Explain the Various Elements of the Marketing Process

Explain the Various Elements of the Marketing Process Introduction This paper explains the strategic marketing planning process illustrating the discussion with examples from the low cost airline, Easyjet. The paper proceeds in five parts. In the next section of the paper, the concept of market segmentation is described and discussed. Next, the concept is located in the overall positioning, segmentation, targeting (PST) organisational strategy. Porters’ Generic Strategy is then outlined, as a supplementary paradigm to market segmentation. The concept of the marketing mix is discussed and applied to the case study company. A brief conclusion closes the paper. Before examining the marketing process, however, it is necessary to provide an overview of the case study company. Easyjet is an airline company that has been operating in the United Kingdom since 1995 (Easyjet, 2014). Like many other low-cost carriers, the company initially modeled itself on the business model of a successful American carrier, Southwestern Airlines (Yip, 2004). That airline had experienced unprecedented success by cultivating and exploiting a low cost operating model – Easyjet sought to implement this model in the European context, launching a flight between London and Amsterdam that was half the cost of the fare at the time offered by national carrier British Airways (Sull, 1999). In the years that followed, Easyjet rapidly expanded its route network to include hubs in some of the major British cities: Glasgow, Manchester and Liverpool, and routes to popular European destinations including Rome, Brussels, Milan, Barcelona, Frankfurt, Oslo and Stockholm. Today, Easyjet is â€Å"Europe’s leading airline†, specialising in short haul, point-to-point flights between Great Britain and Europe (Easyjet, 2014, online). The carrier operates some 600 routes serving 30 countries, and had firm plans to expand its network further afield in the future. Marketing as a concept Marketing can be thought of as a strategic philosophy which holds that assessing and meeting the needs of customers is a complex and multifaceted activity, so that organisations are required to take a holistic, customer-focused approach to all of their business activities (Svensson, 2001). In practice, marketing involves collecting, recording and analysing data about customers, and using this data to establish a strategy for meeting their needs. The marketing process covers a myriad of business activities that enable companies to meet the needs of consumers. Three key activities form the backbone of the marketing process. In the first instance, the customer base is segmented on the basis of demographic or other characteristics. Secondly, apositioning, segmentation, targeting (PST) strategy is developed in order to target goods and services to the correct market segments. Thirdly, a marketing mix is developed. Considered together these three elements form the basis of the firm’s overall marketing strategy (Kotler and Keller, 2006). Market segmentation Populations, and hence markets are potentially large and heterogeneous (Dibb, 1998). Marketers would find it impractical to target every member of such a diverse grouping, and thus market segmentation is a key activity in the marketing process (Kotler and Keller, 2006). Market heterogeneity can be defined as â€Å"the extent to which groupings of customers based on operational descriptor variables respond differentially to the choices of both offerings and the way they are marketed† (Wensley, 1995, p. 78). So, market segmentation refers to the activity in which this large heterogeneous market is segmented or divided into smaller, more homogeneous groupings of individuals with similar demographic characteristics or similar needs (Kotler and Keller, 2006). Segmentation recognises that it is neither practical nor profitable to attempt to satisfy the needs of a large heterogeneous population; ultimately, its aim is to identify the business’ most profitable customers, to understand them, and to target them. Each portion of the market is known as a market segment. Segments can be identified on the basis of consumer characteristics (e.g. socio-economics such as wealth or social class, demographics such as gender or geographical location), psychographics (that is, interest, attitudes or opinions), product-related behavioural characteristics such as purchasing or consumption habits, or, in the case of business to business (B2B) marketing, business characteristics such as business size, location or level or turnover (Wedel and Kamakura, 2000). Easyjet uses two consumer characteristics to segment its market: level of wealth, and hence, the degree to