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Buss4 A2 Key Terms

Assessing Change

Long term targets that will enable the business to fulfil its mission. Corporate aims
A declaration of the organisation’s purpose, principle business aims, identity, policies and values. Mission statement
A plan based on the corporate aims and objectives which defines the overall scope and direction of the business by identifying its choice of business, markets and activities. Corporate strategy
Economic issues that affect the whole economy. Macro-economic factors
Measures the total value of output produced in a country over one year. Gross domestic product (GDP)
Fluctuations in the level of economic activity, measured by real GDP over time. Business cycle
An increase in a country’s annual GDP, after adjusting for inflation. This is known as a ‘real’ increase in GDP. Economic growth
A sustained increase in average prices of goods and services resulting in a fall in the value of money. Inflation
The monthly record of inflation, starting from a base period = 100, calculated by recording price movements in hundreds of consumer goods and services. Retail Prices Index (RPI)
A measure of inflation based on the RPI but excluding housing costs. It is used by the Government and the Bank of England as the UK inflation target. This target is 2% annual CPI inflation. Consumer Price Index (CPI)
Price rises resulting from excess demand for products allowing firms to increase profit margins. Demand pull inflation
Price increases resulting from higher costs of production that are passed on to the consumers. Cost push inflation
The cost of borrowing capital. Interest rates
The number of people willing and able to work but unable to find employment. Unemployment
Jobs are lost as industries decline due to structural change in the economy, e.g. the decline of UK shipbuilding and clothing manufacturing industries. This unemployment tends to be very regionally concentrated. Structural unemployment
Occurs when people take some time to find another job after losing or leaving their previous one. Frictional unemployment
General unemployment that occurs across many industries due to an economic downturn or recession. It is linked with periods of negative GDP growth in the business cycle. Cyclical unemployment
The price of one currency in terms of another, e.g. £1 = € 1.5. Exchange Rate
An increase in the value of a country’s currency in terms of other currencies. This lowers prices of imported goods but may force exporters to raise prices. Exchange rate appreciation
A fall in the value of a country’s currency in terms of other currencies. This raises prices of imports but may allow an exporter to reduce prices. Exchange rate depreciation
The growing trend towards worldwide markets in products, capital and labour, unrestricted by barriers Globalisation
International trade that is allowed to take place without restrictions such as protectionist tariffs and quotas. Free trade
A tax imposed on an imported product. Tariffs
A physical limit placed on the quantity of imports of certain products. Quotas
Economies characterised by low to middle income GDP per head. Emerging markets (economies)
Aims to achieve the government’s objectives by controlling and supporting business, passing legislation and taking action to control the economy. Government intervention
A policy towards the economy in which governments intervene as little as possible, minimise support for and control over industry and keep taxes and government spending to a minimum. Laissez-faire
The account that records the UK’s value of imports of goods and services and the value of its exports – a deficit exists when import values exceed export values and a surplus exists when exports values exceed import values. Balance of payments (current account)
The use by the government of changes in tax rates or governments spending to manage the economy. Fiscal policy
The use of interest rates by the Bank of England (before 1997, the government was directly responsible for this) to keep inflation to a target of 2 per cent (CPI) Monetary policy
Measures taken by the government to improve the efficiency of the economy (e.g. the labour market) to allow for an increase in the total supply of goods and services. Supply side policy
Increases in government spending greater than increases in taxes, e.g. budget deficit. This increases total demand in the economy. Expansionary fiscal policy
Increases in taxes greater than increases in government spending, e.g. budget surplus. This reduces total demand in the economy. Contractionary fiscal policy
Policies used by governments, such as tariffs and quotas, to limit imports and restrict free trade. Protectionism
The environmental factors that influence business behaviour including the characteristics of the population and natural environment in which it exists. Social environment
A firm’s decision to accept responsibility for its social, environmental and ethical actions, often reported through a CSR report. Corporate Social Responsibility (CSR)
The moral beliefs and attitudes from both inside and outside a business that influence its behaviour. Ethical environment
Actions taken by business to help achieve a positive relationship with its stakeholders. Public relations (PR)
Changes in the range, applications and efficiency of technology available. Technological change
Using technical equipment such as computers. Information technology
Voice over internet protocol – making telephone calls via the internet. VolP
The number and strength of competing firms in an industry and the ease of entry for new competitors. Competitive Structure
A competitive industry with many firms, easy to enter and good knowledge amongst consumers about prices and products but with each firm producing differentiated products. Monopolistic competition
Industry with competition amongst a relatively few businesses. Oligopoly
In theory, an industry with just one supplier but the UK and EU definition is of a firm with at least 25% market share or a legal monopoly. Monopoly
Firms working together – called a cartel – to fix prices or agree on output levels to reduce competition. Collusion
Aims to prevent the abuse of monopoly power so that competition in markets is not restricted. Competition policy
Created by: carole appleton