Money & Banking | Functions of The Federal Reserve System & The Tools That The Fed Uses to Control The Money Supply

Discuss the functions of the Federal Reserve System, and describe the tools that the Fed uses to control the money supply.

Possible Answer: The Fed is the nation’s central bank. As the government’s bank, it produces currency and lends money to the government. As the bankers’ bank, it lends money to member banks, stores required reserve funds for banks, and clears checks for them. The Fed’s Open Market Committee is responsible for formulating the monetary policies to promote economic stability and growth by managing—increasing or decreasing—the nation’s money supply. Among its tools for controlling the money supply, the Fed specifies reserve requirements, it sets the discount rate at which it lends money to banks, and it conducts open-market operations to buy and sell securities. It also exerts influence through selective credit controls.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Money & Banking | How Financial Institutions Create Money

Explain how financial institutions create money, and describe the means by which financial institutions are regulated.

Possible Answer: The money supply expands because banks can loan out most of the money they take in from deposits. The new loans create additional deposits as follows: Out of a deposit of $100, the bank may hold $10 in reserve and loan 90 percent—$90—to borrowers. There will still be the original $100 on deposit, and borrowers will also deposit the $90 loans in their banks. Now the borrowers’ banks have another $81 of new deposits available for new loans (90% of the $90). Banks, therefore, have turned the original $100 deposits into $271 ($100 + $90 + 81) of deposits. Further, the government regulates banks to ensure a sound financial system. The Federal Deposit Insurance Corporation insures deposits and guarantees the safety of all deposits up to the current maximum of $100,000. To ensure against failures, the FDIC examines the activities and accounts of all member banks.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Money & Banking | Four Characteristics of Money

What are the four characteristics of money?

Possible Answer: For an object to serve as money, it must be portable, divisible, durable, and stable. U.S. currency, particularly paper money, is portable, allowing someone to carry hundreds or even thousands of dollars. It is divisible, with coins and paper currency in a variety of denominations. Coins are durable due to their composition of precious metals and paper currency is durable because it is replaced by the banking system before it wears out. Finally, it is stable in value, with limited inflation.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Money & Banking | Three Functions of Money

List and describe the three functions of money.

Possible Answer: Money serves three functions: a medium of exchange, a store of value, and a unit of account. Money serves the medium of exchange function by eliminating the need for a barter system. In the form of currency, money can be used for future purchases and allows people to “store value.” Money is a unit of account, allowing people to measure the relative value of goods and services.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Money & Banking | Three Functions of The Federal Reserve System / Central Bank

Describe the three functions of the Federal Reserve System / Central Bank.

Possible Answer: The three functions of the Federal Reserve are acting as the government’s bank, acting as the bankers’ bank, and controlling the money supply. As the government’s bank, the Fed produces the nation’s paper currency and lends money to the government. As the bankers’ bank, the Fed loans money to member banks and provides storage of funds. The Fed is responsible for managing the nation’s economic growth by managing the money supply and interest rates.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Marketing & Consumer Behavior | Elements of The Marketing Mix

Describe the elements of the marketing mix. What is their collective role?

Possible Answer: The elements of the marketing mix include product, price, promotion, and place. The product portion of the marketing mix includes goods, services, or ideas designed to fill a consumer need or want. Meeting consumer needs often means changing existing products to keep pace with emerging markets and competition; many marketers focus on differentiating their product(s) from those of competitors. Pricing a product involves the selection of the best price at which to sell the product. Prices must support a variety of costs within the organization. Further, both low- and high-price strategies can be effective in different situations. Place, or distribution, refers to the proper placement of products in the market. Place decisions—including transporting, warehousing, and inventory control—are all about getting the product from the producer to the consumer. Promotion is the most highly visible component of the marketing mix; promotion refers to the techniques for communicating information about products. Promotion involves activities surrounding advertising, sales promotions, publicity, and public relations. Collectively, the marketing mix allows a marketer to better relate to the identified target market; based on the characteristics of the target market, the marketer will “build” the marketing mix elements around the target market.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Marketing & Consumer Behavior | Three Types of Competition Faced by Marketers

Describe the three types of competition faced by marketers.

Possible Answer: The three types of competition faced by marketers include substitute products, brand competition, and international competition. Substitute products may not look alike, or they may seem very different from one another but can fulfill the same need. Brand competition occurs between similar products, such as the auditing services provided by the large accounting firms of Ernst & Young and KPMG. Brand competition is based on buyers’ perceptions of the benefits of products offered by particular companies. International competition matches the products of domestic marketers again those of foreign competitors. After identifying which type of competition is present, the marketer can then develop a strategy for attracting more customers.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Motivation | Describe Expectancy Theory & Equity Theory

Describe expectancy theory and equity theory.

Possible Answer: The expectancy theory suggests that people are motivated to work toward rewards that they want and that they believe they have a reasonable chance of obtaining. A reward that seems out of reach is likely to be undesirable even if it is intrinsically positive. Equity theory focuses on social comparisons—people evaluating their treatment by the organization relative to the treatment of others. This approach holds that people begin by analyzing inputs—what they contribute to their jobs—relative to outputs they receive; outputs include salary, benefits, recognition, and security. The comparison made in equity theory is very similar to the psychological contract in which an employee views the ratio of contribution to return.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Motivation | Explain The Classical Theory of Motivation

Explain the classical theory of motivation.

