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Business Economics Vocabulary Terms and Definitions 1 Intro ProjectSnack Attack Economics – is the social science that studies the production, distribution, and consumption of goods and services. Scarcity – Ever-present situation in all markets whereby either fewer goods are available than the demand for them, or only too little money is available to their potential buyers for making the purchase. This universal phenomenon leads to the definition of economics as the "science of allocation of scarce resources.” Individuals, families, businesses, and government all face this basic economic problem. Economizing – practicing economics; that is, avoiding waste or reducing expenditures. For example, your mother buys the larger, more concentrated laundry detergent in order to economize. Opportunity cost – the best alternative that is forgone because a particular course of action is pursued. For example, buying an expensive iPod Nano means you'll have less money to spend on fun weekend activities. Trade-off – an exchange of one thing in return for another, especially relinquishment of one benefit or advantage for another regarded as more desirable. For example, you want both a new outfit and a new and a class ring. You forgo the outfit for something that will last longer. Consumption – Expenditure during particular period on goods and services used in satisfaction of needs and wants. Production – Processes and methods employed in transformation of tangible inputs (raw materials, semi-finished goods, or subassemblies) and intangible inputs (ideas, information, know how) into goods or services. Producer – someone who produces or manufactures something. Exchange – reciprocal transfer of goods or services from one entity to another. Project #1Photo Hounds Distribution – in economics, the movement of goods from manufacturer, or a way in which wealth is shared in any particular economic system. Culture – a particular society at a particular time and place; the knowledge and values shared by a society. Subculture – A social group within a national culture that has distinctive patterns of behavior and beliefs. Ethnocentric – centered on a specific ethnic group, usually one's own. Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 2 Social class – people having the same social, economic, or educational status. Nuclear family – a family consisting of parents and their children and grandparents of a marital partner. Extended family – a family consisting of the nuclear family and their blood relatives. Custom – practice or rule of conduct established in a particular community, locality, or trade, by long usage and obligatory on those within its scope. Self-interest – personal advantage or interest. Financial incentives – a monetary reward for a specific behavior, designed to encourage that behavior. Non-financial incentives – a reward that does not include money. Perverse incentives – an incentive that has an unintended and undesirable effect, that is against the interest of the incentive makers. For example, 19th century palaeontologists traveling to China used to pay peasants for each fragment of dinosaur bone (dinosaur fossils) that they produced. They later discovered that peasants dug up the bones and then smashed them into multiple pieces to maximise their payments. Demand – desire for certain good or service supported by the capacity to purchase it. Law of demand – observation that, as a general rule, the demand for a product varies inversely with its price—lower prices stimulate demand and higher prices dampen it. Supply – total amount of a product (good or service) available for purchase at any specified price. It is determined by: (1) Price: producers will try to obtain the highest possible price whereas the buyers will try to pay the lowest possible price—both settling at the equilibrium price where supply equals demand. (2) Cost of inputs: lower the input price the higher the profit at a price level and more product will be offered at that price. (3) Price of other goods: lower prices of competing goods will reduce the price and the supplier may switch to switch to more profitable products thus reducing the supply. Law of supply – if demand is held constant, an increase in supply leads to a decreased price, while a decrease in supply leads to an increased price. Law of supply and demand – economic proposition that, in any free market, the relationship between supply and demand determines price and the quantity produced. A change in either will lead to changes in price and/or amount produced in order to achieve equilibrium in the market. Buyer's market – a market that has more sellers than buyers; low prices result from this excess of supply over demand; also called soft market; opposite of seller's market. Seller's market – a market that has more buyers than sellers; high prices result from this excess of demand over supply. Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 3 Elasticity – degree to which supply or demand for a product or service will change as a result of a change in price. Elastic demand – responsiveness of buyers to changes in price, defined as the percentage change in the quantity demanded divided by the percentage change in price. Inelastic demand – desire for a product or service that does not vary with increases or decreases in price. Products that are daily necessities, and for which there are few alternatives, tend to exhibit inelastic demand. Price – Cost, usually expressed in monetary terms. Relative prices – Substitution effect – in economics, the effect of a change in the price of a commodity, which encourages consumers to substitute one good for another. If a good's price falls, consumers will tend to buy it in preference to other goods; if its price rises, consumers will buy other goods instead. Rationing – method for limiting the purchase or usage of an item when the quantity demanded of the item exceeds the quantity available at a specific price. For example, during World War II many domestic items in the United States, including gasoline and other commodities, were rationed. Equilibrium price – price when the supply of goods in a particular market matches demand. Excess supply – disequilibrium condition in a competitive market in which the quantity supplied is greater than the quantity demanded, hence there's "extra" supply. Also called a surplus. Excess demand – disequilibrium condition in a competitive market in which the quantity demanded is greater than the quantity supplied, hence there's "extra" demand. Also called a shortage. Market price – A security's last reported sale price (if on an exchange) or its current bid and ask prices (if Over-the-Counter); i.e. the price as determined dynamically by buyers and sellers in an open market; also called market value. Project #2Make the Most of It Innovation – the creation of new products and/or services. Decision matrix – systematic approach to making decisions especially under uncertainty. Evaluation criteria – Benchmark, standard, or yardstick against which accomplishment, conformance, performance, and suitability of an individual, alternative, activity, product, or plan, as well as of risk-reward ratio is measured. Relative weight – used in decision matrices to determine how important criteria are rated. The weight is then multiplied by the rate and then totaled for the score. Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 4 Multi-voting – a structured series of voting used to reduce a large list to a significant few items. Project #3China Dynasty Productivity – in labor and other areas of economics, the amount of output per unit of input, for example, the quantity of a product produced per hour of labor. Output – the amount produced. Standard of living – degree of prosperity in a nation, as measured by income levels, quality of housing and food, medical care, educational opportunities, transportation, communications, and other measures. The standard of living in different countries is frequently compared based on annual per capita income. On an individual level, the standard of living is a measure of the quality of life in such areas as housing, food, education, clothing, transportation, and employment opportunities. Total production – processes and methods employed in transformation of tangible inputs (raw materials, semi-finished goods, or subassemblies) and intangible inputs (ideas, information, know how) into goods or services. Income per capita – Income per person in a population. Per capita income is often used to measure a country's standard of living. Consumption per capita – consumption per person in a population who uses a product or service until it has no remaining value. Input – item external to a system (such as a process) that is transformed by the system (usually together with one or more other items) to become an output. Output – amount of energy, work, goods or services, etc. produced by a machine, factory, firm, or an individual in a period. Total product – the total quantity of output produced by a firm for a given quantity of inputs. Productive resources – resources used in the production of goods and services. Fixed inputs – an input whose quantity cannot be changed in the time period under consideration. Variable inputs – an input whose quantity can be changed in the time period under consideration. Fixed costs – a cost that does not vary depending on production or sales levels, such as rent, property tax, insurance, or interest expense. Variable costs – a cost of labor, material or overhead that changes according to the change in the volume of production units. Combined with fixed costs, variable costs make up the total cost of Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 5 production. While the total variable cost changes with increased production, the total fixed costs stays the same. Total costs – variable costs plus fixed costs. Average total cost – total cost per unit of output, found by dividing total cost by the quantity of output. Labor union – an organization of workers or employees who act jointly to negotiate with their employers over wages, fringe benefits, working conditions, and other facets of employment. The main function of unions is to provide a balance for the market control exerted over labor by big business. Local – labor union acting locally for employees of an industry. For example, the local union of the UAW. National – labor union acting nationally for employees of an industry. Federation – overall umbrella labor organization having many affiliated local labor unions and providing extensive support services. The national AFL-CIO is a central trade union federation in the United States having numerous affiliates. Collective bargaining –negotiation process between a union and the company that employs the union's members; The purpose of collective bargaining is to find mutual agreement on wages, fringe benefits, work hours, promotion criteria, grievance procedures, and everything else that has to do with employment. The end result of this process is a collective bargaining agreement, which is a formal contract between management and the union. A negotiation process that breaks down without reaching an agreement might lead to a strike, lockout, or mediation. Strike – agreement of workers, usually the members of a union, to stop working. The objective of a strike is to encourage an employer to raise workers' wages or to improve working conditions. Picketing – the traditional method of demonstrating that a labor union is on strike