which customers are price conscious, and purpose of travel (i.e. leisure or business) (Sull, 1999). The way in which this is evident is through the pricing strategy of the company, which is discussed in greater detail below. For now, it is important to note that Easyjet’s business model differs from conventional carriers who typically drive sales towards the more lucrative business class passengers, filling the remainder of their seats with low-paying leisure passengers. In contrast, Easyjet, â€Å"does not serve the business consumer first and use the tourists as a buffer in case it has some excess capacity, but rather restricts the demand of both segments (by raising the appropriate prices) so as to equate capacity to expected demand† (Koenigsberg, Muller, and Vilcassim, 2004, pp. 16-17). In other words, the company recognises two distinct customer segments but uses similar market capture strategies for both. Segmenting, Positioning and Targeting the market Identifying the target market does not end with segmentation: after segmentation has been undertaken, organisations must target the market, and position themselves. This is known as the segmentation, targeting and positioning (STP) process (Sausen, Tomczak, and Herrmann, 2005) Targeting refers to the way in which marketing efforts are aimed at the segment while positioning refers to the â€Å"designing of the company’s image so that the target customers understand and appreciate what the company stands for in relation to its competitors† (Hooley and Saunders, 1993, p. 8). Two broad strategies can be identified. Functional positioning refers to positioning on the basis of product characteristics (e.g. price or quality), while expressive positioning refers to positioning on the basis of consumer characteristics (Johar and Sirgy, 1989). Easyjet, established in 1995, entered the air travel industry specifically to address the needs of low income passengers, as exemplified by the emphasis placed on the prices of its fares (Sull, 1999; Dobruszkes, 2009). Accordingly, the segmentation strategy used by the company was essentially an income-based, or price-conscious strategy: it met the needs of individuals wishing to travel throughout Europe that were not willing, or able to pay the airfares charged by full service airlines. However, more recently, the carrier has begun to be used by business passengers (Lu, 2009). For instance, from March 2013 to March 2014, the airline transported 12 million business passengers (almost fifty percent of its fleet’s seat capacity was taken up by business passengers), representing a growth in this market by 8.5 per cent over the previous year (The Guardian, 2014). This development has been attributed to the introduction of allocated seating. Previously, Easyjet, like many other Low Cost Carriers (LCCs) was able to keep airfares low because passengers were not able to select their seats prior to travel. However, the company abandoned this policy in November 2012, with the firm’s Chief Executive Officer (CEO) Carolyn McCall, remarking that â€Å"I think allocated seating has been the single most popular thing we have ever done for our passengers’ (cited in The Telegraph, online). The introduction of allocated seating is tantamount to a market repositioning and has enabled the airline to capture a greater share of the business passenger market. Repositioning is a normal part of the marketing process, for as Baines, Fill and Page (2012, p. 131) have noted â€Å"most marketers need to be alert and be prepared to reposition their brands as the relative position occupied by brands, in the minds of customers, will be challenged and shifted around on a frequent basis†. Detractors have argued that the STP process is inadequate at fully explaining business’ repositioning activities because it does not take into account the positioning strategies of competitors. To combat this, strategist Michael Porter (cited in Kotler and Keller, 2006) developed his generic strategies framework. This concept identified three positioning strategies available to firms: cost leadership, differentiation and focus. Under acost leadership strategy, the organisation seeks to offer its product or service at the lowest costs relative to competitors. Under the differentiation strategy, the firm seeks to differentiate itself from its competitors on the basis of product features such as quality. The third approach, the focus strategy, describes a stratified approach to positioning. Organisations using the focus strategy target concentrated or niche markets by seeking to understand the unique needs of that segment and tailoring well-specified products to them. It is generally argued that organisations that do not adopt a strategy