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Business Administration & Management. Mr. Bernstein Managing An Economy, pp 71-76 September 2018. Business Administration & Management Mr. Bernstein. What do we mean by the term “the economy”? In a free market, both buyer and seller are free to engage in a transaction or not.
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Business Administration & Management Mr. Bernstein Managing An Economy, pp 71-76 September 2018
Business Administration & ManagementMr. Bernstein What do we mean by the term “the economy”? In a free market, both buyer and seller are free to engage in a transaction or not. They both engage in a transaction because they feel it will make them better off. We measure “the economy” by totaling all transactions. This is called GDP or Gross Domestic Product. The government calculates this total…how do they get the info? Is it complete?
Business Administration & ManagementMr. Bernstein Growth in the Economy Businesses Want The Economy to Grow…Why? Each business is concerned with the economy of its target market, which can be local, national or global How Can An Economy Grow? Growth in Population Increased Productivity Per Person Increase Exports Decrease Imports
Business Administration & ManagementMr. Bernstein Other Key Economic Indicators CPI, PPI – Inflation measures Leading Indicators Unemployment Rate Retail Sales Personal Income and Consumption Measured, Used and Released by the Government
Business Administration & ManagementMr. Bernstein Inflation Rise in prices caused by imbalance between quantities supplied and demanded Results in a decline in the purchasing power of a dollar Is determined by psychology as well as supply and demand – expectations matter Maintaining low and steady inflation is a primary goal of our government’s monetary policy Which is worse – inflation or deflation?
Business Administration & ManagementMr. Bernstein US CPI, 2004- 2015
Business Administration & ManagementMr. Bernstein Business Cycle Expansion and Contraction of GDP Can be driven by psychology The government attempts to influence via monetary and fiscal policy Policy must balance GDP goals against the risk of inflation
Business Administration & ManagementMr. Bernstein US GDP, 1950- 2012