against an employer, whereby union members carry picket signs and walk in a line in front of the employers plant, factory, or place of business. Boycotts – organized effort to reduce the sales of a particular good that's intended to punish the producer or seller. Boycotts are promoted by labor unions to inflict harm on their companies and (hopefully) encourage their employers to settle labor distributes. Featherbedding – a labor union practice of artificially increasing the number of workers employed even though the specific job or task can be completed with fewer workers. This can be done mandating that specific jobs be performed only by workers with specific skill levels or be mandating that a certain number of workers are needed to perform a job or task. By increasing the demand for workers, featherbedding also keeps wages higher. Lockouts – a plant or factory that is closed temporarily, because it's owners are trying to gain a negotiating advantage over the employees' union. A company’s management commonly uses a lockout if Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 6 they suspect the union is planning to strike. A lockout by management before the union strikes is much like a pre-emptive military attaché that tries to hit the enemy hard, fast, and first. Injunctions – court order requiring a person, union, or firm to refrain from a particular activity. The general intent of an injunction is to prevent the action of one person that is very likely to harm another. Injunctions were commonly used during the more turbulent periods of the labor union movement, primarily by firms to prevent unions from striking. Strikebreakers – someone who starts working or continues to work for a firm while a labor union is engaged in a strike of the firm. Strikebreaker is the polite name for such a person. Striking union members are more inclined to use the term scab (or something even more derogatory). Importing/exporting – goods purchased from other countries/sale of goods to a foreign country. Licensing – the granting of permission to use intellectual property rights, such as trademarks, patents, or technology, under defined conditions. Franchising – arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications. Foreign direct investment – the acquisition of controlling interest in foreign firms and businesses from one country in another country. Abbreviated FDI, foreign direct investment can also take the form of constructing factories, structures and equipment (or any form of physical capital) in foreign soil. Joint ventures – activity undertaken by two or more entities in which each entity has some degree of control. Joint ventures are commonly undertaken by two or more business firms, allowing each firm to participate in the benefits of the venture without the loss of control that would come from a formal merger of the firms. For example, a bank and a computer company might undertake a joint venture to develop a computerized, online payment system. Joint ventures are usually risky activities and often related to the development of new technology. Wholly owned ventures – Quality – an inherent or distinguishing characteristic. no project here Specialization of labor – the condition in which resources are primarily devoted to specific production tasks. This is one of THE most important and most fundamental notions in the study of economics. Specialization is closely related to the concept of division of labor. To the extent that specific production tasks are divided among different workers, each worker is able to specialize. If every worker performs every task, then specialization is not possible. Division of labor – basic economic notion that labor resources are used more efficiently if work tasks are divided among different workers. This allows workers to specialize in production as each becomes highly skilled at specific tasks. Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 7 Depth of jobs – ability and power an employee has to influence his or her work environment. It refers to the amount of discretion an employee has in a job. A highly specialized position, such as a high-level manager, provides many decision opportunities characteristic of a job with great depth. Scope of jobs – number of different tasks that constitute a job, and the number of job cycles in a given period. Business processes – series of logically related activities or tasks (such as planning, production, sales) performed together to produce a defined set of results. Also called business function. Value chain – Management processes – a process of planning and controlling the performance or execution of any type of activity. Support processes – activity or function that supports the day-to-day operations of an organization, such as accounting, communications, maintenance, sales. Tax – any sort of forced or coerced payment to government. The primary reason government collects taxes is to get the revenue needed to finance public goods and pay administrative expenses. Revenue – amount generated from sale of goods or services, or any other use of capital or assets, associated with the main operations of firm—before any costs or expenses are deducted. Expenditure – actual payment of cash or cash-equivalent for goods or services, or a charge against available funds in settlement of an obligation—as evidenced by an invoice, receipt, voucher, or other such document. Excise tax – alternative term for excise duty; tax levied on the manufacture, sale, or use of locally produced goods. Income tax – annual charge levied on both earned income (wages, salaries, commission) and unearned income (dividends, interest, rents). In addition to financing a government's operations, progressive income taxation is designed to distribute wealth more evenly in a