(SURB 1105-204) Test #1 “Key Terms”

Chapter One

	Businesses: Entities that offer goods and services to their customers in order to	earn a profit.

	Competition: Arises when two or more businesses contend with one another to	attract customers and gain an advantage.

Corporation: A business that is a legal entity separate from the owner or owners.

	E-commerce: Primarily consists of two different kinds of businesses: business to	consumer (B2C) and business to business (B2B).

	Entrepreneur: Someone who assumes the risk of creating, organizing, and	operating a business and directs all business resources.

	Expenses: The money a business pays out.

	Factors of Production: The resources used to produce goods and services. These	include labor (which is improved through education), natural resources, capital,	entrepreneurial talent, and technology.

	Financial Capital: Money used to facilitate a business enterprise.

	General Partnership: Every partner participates in the daily management tasks of	the business, and each has some degree of control over the decisions that are	made.

	Globalization: The movement toward a more interconnected and interdependent	world economy.

	Goods: Any physical products offered by a business; tangible items.

	Green Economy: One that factors ecological concerns into its business decisions.

	Labor: The human resource that refers to any physical or intellectual work people	contribute to a business’ production.

	Limited Partnership: There is at least one partner who controls business	operations and is personally liable.

	Limited Liability Company (LLC): Owners have limited personal liability for	debts and actions of the company, but also provide owners with tax advantages	and management flexibility.

	Local Business: Typically a one-of-a-kind, single outlet serving a limited	surrounding area that relies heavily on constant patronage.

	Multinational Enterprise: Makes and/or sells products in several countries; the	have expanded to service and provide goods to international consumers.

	National Business: Has several outlets throughout the country; does not serve an	international market.

	Natural Resources: The raw materials provided by nature that are used to produce	goods and services. Some examples of which are soil, trees, coal, oil, and ores.

	Nonprofit Organization: Seek to service their communities through social,	educational, or political means; any excess profit is used to further their stated	mission.

	Offshoring: Allows many types of work to be located outside the United States.

	Partnership: Owned by two or more people that is not registered with the state as	a corporation or a LLC; general and limited.

	Profit: Earned when a company’s revenue is greater than its expenses; profit	drives businesses.

	Real Capital: Physical facilities used to produce goods and services.

	Regional Business: Serves a wider market than local business, but same deal.

	Revenue: The money a business brings in.

	Service: Refers to an intangible product that is bought or sold; cannot be	physically handled.

	Social Environment: An interconnected system of different demographic factors.	For example: Gender, ethnicity, age, faith, and so on.

	Sole Proprietorship: A business that is owned by one person; less government	regulation but more risk and liability.

	Stakeholder: Someone who is affected by a company’s actions or who has an	interest in what the company does.

	Supply Chain: The process by which products, information, and money move	between supplier and consumer.

	Technology: Items and services such as the smartphone, computer software, and	digital broadcasting that make business more effective, efficient, and productive.

	Telecommunicating: Work from home or another location away from the office.

	Undercapitalization: Occurs when a business owner cannot gain access to	adequate financing.

Chapter Two

	Business Cycle: Natural increases and decreases in the economy over periods of	time.

	Capitalism: The economic system that allows for freedom of choice among those	encompassed in its economy. It encourages private ownership of resources	required to make and provide the goods and services we enjoy.

	Communism: An economic system in which a state’s government makes all	economic decisions and controls all the social services and many of the major	resources required for production of goods and services.

	Complementary Goods: Products or services that go with each other and are	consumed together. For example: an iPod with iTunes.

	Consumer Price Index (CPI): A benchmark used to track changes in prices over	time by creating a “market basket” of specified set goods and services (including	taxes) that represent the average buying pattern of urban households.

	Currency: A unit of exchange for the transfer of goods and services.

	Cyclical Unemployment: Measures unemployment caused by lack of demand for	those who want to work. This is one of the four types of unemployment.

	Deflation: A continuous decrease in prices over time.

	Demand: Refers to how much of a product or a service people want to buy at any	given time.

	Demand Curve: A graphical representation of the concept of demand at several	points in time in correlation to prices (y) and units demanded (x).

	Depression: A very severe or long recession. Pretty straight forward.

	Determinants of Demand: Changes in income levels, population changes,	consumer preferences, complementary goods, substitute goods.

	Determinants of Supply: Technology changes, changes in resource prices, price	expectations, number of suppliers, and price of substitute goods.

	Discount Rates: Pretty self explanatory. 5% off, 10% off, etc.

	Disinflation: A decrease in the rate of inflation.