Possible Answer: According to the classical theory of motivation, workers are motivated solely by money. Frederick Taylor, who introduced the concept of scientific management, proposed that companies and workers would benefit from money being a motivator. Taylor reasoned that paying employees more should prompt them to produce more. Taylor’s scientific management approach viewed increased efficiency in operations as an ultimate goal. Industrial engineering techniques were applied to each facet of a job to determine how to perform it most efficiently. These studies were the first scientific attempts to break down jobs into components and to devise more efficient tools and machines for performing them.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Motivation | Psychological Contract

Explain the psychological contract.

Possible Answer: A psychological contract is a person’s set of expectations regarding what he or she will contribute to the organization and what it will provide in return. An individual makes a variety of contributions to the organization; contributions can include effort, skills, ability, time, and loyalty. In return for these contributions, the organization provides inducements to the individual; these inducements can include pay, career opportunities, job security, status, etc. All organizations face the basic challenge of managing psychological contracts: They want value from their employees and they need to give employees the right inducements. Recent trends in downsizing and cutbacks have complicated the process of managing psychological contracts. In addition, globalization of business is also a challenge.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

HR Management & Labor Relations | Common Incentive Program Options

What common incentive program options are available for workers?

Possible Answer: Incentive programs are special-pay programs designed to motivate high performance. A sales bonus is a typical incentive; a bonus is a special payment above one’s salary. Merit salary systems, on the other hand, link pay raises to performance levels in nonsales jobs. Executives commonly receive stock options as incentives. Further, pay for performance, or variable pay, is a newer incentive plan in which middle managers are rewarded for especially productive output—for producing earnings that significantly exceed the cost of bonuses, for example. Profit-sharing plans distribute profits earned above a certain level to employees; conversely, gain-sharing plans distribute bonuses to employees when a company’s costs are reduced through greater efficiency. Pay-for-knowledge plans encourage workers to learn new skills and to become proficient at different jobs; they receive additional pay for each new skill or job that they master.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Organizing The Business | Describe the Informal Organization & Discuss Intrapreneuring

Describe the informal organization and discuss intrapreneuring.

Possible Answer: The formal organization is the part that can be represented in chart form. The informal organization—everyday social interactions among employees that transcend formal jobs and job interrelationships—may alter formal structure. There are two important elements in most informal organizations. Informal groups consist of people who decide to interact among themselves. Their impact on a firm may be positive, negative, or irrelevant. The grapevine is an informal communication network that can run through an entire organization. Because it can be harnessed to improve productivity, some organizations encourage the informal organization. Many firms also support intrapreneuring—creating and maintaining the innovation and flexibility of a small business within the confines of a large, bureaucratic structure.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

HR Management and Labor Relations | Contrast Internal & External Recruiting

Contrast internal and external recruiting.

Possible Answer: Internal recruiting means considering present employees as candidates for openings. Promotion from within can help build morale and keep high-quality employees from leaving. In unionized firms, the procedures for notifying employees of internal job-change opportunities are usually spelled out in the union contract. For higher-level positions, a skills inventory system may be used to identify internal candidates, or managers may be asked to recommend individuals who should be considered. External recruiting involves attracting people outside of the organization to apply for jobs. External recruiting methods include advertising, campus interviews, employment agencies or executive search firms, union hiring halls, referrals by present employees, and hiring walk-ins or gate-hires. A manager must select the most appropriate method for each opening.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Organizing The Business | Explain Specialization & Departmentalization

Explain specialization and departmentalization.

Possible Answer: The process of identifying specific jobs and designating people to perform them leads to job specialization. After they are specialized, jobs are grouped into logical units—the process of departmentalization. Departmentalization follows one of five forms: (1) product departmentalization, (2) process departmentalization, (3) functional departmentalization, (4) customer departmentalization, or (5) geographic departmentalization. Larger companies take advantage of different types of departmentalization for various levels.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Business Management | The Importance of Strategic Management

Explain the importance of strategic management and effective goal setting in organizational success.

Possible Answer: Effective management starts with setting goals—objectives that a business hopes to achieve. Determined by the board and top management, strategies reflect decisions about resource allocations, company priorities, and strategic plans. Companies often develop alternative plans in case things go awry. There are two common methods of dealing with the unforeseen: contingency planning and crisis management.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Business Management | Different Types of Managers

Identify different types of managers likely to be found in an organization by level and area.

Possible Answer: There are three levels of management. The few executives who are responsible for the overall performance of large companies are top managers. Just below top managers are middle managers, including plant, operations, and division managers, who implement strategies, policies, and decisions made by top managers. Supervisors and office managers are the first-line managers who work with and supervise the employees who report to them. In any large company, most managers work in one of five areas. Human resource managers hire and train employees, assess performance, and fix compensation. Operations managers are responsible for production, inventory, and quality control. Marketing managers are responsible for getting products from producers to consumers. Information managers design and implement systems to gather, organize, and distribute information. Some firms have a top manager called a chief executive office. Financial managers, including the chief financial officer, division controllers, and accounting supervisors, oversee accounting functions and financial resources.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition

Business Management | Four Basic Functions of Management Process

Define and explain the four basic functions that constitute the management process.

Possible Answer: The four basic functions include planning, organizing, leading, and controlling. Planning is determining what the organization needs to do and how best to get it done. The process of arranging resources and activities into a coherent structure is called organizing. When leading, a manager guides and motives employees to meet the firm’s objectives. Controlling is the process of monitoring performance to make sure that a firm is meeting its goals.

Source: Business Essentials, 8e (Ebert/Griffin) – Global Edition