Intro to Business 101 Vocab

foreign outsourcing

(also contract manufacturing) Contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production.

direct investment

(or foreign direct investment) When firms either acquire foreign firms or develop new facilities from the ground up in foreign countries.

balance of trade

A basic measure of the difference in value between a nation's exports and imports, including both goods and services.

embargo

A complete ban on international trade of a certain item, or a total halt in trade with a particular nation

infrastructure

A country's physical facilities that support economic activity.

Federal Deposit Insurance Corporation (FDIC)

A federal agency that insures deposits in banks and thrift institutions for up to $100,000 per customer, per bank.

economy

A financial and social system of how resources flow through society from production, to distribution, to consumption.

trading bloc

A group of countries that have eliminated tariffs and harmonized trading rules to facilitate the free flow of goods among the member nations.

monopolistic competition

A market structure with many competitors selling differentiated products. Barriers to entry are low. (Like T-shirt companies)

pure competition

A market structure with many competitors selling virtually identical products. Barriers to entry are quite low.

natural monopoly

A market structure with one company as the supplier of a product because the nature of that product makes a single supplier more efficient than multiple, competing ones. Most natural monopolies are government sanctioned and regulated (like cable)

monopoly

A market structure with one producer completely dominating the industry, leaving no room for any significant competitors. Barriers to entry tend to be virtually insurmountable .

oligopoly

A market structure with only a handful of competitors selling products that are either similar or different. Barriers to entry are typically high. (like car manufacturing)

consumer price index (CPI)

A measure of inflation that evaluates the change in the weighted-average price of goods and services that the average consumer buys each month.

producer price index (PPI)

A measure of inflation that evaluates the change over time in the weighted-average wholesale prices.

balance of payments

A measure of the total flow of money into or out of a country

contraction

A period of economic downturn, marked by rising unemployment and failing business production.

deflation

A period of failing average prices across the economy

inflation

A period of rising average prices across the country

recovery

A period of rising economic growth and high employment

disinflation

A period of slowing average price increases across the economy.

World Trade Organizations (WTO)

A permanent global institution to promote international trade and to settle international trade disputes

reserve requirement

A rule set by the Fed, which specifies the minimum amount of reserves (or funds) a bank must hold, expressed as a percentage of the bank's deposits.

ethics

A set of beliefs about right and wrong, good and bad

foreign franchising

A specialized type of foreign licensing in which a firm expands by offering businesses in other countries the right to produce and market its products according to specific operation requirements.

economic system

A structure for allocating limited resources.

partnership

A voluntary agreement under which two or more people act as co-owners of a business for profits

strategic alliance

An agreement between two or more firms to jointly pursue a specific opportunity without merging their businesses. Strategic alliances typically involve less formal, less encompassing agreements than partnership.

hyperinflation

An average monthly inflation rate of more than 50%

communism

An economic and political system that calls for public ownership of virtually all enterprises, under the direction of a strong central government.

recession

An economic downturn marked by a decrease in the GDP for two consecutive quarters.

socialism

An economic system based on the principle that the government should own and operate key enterprises that directly affect public welfare.

capitalism

An economic system-also known as the private enterprise or free market system-based on private ownership, economic freedom, and fair competition.

depression

An especially deep and long lasting recession.

World Bank

An international cooperative of 186 member countries, working together to reduce poverty in the developing world

free trade

An international economic and political movement designed to help goods and services flow more freely across international boundaries.

International Monetary Fund (IMF)

An international organization of 186 member nations that promotes international economic cooperation and stable growth

General Agreement on Tariffs and Trade (GATT)

An international trade agreement that has taken bold steps to lower tariffs and promote free trade worldwide.

General Agreement on Tariffs and Trade (GATT)

An international trade treaty designed to encourage worldwide trade among its members

Business

Any activity that provides goods and services in an effort to earn a profit

business technology

Any tools-especially computers, telecommunications, and other digital products-that businesses can use to become more efficient and effective.

foreign licensing

Authority granted by a domestic firm to a foreign firm for the rights to produce or to use its trademark/patent rights in a defined geographical areas.

nonprofits

Business like establishments that employ people and produce goods and services with the fundamental goal of contributing to the community rather than generating financial gain.

e-commerce

Business transactions conducted online, typically via Internet

importing

Buying products domestically that have been produced or grown in foreign nations.

sociocultural differences

Differences among cultures in language, attitudes and values.

mixed economies

Economies that embody elements of both planned and market-based economic systems.

universal ethical standards

Ethical norms that apply to all people across a broad spectrum of situations

monetary policy

Federal Reserves decisions that shape the economy by influencing interest rates and the supply of money.

factors of production

Four fundamental elements- natural resources, capital, human resources and entrepreneurship- that businesses need to achieve their objectives.

fiscal policy

Government efforts to influence the economy, through taxation and spending

M1 money supply

Includes all currency plus checking accounts and traveler's checks.