	Economics: The study of how individuals and businesses make decisions to best	satisfy wants, needs, and desires with limited resources.

	Economic Indicators: Gross Domestic Product (GDP), Consumer and Producer	Price Indexes (CPI + PPI), and the unemployment rate.

	Equilibrium Price: The price at which supply and demand are equal.

	Federal Funds Rate: The interest rate that banks charge other banks when they	borrow funds overnight from one another. Banks are required to have x amount of	cash at all times, which is why this is in place.

	Federal Reserve System (the Fed): The central banking system in the United	States that was created by Congress to be an independent government entity,	including twelve regional Federal Reserve Banks and a Board of Governors in	Washington, D.C.

	Fiscal Policy: Designed so that the government can influence the economy in a	way so that cycles transition more smoothly and predictably via taxing and	spending.

	Frictional Unemployment: Measures temporary unemployment in which workers	move between jobs, careers, and locations. This is one of four unemployments.

	Goods: See chapter one’s definition. Nothing has really changed.

	Gross Domestic Product (GDP): A measurement of economic activity which	accounts for the market value of all final goods and services produced within a	country’s territory by citizens of said country during the span of a year.

	Gross National Product (GNP): Very similar to GDP, except that this measure	accounts for all goods and services produced by companies headquartered in the	country’s borders, even if the factories or agents of said company are practicing	outside of country borders. For example, Nike shoe factories in China.

	Inflation: A rise in the general level of prices over time.

	Law of Supply: The amount of a product or service supplied is directly	proportional to the price.

	M-1: Coins, bills, traveler’s checks and checking accounts constitute as the	narrowest measure of our money supply. These tend to be the most liquid in that	they are already in the preferred form of exchange.

	M-2: Another part of the money supply is that which is available for banks to lend	out, such as savings deposits, money market accounts, and certificates of deposit	less than $100,000. This and M-1 are combined to form M-2.

	M-3: This constitutes of M-1 and M-2 plus less liquid funds, such as the larger	certificates of deposit (greater than $100,000), money market accounts held by	large banks and corporations, and deposits of Eurodollars (US money in foreign	countries).

Macroeconomics: The study of the behavior of the overall economy through means of measurement such as unemployment, interest rates, inflation, and price levels.

Market: The mechanism by which buyers and sellers exchange goods and services.

Market Economy: A market wherein individuals are able to make their own economic decisions. The freedom of choice exists for both buyer and seller.

Market Price: The price at which supply and demand are in equilibrium. Nobody will want more than is available, and there will not be a surplus in stock.

Microeconomics: The study of how individual businesses, households, and consumers make decisions to allocate their limited resources in the exchange of goods and services. While macro studies the large, micro studies the small.

Mixed Economy: A unique blend of market and planned economies. There is no such thing as a textbook Capitalist, Communist, or Socialist market in our world. All economies are mixed in some way, shape, or form.

Monetary Policy: The management of fund allocation by the government in respect to the taxing and spending agreed upon in the Fiscal Policy.

Money Supply: The combined amount of money available within the economy (M-1 + M-2 + M-3).

Monopolistic Competition: This type of competition occurs when there are many buyers and sellers, little differentiation between the products themselves (such as soda versus soda), but there is a perceived difference between products by the consumers (Coke versus Pepsi).

Monopoly: This occurs when there is only one provider of a service or product and no substitutes for the service or product exist.

Oligopoly: A form of competition in which only a few sellers exist. For instance, the gaming industry is dominated by Microsoft, Sony, and Nintendo; with smaller companies either catering to these three or trying their luck with the PC platform.

Open Market Operations: The primary tool used by the Fed in regulating its monetary policy, which consists primarily of buying and selling U.S. Treasury bonds in the “open market.”

Perfect Competition: This occurs when there are many buyers and sellers of the same product that are virtually identical and any seller can easily enter and leave the market. When these conditions exist, there is very little negotiation for price fluctuation, as the market equilibrium has already been found and is in high circulation. Unfortunately, there are very few, if any, examples of this in real life.

Planned Economic System: A system in which the government or other	centralized group determines what goods and services to produce and controls the	means and resources to produce the goods and services.

	Privatization: The conversion of government-owned production and services to	privately owned, profit-seeking enterprises.

Producer Price Index (PPI): Tracks the average change in prices at the whole-sale level. In other words, it tracks prices of goods sellers use to create their products or services, such as raw materials, product components that require further processing, and finished goods sold to retailers. This excludes energy prices and prices for services.

Productivity: Measures the quantity of goods and services that human and physical resources can produce in a given time period.

Recession: A decline in the GDP for two or more successive quarters of a year.