are unsuccessful (Kotler and Keller, 2006). Easyjet has been vastly successful in relation to its competitors since its inception. In 2014, it became the largest British airline, in terms of passenger volumes, outstripping those of the national carrier, British Airways (Euromonitor, 2014). In Europe, in terms of market share, the company is second only to its Irish competitor, Ryanair. The fact that the company is competing on two fronts (with similar, low cost-carriers and conventional full-service carriers) suggests that it is pursuing a differentiation strategy. Easyjet has differentiated itself from low-cost carriers by introducing aspects which are typically absent from the services provided by those airlines (allocated seating is a good example), but it is differentiated from full-service airlines through, for example, its pricing strategy. The marketing mix An essential element of any company’s marketing strategy is the marketing mix (Brassington and Pettitt, 2009). This concept was developed to explain the factors influencing the demand for a product. Typically, the marketing mix is operationalised in terms of the ‘4 Ps’ Product, Place, Price and Promotion. Product In services marketing, product refers to all aspects of the services offered by the organisation including the level of the quality of the service, any guarantees or warranties, product lines or packaging (Kotler and Keller, 2006). Easyjet aspires to offer its business and leisure passengers safe and simple flights to a myriad of European destinations (Easyjet, 2014). To meet these aspirations, the company operates a large, modern fleet comprised of 220 Airbus A320 and A319 (ADS Advance, 2014). Despite media claims, the airline is one of the safest and most punctual airlines in Europe, and has invested significant amounts of cash in boosting the quality of its product. For instance, the company is investing in drone and robots that will be used to carry out safety checks on the aircraft, and the airline is working towards the provision of ‘paperless planes’ which it says will improve efficiency (ADS Advance, 2014). Flexibility is a major feature of the airline’s product. While full service airlines adhere to a business model that discriminates between airfares with different levels of flexibility (for example, non-refundable tickets and fully refundable tickets), Easyjet does not differentiate between tickets in this way (Nair, Paulose, Palacios, and Tafur, 2013). Furthermore, it is conventional in the industry for one-way tickets to cost passengers more than round-trip tickets. Carriers prefer passengers to make return flights because selling tickets in this way builds convenience into their flight scheduling processes. Passengers who purchase one-way flights make it difficult for carriers to set schedules and make staffing decisions (Nair et al, 2013). Easyjet utilises a different business model, which makes it more straightforward for customers to understand the product offering and enables it to build flexibility into its scheduling systems. Place Place refers to the distribution strategy of a company (Brassington and Pettitt, 2010). Easyjet aims to make travel on its fleet as widely available as possible, highlighted by its presence in almost every Western European country (Easyjet, 2014). The company is particularly proud of the extensiveness of its network, with its marketing materials claiming that â€Å"over 300 million people [reside] within a one hour drive of an easyJet airport† (Easyjet, 2014, online). Not only is the airline the leading carrier in Europe, it also holds strong positions in several major markets, including Edinburgh, Venice, Nice, and Naples, where it is the largest carrier, and Lisbon, Lyon and London Stansted, where it is the second largest carrier (Easyjet, 2014). However, the companys stated efforts to capture a growing share of the business passenger market share might be hindered by its choice of airports. Despite the firm’s claims that it serves ‘convenient’ locations, in many cases, the airline serves not the primary airport in a city, but smaller, supplementary airports that are typically in out-of-the-way locations. For instance, most Easyjet flights to Paris land at the city’s Orly airport, rather than the more popular Charles de Gaulle. Serving smaller airports is a key characteristic of the LCC business model, for larger airports tend to carry greater landing fees (O’Connell and Williams, 2005). Place also refers to the outlets through which customers can purchase the product or service. When it was first established Easyjet first offered passengers the opportunity to purchase flights only through its own website, via its telephone booking system and at the