor-management disputes through a third party. The decision is final and binding.
Equal Employment Opportunity Commission (EEOC)
Processes discrimination complaints, issues regulations regarding discrimination, and disseminates information.
Occupational Safety and Health Administration (OSHA)
Sets workplace safety and health standards and assures compliance.
mediation
Negotiation process in which a specialist facilitates labor-management contract discussions and suggests compromises.
union shop
Nonunion workers can be hired but must join the union later.
open shop
Workers do not have to join the union or pay union dues.
agency shop
Workers don’t have to join a union but must pay union dues.