Chapter 2

Question 1

Economic Growth

Answer 1

The expansion of the national economy measured in % terms compared to previous years

Question 2

GDP

Answer 2

Gross domestic product; the total value of a nations income produced by economic activity from within its boarders
aka Gross value added

Question 3

GNP

Answer 3

Gross national product; takes into account net income earned overseas

Question 4

Fiscal policy

Answer 4

Uses government spending, tax and borrowings to influence the patten of economic activity, the level of growth of aggregate demand, output and employment

Question 5

Monetary policy

Answer 5

Uses interest rates and the level of money supply to relate or deflate the economy

Question 6

Monetary policy: Reflate

Answer 6

Cut interest rates
Increase money supply
Quantitative easing

Question 7

Monetary policy; Deflate

Answer 7

Increase interest rates

Reduce the money supply

Question 8

To increase the money supply

Answer 8

Lower the banks reserve requirements or relax direct controls over the bank’s ability to lend

Question 9

Quantitative easing

Answer 9

An expansionary monetary policy whereby a central bank buys predetermined amounts of government bonds or other financial assets to stimulate the economy and increase liquidity

Question 10

Supply side policies

Answer 10

Policies that seek to enhance long-term growth prospects in an economy by adopting policies that improve efficiency and aggregate supply within an economy

Question 11

Fiscal policy benefits

Answer 11

Effective for short-term impact on demand. Can be targeted at certain sectors

Question 12

Fiscal policy drawbacks

Answer 12

Potential inflationary tendencies. Potential impact on debt burden of the economy

Question 13

Monetary policy benefits

Answer 13

Effective at controlling key policy target on inflation

Question 14

Monetary policy drawbacks

Answer 14

Not as flexible at targeting individual market sectors (interest rates apply to everyone)

Question 15

Supply side policy benefits

Answer 15

Not inflationary. Doesn’t automatically lead to increases in government borrowing.
Increases competitive standing in the world

Question 16

Supply side policy drawbacks

Answer 16

Long term policy.

Tax cuts in the short term may lead to inflation (supply can’t match demand quickly enough)

Question 17

National income accounting

Answer 17

How a country attempts to measure the goods and services and monetary flows through an economy

Question 18

Balance of payments

Answer 18

Records of financial transactions between a country and the international economy

Question 19

Current account

Answer 19

Measures trade in goods and services

Question 20

Financial and capital output

Answer 20

Tracks capital flows in and out

Question 21

Industry competitor

Answer 21

Same products but different size, striation and variations (easyjet vs british airways)

Question 22

Brand competitor

Answer 22

Similar size, structure and products

Question 23

Form competitor

Answer 23

Satisfy the same needs in different ways (cinema vs netflix)

Question 24

Generic competitor

Answer 24

Competing for the same disposable income (takeaway pizza vs fish and chips)

Question 25

Detailed competitor analysis

Answer 25

Things including their resources (people), assumptions about the industry, USP and competitive advantage

Question 26

Market share

Answer 26

Measured relative to the largest competitor in the market

Question 27

Market growth

Answer 27

A measure of the markets attractiveness

Question 28

STARS

Answer 28

HOLD high growth products competing in markets where they are relatively strong that need heavy investment to sustain their growth

Question 29

QUESTION MARKS

Answer 29

BUILD SHARE Products with a low market share but operate in high growth markets, need heavy investment to grow market share against powerful competitors

Question 30

CASH COWS

Answer 30

HARVEST | Low growth products with a high market share, little need of investment so provide continued profits to invest in stars

Question 31

DOGS

Answer 31

DIVEST | Low relative share in less attractive markets. Dogs should generate positive cash flows or should be allowed to die.

Question 32

FDI

Answer 32

Foreign direct investment - where organisations invest oversees usually to benefit from a lower cost base

Question 33

Export credit insurance

Answer 33

Political risk insurance, provided by most governments and the world bank, to encourage investment in emerging markets

Question 34

Lobbying

Answer 34

Attempting to influence policies or decisions

Question 35

Buffering

Answer 35

An attempt to influence ahead of a policy or decision being made

Question 36

Bridging

Answer 36

Ensuring the company knows what is required of companies

Question 37

Core competencies

Answer 37

Integral to an organisation's competitive advantage so do not outsource

Question 38

Complementary competencies

Answer 38

Can be outsourced due to their technical complexity but only given to a trusted partner

Question 39

Residual competencies

Answer 39

Can be outsourced as basic, arms-length transaction e.g. cleaning

Question 40

Tariffs

Answer 40

A tax on imports used to restrict imports and raise revenue for the government

Question 41

Import quotas

Answer 41

Directly reduce the quantity of a product that is imported and indirectly reduces the amount of money that the sport producers receive.

Question 42

Voluntary export restraint (VER)

Answer 42

Similar to an import quota but the exporting country voluntarily restricts the number of goods that is ships to its trading partner.

Question 43

Export subsidy

Answer 43

A payment to a domestic producer who exports a good abroad

Question 44

Trade embargoes

Answer 44

The prohibition of commerce and trade with a certain county

Question 45

Administrative controls

Answer 45

Onerous red tape ad admin procedures on exports from abroad

Question 46

Balanced trade scheme

Answer 46

Each country will agree to purchase the same value of the goods as it sells to the other