Business Chapter 1-4

What is probably the most effective way for a company to encourage ethical behavior? Hire employees who are ethical and in agreement with the company’s views.

Socioeconomic model of social responsibility, which places emphasis not only on profits but also on the impact of business decisions on society. Because business is a part of our society, it cannot ignore social issues.

Terms in this set (10) Which of the following best defines balance of trade? The total value of a nation’s exports minus the total value of its imports over some period of time.

Why does the balance of payments always balance, even though the balance of trade doesnot? The balance of payments keeps track of all of the transactions and the records are measured in a double-entry book-keeping, so the total debits must equal to total credits.

Balance of trade (BOT) is the difference between the value of a country’s exports and the value of a country’s imports for a given period. Balance of trade is the largest component of a country’s balance of payments (BOP).

A country’s trade balance equals the value of its exports minus its imports. Exports are goods or services made domestically and sold to a foreigner. If it was purchased or made in a foreign country, it’s an import. When a country’s exports are greater than its imports, it has a trade surplus.

Unfavorable Balance of Trade. The value of a nation’s imports in excess of the value of its exports.

First, fall in domestic prices or lower rate of inflation will induce people to buy domestic products rather than imported goods. Second, lower domestic prices or lower rate of inflation will stimulate exports. Fall in imports and rise in exports will help in reducing deficit in balance of payments.

Three ways to reduce the trade deficit are:

1. Consume less and save more. If US households or the government reduce consumption (businesses save more than they spend), imports will drop and less borrowing from abroad will be needed to pay for consumption.
2. Depreciate the exchange rate.
3. Tax capital inflows.

In the simplest terms, a trade deficit occurs when a country imports more than it exports. A trade deficit is neither inherently entirely good or bad. A trade deficit can be a sign of a strong economy and, under certain conditions, can lead to stronger economic growth for the deficit-running country in the future.