airports from which it operates (Euromonitor, 2013; 2014). The purpose of this model was to build the brand, and to keep costs low. Over time, however, the company has extended its distribution model to include third party intermediaries like lastminute.com and travelsupermarket.com. This enables customers to be creative in building their journeys (for example, booking an outward flight with one carrier and a return flight with another), and has allowed the airline to boost its market share, because the growth of specialist search engines means that travellers need only visit one website when they are searching for flights (Euromonitor, 2014). Promotion The telephone booking system that the company used to drive sales at its inception is also slowly being phased out, moving the company every further towards to an Internet-only business model (Euromonitor, 2014). When the company was first established, it relied on its web facilities, fleet and personnel branding (a trademark orange) and word-of-mouth to drive sales. It took the company 17 years of trading before it invested in a directed marketing campaign (Marketing Magazine, 2012). The company even featured in a London Weekend Television documentary, or ‘docusoap’ which, contrary to the fears of some analysts, turned out to be an enormously successful promotional exercise. As noted by Kilborn (2006, p. 201) â€Å"while Easyjet knew that there were certain risks involved in opening themselves up in this way, these were seen to be more than offset by the perceived opportunities for keeping the Easyjet brand name in front of the consumer. In the estimation of the company’s PR advisors, even those incidents of delays and other problems associated with air travel, could be turned to the companys advantage. The fact that Easyjet staff would be seen to be so actively involved in smoothing out problems and assisting in making alternative travel arrangements was regarded as a useful exercise in company public relations† In addition, the company has recently adopted a more aggressive marketing and branding strategy. In October 2011, the airline invested some  £50 million into its marketing strategy, recruiting an external advertising agency to establish a strong European-wide promotional campaign (Marketing Magazine, 2012). Although the resulting campaigns ‘Europe by Easyjet’ and ‘Where Are Young Going?; were panned by critics, analysts attributed a massive boost in the firm’s revenues per seat and passenger numbers to this aggressive promotional strategy (Marketing Magazine, 2012). Price There can be no doubt that the pricing strategy of the airline is the cornerstone of its business model. Although the company has shifted some of its focus to other elements of the marketing mix in recent years, the low prices offered by the company are probably its best-known feature among consumers. As the companys Chief Executive, Carolyn McCall remarked in a 2012 interview with Marketing Magazine (2012, online). â€Å"Well never move away from price – it is the cornerstone of what we do. But now we communicate destination and service†. This focus on low price and low costs is tantamount to what strategist Michael Porter (1985) termed a cost leadership position. It is interesting that analysts have argued that such a position is untenable in the long run. For example, the CEO of US airliner Skytrax Edward Plaisted has argued that low-cost airline models rarely guarantee success – he pointed to the fact that half of new carriers go bust because they cannot maintain the low cost strategy (Kah, 2012). Porter (1985) did argue that for such as position to be sustained, services must be perceived by customers to be good value for money. The empirical evidence does seem to suggest that Easyjet’s customers do believe that the carrier offers value for money, as highlighted by its improving punctuality record and growing passenger numbers (Euromonitor, 2014). The company has even outperformed competitors following a similar business model: for instance, the British low cost airline Flybe has reported large annual losses since 2012 (Euromonitor, 2014). For this reason, the airline’s chief has argued that there is a lot of blue water between us and Ryanair, and very little between us and British Airways† (Marketing Magazine, 2012, online). The way in which the carrier has been able to consolidate its competitive advantage is by balancing its low price strategy with high peripheral prices (Euromonitor, 2014). For example, although passengers are able to find flights for as little as 9 euros, there are additional charges for printing off boarding cards, checking in at the airport, selecting a seat and taking hold luggage. Clearly, the growth in passenger