population, and to serve as automatic fiscal stabilizer to cushion the effects of economic cycles. Its two basic types are (1) Personal income tax, levied on incomes of individuals, households, partnerships, and sole-proprietorships; and (2) Corporation income tax, levied on profits (net earnings) of incorporated firms. Property tax – tax imposed on the market value of real and personal property such as boats, cars, buildings, land, etc. Sales tax – tax levied on sale of goods or services. Project #4Seven Days, Six Nights Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 8 Exchange rate – price for which the currency of a country can be exchanged for another country's currency. Exchange rate quotation – an exchange rate quotation is given by stating the number of units of "term currency" (or "price currency" or "quote currency") that can be bought in terms of 1 unit currency (also called base currency). Free-floating currency – Pegged currency – one currency is said to be pegged to another when the exchange rate between the two is fixed and the market forces do not influence the exchange rate. For instance the Chinese yuan is pegged at 8 yuan to a dollar, which means that one dollar will buy 8 yuans no matter what the market conditions are. Foreign-exchange market – a market that trades the currencies of different countries. Strong/weak dollar – dollar that can be exchanged for a large or increasing amount of foreign currency. For example, if the dollar were strong, one would expect imports to be high and exports to be low because the dollar will buy a lot in a different country while it is expensive to purchase dollars with outside currencies. / dollar that can be exchanged for only a small or decreasing amount of foreign currency. A weak dollar means that the U.S. dollar cannot buy very much of another currency. Arbitrage – attempting to profit by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Project #5Hollywood Metamorphosis Stages of production – the three stages of production are characterized by the slope and shape of the total product curve. The first stage is characterized by an increasingly positive slope, the second stage by a decreasingly positive slope, and the third stage by a negative slope. Because the slope of the total product curve IS marginal product, these three stages are also seen with marginal product. In Stage I, marginal product is positive and increasing. In Stage II, marginal product is positive, but decreasing. And in Stage III, marginal product is negative. Theory of production – an effort to explain the principles by which a business firm decides how much of each commodity that it sells (its “outputs” or “products”) it will produce, and how much of each kind of labor, raw material, fixed capital good, etc., that it employs (its “inputs” or “factors of production”) it will use. Production function –describes a mapping from quantities of inputs to quantities of an output as generated by a production process. Increasing returns – Stage I in the short-run production process. Output increases even though one input varies. Diminishing returns – Stage II in the short-run production process. Output begins to decline. Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 9 Law of diminishing returns – principle stating that as more and more of a variable input is combined with a fixed input in short-run production, the marginal product of the variable input eventually declines. Law of variable proportions – by varying one input (like labor) and other inputs remain constant, output will eventually decline. Output will go through 3 stages: I – increasing returns; II – diminishing returns; and III – negative returns. Stage II is ideal because there is a balance between production and total output. Marginal product negative returns – Marginal cost – increase or decrease in the total cost of a production-run, from making one additional unit of an item. Total revenue – total sales revenue and other revenue for a particular period. Marginal revenue – increase in the gross revenue of a firm produced by selling one additional unit of output. Project #6The Good ‘Ole Days Monetary policy – economic strategy chosen by a government in deciding expansion or contraction in the country's money supply. Applied usually through the central bank, a monetary policy employs three major tools: (1) buying or selling national debt, (2) changing credit restrictions, and (3) changing the interest rates by changing reserve requirements. Maximum sustainable output and employment – Stable prices – Reserves – funds or materials set aside or saved for future use. Loose monetary policy – Tight monetary policy – restriction of money supply in an economy by the central bank through (1) tightening of credit qualifications, (2) soaking up cash by selling government bonds, and/or (3) raising the banks' reserve requirements. Fiscal policy – government's revenue (taxation) and spending policy designed to (1) counter economic cycles in order to achieve lower unemployment, (2) achieve low or no inflation, and (3) achieve sustained but controllable economic growth. In a recession, governments stimulate the economy with deficit spending (expenditure exceeds revenue). During period of expansion, they restrain a fast growing economy with higher taxes and aim for a surplus (revenue exceeds expenditure). Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 10 Aggregate demand – total level of demand for desired goods and services (at any time by all groups within a national economy) that makes up the gross domestic product (GDP). Aggregate demand is the sum of consumption expenditure, investment expenditure, government expenditure, and net exports. Neutral fiscal policies – Expansionary fiscal policies – Restrictive fiscal policies – Public capital – Infrastructure – relatively permanent and foundational capital investment of a country, firm, or project that underlies and makes possible all its economic activity. It includes administrative, telecommunications, transportation, utilities, and waste removal and processing facilities. Some definitions also include education, health care, research and development, and training facilities. Capital spending – alternative term for capital expenditure. Money spent to acquire or upgrade physical assets such as buildings and machinery. Tax abatements – reduction of or exemption from taxes granted by a government for a specified period, usually to encourage certain activities such as investment in capital equipment. Inflation – a persistent increase in the average price level in the economy. Inflation occurs when the AVERAGE price level (that is, prices IN GENERAL) increases over time. This does NOT mean that ALL prices increase the same, nor that ALL prices necessarily increase. Some prices might increase a lot, others a little, and still other prices decrease or remain unchanged. Inflation results when the AVERAGE of these assorted prices follows an upward trend. Inflation is the most common phenomenon associated with the price level. Inflation rate – the percentage change in the price level from one period to the next. Deflation – an extended decline in the average level of prices. This is the exact opposite of inflation--in which prices are rising over an extended period, and it should be contrasted with disinflation--which is a decline in the inflation rate. Like inflation, deflation occurs when the AVERAGE price level decreases over time. Consumer Price Index – an index of prices of goods and services typically purchased by urban consumers. The Consumer Price Index, commonly known by its abbreviation, CPI, is compiled and published monthly by the Bureau of Labor Statistics (BLS), using price data obtained from an elaborate survey of 25,000 retail outlets and quantity data generated by the Consumer Expenditures Survey. Standard of living – an economy's ability to produce the goods and services that consumers use to satisfy their wants and needs. In practice, it is the average real gross domestic product per person-usually given the name per capita real GDP. Targeted inflation rate – Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 11 Price stability – Consumer Confidence Survey – reflects prevailing business conditions and likely developments for the months ahead. This monthly report details consumer attitudes and buying intentions, with data available by age, income, and region. GDP – Gross Domestic Product. The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. Personal consumption expenditures – common term for expenditures by the household sector on gross domestic product. In general consumption expenditures include the wide assortment of goods and services purchased by the household sector that provide satisfaction of wants and needs. Consumption expenditures are divided into three categories -- durable, nondurable, and services. Gross private domestic investment – expenditures on capital goods to be used for productive activities in the domestic economy that are undertaken by the business sector during a given time period. Government purchases of goods and services – expenditures made by the government sector on final goods and services, or gross domestic product. Government purchases are used to buy the goods and services needed to operate the government (such as administrative salaries) and to provide public goods (including national defense, highway construction). Net exports of goods and services – the official government measure of net exports with the foreign sector, the difference between exports and imports. It seeks to quantify that portion of gross domestic product that is purchased by the foreign sector. Trade deficit – a condition in which a nation's imports are greater than exports. In other words, a country is buying more stuff for foreigners than foreigners are buying from domestic producers. A trade deficit is usually thought to be bad for a country. Trade surplus – a condition in which a nation's exports are greater than imports. In other words, a country is buying less stuff from foreigners than foreigners are buying from domestic producers. A trade surplus is usually thought to be a good thing for a country. Uncounted production – Underground economy – illegal and unreported market transactions and productive activity that escape the watchful eyes of official record keepers. Double counting – act of including the value of intermediate goods more than once in the value of gross domestic product. Because the value, or price, of final goods includes the cost, or value, of all intermediate goods used, including market transactions for intermediate separately in the measurement of gross domestic product would lead to double counting. Unemployment rate – proportion of the civilian labor force 16 years or older that is actively seeking employment, but is unemployed and not engaged in the production of goods and services. Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 12 Frictional unemployment – unemployment attributable to the time required to match production activities with qualified resources. Frictional unemployment essentially occurs because resources, especially labor, are in the process of moving from one production activity to another. Employers are seeking workers and workers are seeking employment, the two sides just haven't matched up. Hence unemployment of the frictional variety increases. This mismatch is largely the result of limited information, which is often compounded by geographic separation between producer and resource. Frictional unemployment is one of four unemployment sources. The other three are cyclical unemployment, seasonal unemployment, and structural unemployment. Structural unemployment – unemployment caused by a mismatch between workers' skills and skills needed for available jobs. Structural unemployment essentially occurs because resources, especially labor, are configured (trained) for a given technology but the economy demands goods and services using another technology. Cyclical unemployment – unemployment attributable to a general decline in macroeconomic activity, especially expenditures on gross domestic product, that occurs during a business-cycle contraction. When the economy dips into a contraction, or recession, aggregate demand declines, so less output is produced and fewer workers and other resources are employed. Hence unemployment of the cyclical variety increases. Cyclical unemployment is one of four unemployment sources. The other three are seasonal unemployment, frictional unemployment, and structural unemployment. Seasonal unemployment – caused by relatively regular and predictable declines in particular industries or occupations over the course of a year, often corresponding with the seasons. Unlike cyclical unemployment, that could occur at any time, seasonal unemployment is an essential part of many jobs. For example, your regular, run-of-the-mill, department store Santa Clause can count on 11 months of unemployment each year. Seasonal unemployment is one of four unemployment sources. The other three are cyclical unemployment, frictional unemployment, and structural unemployment. Technological unemployment – unemployment resulting from the application of new technology, either by eliminating jobs or by changing the nature of work so that those who had performed the work no longer have applicable skills to do so. Full employment – a rate of employment defined by government economists to take into account the percentage of unemployed who would not be employed regardless of the nation's economy. Interest rate – this is the cost of borrowing funds and the payment received for lending. Nominal interest rate – market interest rate unadjusted to reflect the erosion of the purchasing power due to inflation. See real interest rate. Real interest rate – the market, or nominal interest rate, after adjusting for inflation. This is the interest rate lenders receive and borrowers pay expressed in real dollars. See nominal interest rate. Interest rate fluctuation – rate that fluctuates over the term of a loan on the basis of changes in an index that reflects changes in the market rates of interest. Default risk – probability that a borrowing agent will not pay in full the agreed interest and/or principal. Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder Business Economics Vocabulary Terms and Definitions 13 Liquidity risk – probability of loss arising from a situation where (1) there will not be enough cash and/or cash equivalents to meet the needs of depositors and borrowers, (2) sale of illiquid assets will yield less than their fair value, or (3) illiquid assets will not be sold at the desired time due to lack of buyers. Maturity risk – Business cycles – recurring expansions and contractions of the national economy (usually measured by real gross domestic product). A complete cycle typically lasts from three to five years, but could last ten years or more. It is divided into four phases -- expansion, peak, contraction, and trough. Unemployment inevitably rises during contractions and inflation tends to worsen during expansions. To avoid the inflation and unemployment problems of business cycles, the federal government frequently undertakes various fiscal and monetary policies. Expansion – a phase of the business cycle characterized by a general period of rising economic activity. An expansion is one of two basic business cycle phases. The other is contraction. The transition from expansion to contraction is termed a peak and the transition from contraction to expansion is termed a trough. Expansions last an average of about 3-4 years, but this by no means not guaranteed. Peak – the transition of a business cycle from an expansion and a contraction. The end of an expansions carries the descriptive term peak. At the peak, the economy has reached the highest level of production in recent times. The bad thing about a peak, however, is that it is a turning point, a turning point to a contraction. So even though a peak is the "highest" is not necessarily something we want. We would prefer never to reach the peak. Contraction – a phase of the business cycle characterized by a general period of declining economic activity. A contraction is one of two basic business cycle phases. The other is expansion. The transition from contraction to expansion is termed a trough and the transition from expansion to contraction is termed a peak. The popular term for contraction, one that frequent shows up in the media, is recession. Trough – the transition of a business cycle from a contraction and an expansion. The end of a contraction carries the descriptive term trough. At the trough, the economy has reached the lowest level of production in recent times. The good thing about a trough, however, is that it is a turning point, a turning point to an expansion. So even though a peak is the "lowest" is not necessarily something that's undesirable. Project #7To Infinity and Beyond! Entrepreneurial discovery – Feasibility study – evaluation of a contemplated project or course of action, according to preestablished criteria to determine if the proposal meets management requirements. An analysis is also made of alternative means of accomplishing the task. Definitions from AmosWEB.com, BusinessDictionary.com, InvestorWords.com, High School of Business™ Mrs. Schroeder