Unit 1: The Context of Business
This unit covers the basic concepts that give context to a business. We explore economic and historical information governments use to make decisions, which provides a foundation for future decision-making. You will learn about productivity, the business cycle, the impact of business on society, economic trends and policies, and elements of global business. We will examine the financial meltdown of 2008, including the government bailout of AIG and General Motors, and the collapse of Lehman Brothers, which provide teachable moments in economic policy and business cycles.
Completing this unit should take you approximately 15 hours.
Upon successful completion of this unit, you will be able to:
- identify foundational business practices;
- describe economic indicators;
- identify positive and negative impacts of business on society;
- use economic indicators to describe the state and health of an economy;
- identify and explain current economic trends and growth;
- identify the four phases of the business cycle in real-life situations;
- use economic indicators to predict where a business is heading in the business cycle;
- describe global trade restrictions;
- identify factors affecting the success of businesses;
- evaluate the feasibility of doing business in a specific country;
- describe methods for business entry into the global marketplace; and
- identify trade facilitators.
- identify foundational business practices;
1.1: Business Basics
Read this article for an overview of basic business concepts. This article will give you a solid foundation for the course material to follow. While the goal of business is to make a profit, there are many other goals. These sections will explain the various types of goals, how they are assessed, the markets they serve, and their impact on society. As you read these pages, make sure to click on any embedded hyperlinks for additional definitions and explanations of the concepts.
Read this section learn about internal and external factors that affect the success of businesses. Pay particular attention to Figure 1.2 to gain an understanding of where each of these factors falls.
Read this section, paying particular attention to the sections on communities, financial contributions, volunteerism, and supporting local causes to learn more about the positive impact of businesses.
Read this section to gain an understanding of the environmental impacts of businesses and the importance of sustainability.
Read this article for a fascinating look at the environmental impact that changes in an industry can have. While many would argue that the shift away from coal as an energy source is good for the environment, one must also consider the lasting impact coal plants can have on the environment even after they have closed.
Now that you've read about some of the positive and negative impacts of businesses, complete this activity on whether Nike was responsible for compensating Honduran factory workers. Consider how Nike impacted society, and determine whether you think their impact was positive or negative.
1.2: Productivity and the Business Cycle
Read this explanation of the United States economy. American workers are considered some of the most productive in the world. Productivity is the final output after you have considered the hours worked. Productivity in this country has grown because technology has lowered the cost of producing goods and services.
Read this explanation of the United States economy and its relationship to the GDP. The combination of expansion and contractions is called the business cycle. The United States GDP has had slow, steady growth, allowing citizens to have a high standard of living. Over the last two decades, China's GDP has been growing much faster than most other countries.
Read this article, and then summarize what you consider the three most viable causes of business cycles.
1.3: Economic Indicators as Components of Economic Stability
Numerous economic indicators help business leaders determine what the future might hold. These might include the unemployment rate, housing statistics, the consumer price index, and more. In a 2-3 page essay, discuss what the data seems to be showing in the results of your research. Rank or order the economic indicators you consider most important, especially what the indicators say about the economy. In your conclusion, share where you believe the economy is going.
Go to the CPI Inflation Calculator and perform two calculations. First, compute what a pair of denim jeans cost the year you were born if they cost $80 today. Then, compute what a car cost during the year you were born if it sells for $23,000 today. Feel free to explore the inflation rate of interest by performing additional calculations on this calculator.
Read this article about the pattern of US prices and inflation rates from 1913 to the present. Pay particular attention to the charts that show the comparison between US rates and those of other countries worldwide.
Read this section, which explains Gross Domestic Product. The GDP is the dollar value of goods and services produced in a given country in a year. What is the significance of GDP as an economic indicator?
Read this section to understand more about economic growth. Looking at GDP alone does not give much of an indication of the health of an economy. It is the change in GDP that is relevant. If GDP goes up, the economy is growing. This positive movement is what we want as we leave behind the most recent recession. Complete the exercises at the end of the section.
Carefully review this chart, which compares the GDP per capita of several countries around the world. Note the date of the information provided. Studying GDP per capita will allow you to compare one country to another. Why is the US GDP per capita higher than China's? How is GDP per capita found?
Read this section for an in-depth look at the relationship between inflation, the economy, and how we spend our money. As you read this material, consider the effect of inflation on your purchasing power and buying habits. As the rate of inflation increases, there is a decline in your purchasing power as a consumer, but a decrease in inflation and lower prices can also affect what we buy. For example, as gas prices decline, we see an associated decline in the rate of hybrid car purchases. List three ways that inflation might affect your life.
Review this section on inflation. Inflation is essential for the US consumer because it affects buying power and how far the income dollar will reach.
1.4: Components of Economic Policy
Read this section to learn about revenues and expenses in the federal budget. In the year of an election, the candidates promise to reduce government spending. Usually, this does not happen. The yearly deficit continues to add to the national debt. Some U.S. citizens think that government spending helps the economy grow. Others believe that government spending comes out of the hands of consumers and business owners, thereby slowing growth. After you read, write a paragraph that expresses your thoughts on this argument.
Read this section to learn about budget surpluses. It is pretty unlikely that the United States will see a budget surplus in the near future. This situation is present when the tax revenues collected are greater than the expenses of the United States government. Complete the exercise at the end of the section.
Read this page to learn about the monetary policy. Monetary policy manages the money supply under the control of the Federal Reserve Board.
Read this article to learn more about the Federal Reserve Bank of New York.
1.5: Doing Business Globally
Read this chapter, which discusses the importance of global trade.
Read this section to learn about why businesses are going global and the difference between imports and exports.
There are a variety of methods businesses can use to enter the global marketplace. Some carry heavier risks than others, and some require firms to give up some of their control. Read about the types of international business and rate them based on risk and control.
While international trade seems like a win-win situation for businesses, many governments impose trade restrictions such as tariffs or quotas to control how much foreign product is introduced into their country. Often, these trade restrictions are put in place to protect domestic industries or ensure a working population. Read about the trade restrictions and reflect on what would precipitate a government imposing one trade restriction rather than another.
It can be daunting to start a business in the United States. One must learn how to navigate through the bureaucratic red tape. Can you imagine how much more difficult it must be to navigate the bureaucratic red tape for more than one country? Luckily, for a business entering the global marketplace, organizations such as the World Bank and International Monetary fund, trade agreements such as GATT and NAFTA, and economic communities make the process easier to navigate.
These lectures discuss the 2008 financial crisis in the United States. In the first, we see how we can plot early warning signs for a financial crisis. The second gives an insider's view of how banking practices led to the 2008 financial crisis.
Unit 1 Assessment
- Receive a grade
Take this assessment to see how well you understood this unit.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.