numbers and the growth in the airline itself means that customers do view, even the high prices of peripherals as value for money. It must therefore be concluded that Easyjet’s cost leadership strategy is a fruitful one. Conclusion This report has outlined the marketing process, using the low cost airline Easyjet as a case study. The case study shows that the company has embraced the idea of marketing as a holistic, organisation-wide philosophy, and its recent successes can be attributed – at least partly – to well thought out segmentation and PST techniques, and an appropriate marketing mix. References ADS Advance (2014). Easyjet applies innovative tech to improve efficiency. Online at http://www.adsadvance.co.uk/easyjet-applies-innovative-tech-to-improve-efficiency.html . Date accessed: 17 October 2014 Baines, P., Fill, C. and Page, K. (2012). Essentials of Marketing. Oxford: Oxford University Press Brassington,F. and Pettitt, S. (2000) Principles of Marketing. London: Prentice Hall Dobruszkes, F. (2009). New Europe, new low-cost air services. Journal of Transport Geography, 17(6), 423-432. Dibb, S. (1998). Market segmentation strategies for success. Marketing Intelligence and Planning. 16(7), pp. 394-406. Easyjet (2014). About us. Online at http://corporate.easyjet.com/about-easyjet.aspx?sc_lang=en_$ja=tsid:31245|cat:101248RefID=EJH_AFFWINcallwinid=101248awc=3550_1413547041_0c47faefc4e3a8d5b7f288863c6c2a29 . Date accessed: 17 October 2014 Euromonitor (2014). Low-cost carriers: Exploring new territories. London: Euromonitor Euromonitor (2013). Easyjet Airline Co. Ltd in Travel and Tourism. London: Euromonitor Hooley, G. J., Saunders, J. A. (1993). Competitive positioning: The key to market success. Hemel Hempstead, England: Prentice Hall. Johar, J. S., Sirgy, M. J. (1989). Positioning models in marketing: toward a normative-integrated model. Journal of Business and Psychology, 3(4), 475-485. Kah, S. (2012). The Cost of Poor Quality. Retrieved from http://www.improvementandinnovation.com/features/article/the-cost-of-poor-quality-what-will-customers-give-up-in-exchange-for-low-costs/?isFeature=1 on 19 October 2014 Kilborn, R, (2006). A Marriage Made in Heaven or in Hell? Relations Between Documentary Filmmakers. In L’Etang, J. (ed). Public Relations: Critical Debates and Contemporary Practice. New Jersey: Lawrence Erlbaum, 187-204 Koenigsberg, O., Muller, E., Vilcassim, N. J. (2004). Easyjet Airlines: Small, lean and with prices that increase over time. Mimeo. Centre for Marketing Working Paper 04-904. London Business School. Kotler, P. and K. L. Keller (2006). Marketing Management. Upper Saddle River, NJ: Pearson Education. Lu, C. (2009). The implications of environmental costs on air passenger demand for different airline business models. Journal of Air Transport Management, 15(4), 158-165. Marketing Magazine (2012). Industry View: Is Easyjet’s Marketing Makeover Working? Online at http://www.marketingmagazine.co.uk/article/1131167/industry-view-easyjets-marketing-makeover-working . Date accessed: 16 October 2014 Nair, S., Paulose, H., Palacios, M., Tafur, J. (2013). Service orientation: effectuating business model innovation. The Service Industries Journal, 33(9-10), 958-975. O’Connell, J. F., Williams, G. (2005). Passengers’ perceptions of low cost airlines and full service carriers: A case study involving Ryanair, Aer Lingus, Air Asia and Malaysia Airlines. Journal of Air Transport Management, 11(4), 259-272. Porter, M E. (1985). Competitive Advantage. New York: The Free Press Sausen, K., Tomczak, T. and Herrmann, A. (2005). Development of taxonomy of strategic market segmentation: a framework for bridging the implementation gap between normative segmentation and business practice. Journal of Strategic Marketing, 13(3), 151-173. Sull, D. (1999). Easyjets $500 million gamble. European Management Journal, 17(1), 20-32. Svensson, G. (2001). Re-evaluating the marketing concept. European Business Review, 13(2), 95-101. The Guardian (2014). Easyjet business travel takes off with success of seat booking. Online at http://www.theguardian.com/business/2014/may/13/easyjet-business-travel-allocated-seating . Date accessed: 16 October 2014 The Telegraph (2013). Easyjet boosted by business passengers. Online at http://www.telegraph.co.uk/finance/newsbysector/transport/10826571/easyJet-boosted-by-business-passengers.html. Date accessed: 16 October 2014 Wedel, M. and Kamakura, W. (2000). Market Segmentation: Conceptual and Methodological Foundations. Norwell: Kluwer Wensley (1995). A critical review of research in marketing. British Journal of Management, 6(1), 63-82. Yip, G. S. (2004). Using strategy to change your business model. Business Strategy Review, 15(2), 17-24.