M2 money supply

Includes all of M1 money supply plus most savings accounts, money market accounts and certificates of deposit.

countertrade

International trade that involves the barter of products for products rather than for currency

quotas

Limitations on the amount of specific products that may be imported from certain countries during a given time period

voluntary export restraints (VERs)

Limitations on the amount of specific products that one nation will export to another nation.

protectionism

National policies designed to restrict international trade, usually with the goal of protecting domestic businesses

balance of payment surplus

Overage that occurs when more money flows into a nation than out of that nation

budget surplus

Overage that occurs when revenue is higher than expenses over a given period of time

trade surplus

Overage that occurs when the total value of a nation's exports is higher than the total value of its imports.

Entrepreneurs

People who risk their time, money and other resources to start and manage a business

Value

Relationship between the price of a good or service and the benefits that it offers its customers

exporting

Selling products in foreign nations that have been produced or grown domestically.

budget deficit

Shortfall that occurs when expenses are higher than revenue over a give period of time.

balance of payment deficit

Shortfall that occurs when more money flows out of a nation than into that nation.

trade deficit

Shortfall that occurs when the total value of a nation's imports is higher than the total value of its exports

tariffs

Taxes levied against imports

open market operations

The Federal Reserve function of buying and selling government securities, which include treasury bonds, notes and bills

productivity

The basic relationship between the production of goods and services (output) and the resources needed to produce them (input) calculated via the following equation: output/input=productivity

comparative advantage

The benefit a country has in a given industry if it can make products at a lower opportunity cost than other countries.

absolute advantage

The benefit a country has in a given industry when it can produce more of a product than other nations using the same amount of resources.

demand curve

The graphed relationship between price and quantity from a customer demand standpoint.

supply curve

The graphed relationship between price and quantity from a supplier standpoint.

demographics

The measurable characteristics of a population. Demographic factors include: population size and density and specific traits such as age, gender and race.

Profit

The money that a business earns in sales for revenue minus expenses such as the cost of goods and the cost of salaries.

opportunity cost

The opportunity of giving up the second best choice when making a decision

quality of life

The overall sense of well-being experienced by either an individual or a group.

unemployment rates

The percentage of people in the labor force over age 16 who do not have jobs and are actively seeking employment.

business cycle

The periodic contraction and expansion that occur over time in virtually every economy.

equilibrium price

The price associated with the point at which the quantity demanded of a product equals the quantity supplied.

privatization

The process of converting government owned businesses to private ownership.

Standard of living

The quality and quantity of goods and services available to a population.

demand

The quantity of products that consumers are willing to buy at different market prices.

supply

The quantity of products that products are willing to offer for sale at different market prices.

speed-to-market

The rate at which a new product moves from conception to commercialization.

discount rate

The rate of interest that the Federal Reserve charges when it loans funds to banks.

World Wide Web

The service that allows computers users to easily access and share information on the Internet in the form of text, graphics, video, and animation.

business environment

The setting in which business operates. The five key components are: economic environment, competitive environment, technological environment, social environment, and global environment.

macroeconomics

The study of a country's overall economic issues, such as the employment rate, the gross domestic product, and taxation policies.

microeconomics

The study of smaller economic units such as individual consumers, families, and individual businesses.

economics

The study of the choices that people, companies, and government make in allocating society's resources.

federal debt

The sum of all the money that the Federal Government has borrowed over the years and not yet repaid.

money supply

The total amount of money within the overall economy

gross domestic product (GDP)

The total value of all final goods and services produced within a nation's physical boundaries over a given period of time.

North American Free Trade Agreement (NAFTA)

The treaty among the United States, Mexico and Canada that eliminated trade barriers and investment restrictions over a 15 year period starting in 1994.

free trade

The unrestricted movement of goods and services across international borders

European Union (EU)

The world's largest common market, composed of 27 European nations

Loss

When a business incurs expenses that are greater than its revenue

joint ventures

When two or more companies join forces- sharing resources, risks and profits, but not actually merging companies- to pursue specific opportunities.

exchange rate

a measurement of the value of one nation's currency relative to the currency of other nations