Economic Challenges
Facing Global and Domestic
Business
Distinguish between micro- Identify and describe the four
1 economics and macroeconomics.
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stages of the business cycle.
Explain the factors that drive Explain the factors that affect the
2 supply and demand.
6 stability of a nation’s economy.
Describe the four types of market Discuss how monetary and fiscal
3 structures in a private enterprise policy are used to manage an
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system. economy’s performance.
Communism Socialism
• Property owned and shared by • Government ownership and
the community under a strong operation of major industries,
central government. such as healthcare or
communications.
• Adopted in early 20th century
by many nations, but • Some private ownership of
government-owned industry allowed.
monopolies often suffered from
inefficiency.
• Economic systems that combine features of private
enterprise and planned economies.
• Inflation devalues money - people can purchase less with what they
have.
• Deflation is when prices continue to fall. Deflation can cause a
weakened economy.
• Changing prices are tracked by the Consumer Price
Index (CPI).
– The monthly average change in prices of goods and
services.
– A multitude of items are priced to compile the data included
in the “CPI Market Basket”
• The Bureau of Labor Statistics calculates the CPI
monthly along with other economic measures.
The unemployment rate is the percentage of total workforce actively
seeking work but currently unemployed.
• Monetary Policy - government actions to increase or decrease
the money supply and change banking policy and interest rates
to influence consumer spending.
– Expansionary monetary policy: Efforts to increase the money
supply to reduce costs of borrowing and encourage new
investment.
– Restrictive monetary policy: Efforts to decrease the monetary
supply to curb rising prices and overexpansion.
• The Federal Reserve System formulates and implements
monetary policy.