Reserve Requirement: The minimum amount of money banks must hold in reserve to cover deposits, as regulated by the Federal Reserve Bank. This is hardly modified by the Federal Reserve Bank, but it can fluctuate as a means of enforcing monetary policy.

Seasonal Unemployment: Measures those out of work during the off-season, such as lifeguards and holiday-themed stores. This is one of four unemployment types.

Services: See chapter one’s definition. Not much has changed.

Shortage: Self explanatory. Demand is greater than supply due to low prices.
	Socialism: Provides that the government owns or controls many basic businesses	and services so that profits can be distributed evenly among the people.

	Structural Unemployment: Measures permanent unemployment associated when	an industry changes in such a way that jobs are terminated completely. The skill	sets that workers possess do not match those demanded in the economy. This is	one of four types of unemployment, and perhaps the most severe.

	Substitute Goods: Goods that can be used in place of other goods, such as a	burger from McDonalds as opposed to a burger from Burger King (even though	we all know Five Guys is superior… Just saying.)

	Supply: Refers to how much of a product or service is available for purchase at	any given time.

	Supply Curve: A graphical representation of the concept of supply at several	points in time in correlation to prices (y) and units demanded (x).

	Surplus: Self explanatory. Supply is greater than demand due to high prices.

	Unemployment Rate: Measures the number of workers who are at least sixteen	years of age who are not working and who have been trying to find a job within	the past four weeks to no avail. There are four types of unemployment, but		usually only frictional and structural are accounted for.

Chapter Three

	Amoral Behavior: Actions taken by a person who has no sense of right and wrong	and no interest in the moral consequences of his or her actions.

	Code of Ethics: A statement of one’s commitment to certain ethical practices.

	Corporate Philanthropy: Actions taken by a company as a collective to better the	condition of those in need. Typically this is seen in mass donations driven by	large organizations, such as Target’s commitment to donate 5% of pretax profits	to charity (which amounts to ~$3,000,000 weekly).

	Corporate Social Responsibility (CSR): A company’s obligation to conduct its	activities with the aim of achieving social, environmental, and economic	development. CSR can be broken down into five major pillars, which consist of	“Human Rights and Employment Standards in the Workplace,” “Ethical Sourcing	and Procurement,” “Marketing and Consumer Issues,” “Environmental, Health,	and Safety Concerns,” and “Community and Good Neighbor Policies.”

	Ethics: The study of the general nature of morals and of specific moral choices	one makes in daily life.
	Ethics Training Program: Organized attempts by corporations to educate on and	reinforce concepts in ethics that said corporations endorse. These programs are	vital in establishing that business shall be conducted in an orderly, just fashion.

	Judeo-Christian Ethics: A code of ethics shared between those of similar faith (In	this case, Christians and Jews.) Not all ethical codes are enforced strictly by	religious views, but ethics and faith tend to go hand-in-hand.

	Legal Compliance: Refers to conducting a business within the boundaries of all	the legal regulations of that industry. Government agencies such as the Equal	Employment Opportunity Commission (EEOC) and the Securities and Exchange	Commission (SEC) help provide guidelines for companies so that they may run	business in compliance with the law.

	Legal Regulations: The specific laws governing the products or processes of a	specific industry. When enough people feel that a specific ethical standard should	be an important part of conducting business, it may eventually become a law.

	Mission Statement: A public statement which defines the existence of the	corporation and the purpose it serves in society, in addition to values and	corporate aspirations.

	Moral Relativism: An ethical system which holds that there is no universal moral	truth, but instead, only an individual’s personal beliefs and values.

	Personal Ethics: The principles that decide the actions one takes in his/her life.

	Price Fixing: This occurs when a group of companies agree among themselves to	set their product’s prices at a set level, independent of market supply and demand.

	Situational Ethics: An ethical system wherein people make decisions based on a	specific situation as opposed to abiding to universal moral laws. (Use judgment)

	Social Audit: A study of how well a company is doing at meeting its social	responsibilities. It is an internal systematic examination measuring and	monitoring what goals the company has set, what progress it has made, and how	resources such as funding and manpower have been applied to CSR.

	Socially Responsible Investing (SRI): Investing only in companies which have	met a certain standard according to CSR.

	Sustainability: The process of working to improve the quality of life in ways that	simultaneously protect and enhance the Earth’s life support systems.

	Unethical Behavior: Actions taken by individuals which do not abide to any set	code of ethics, and in fact offend those who do abide by ethical codes.
	Whistleblower: An employee who reports corporate misconduct, most often to	outside firms such as the government.