Essay on Myth of the Fortunate Fall in John Milton’s Paradise Lost

Myth of the Fortunate Fall in Paradise Lost  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚     Ã‚  Ã‚   From this descent / Celestial Virtues rising, will appear / More glorious . . . than from no fall. (ii. 14-16)1These are Satan's words to the fallen angels in Paradise Lost. Satan claims that their fall from Heaven will seem like a "fortunate fall," in that their new rise to power will actually be "more glorious" than if they had stayed in Heaven all the while. Can we, as fallen humans, possibly make Satan's words our own, even if it is not our own work but God's that causes our "rising"; or, if we do claim a "fortunate fall," have we been beguiled by Satan to rejoice in our fallen state? While it is common among beguiled critics to claim that Paradise Lost presents the Fall as fortunate, in fact the Fall is much less fortunate than these critics presume.    Millicent Bell is among the beguiled, but he starts off with a vital point that is too easily forgotten. What does the narrative make explicit about the Fall? "The bare story makes no mystery of it. It was infinite disaster."2 From the beginning of the epic we learn that the Fall "Brought death into the world, and all our woe" (i. 3). It "brought into this world a world of woe,/Sin and her shadow Death, and misery/Death's harbinger" (ix. 11-13). We learn that Eve, after leaving Adam to go her own way in Eden (just before the Fall) "never from that hour in Paradise/Found'st either sweet repast, or sound repose" (ix. 406-07). Eve's Fall is a great calamity for the world (ix. 782-84); so is Adam's, completing the original sin (ix. 1003). The couple's early reactions to their sin include disgust, shame, lust, and scorn for the earth (ix. 1010 ff.). The woe of Satan, too, is "perpetual" (ii. 861) and "eternal" (iv... ...s that Paradise is where she and Adam are together, so that an Eden without Adam would be no Paradise at all (xii. 615-17). 15. Bell (878-79) asserts that Milton could not have understood Raphael's words about education and spiritual uplift without tying them to the harshness of error and suffering; though I disagree, Bell's general point stands: as a fallen human the life of righteous suffering is the only good one that Milton could have had true sympathy for. On the other hand, in the context of the epic, Frank Kermode and Barbara Lewalski recognize that in Paradise Lost we yet know nothing of this inner paradise with which to compare it to Eden (we have only Michael's word): "The paradise of Milton's poem is the lost, the only true paradise, we confuse ourselves . . . if we believe otherwise" (Kermode, "Adam Unparadised," Elledge 603-04; cf. Lewalski 270).

Free Essays on The Stranger (The Outsider): Relationships :: Camus Stranger Essays

Relationships in The Stranger (The Outsider)  Ã‚   On the surface, Albert Camus's The Stranger (The Outsider) was about a misguided man and his sudden, fatal tribulation. Covertly, a second, more heart-grasping plot occurred in the novel. It involved a misfortuned widower and his side-kick of a dog. This scenario can be sharply contrasted to Meursault's insensitivity toward all life (and beyond). Purposefully, this contrast will evidently prove the case that Camus employed a broad range of multipersonality to enhance his novel and, perhaps, to illustrate the keen differences in people. Salamano, the widower, was afforded the dog shortly after the passing of his wife. Apparently, he showed no regard or value for her, for "he hadn't been happy with her, but he'd pretty much gotten used to her" (Camus 44). The dog was to fill the void in his life. He often pampered the dog and lavished it with gifts. When the dog took ill, he nourished it back to a considerable health. However, soon afterward he became indifferent to the dog. He began verbally and physically abusing the dog. His second "marriage" mirrored the one with his wife profoundly. The dog eventually ran off to escape the punishment, and once again Salamano experienced a life of solitude. He did not get over this loss as well or as soon as the one of his wife. He came to the realization that he had taken life for granted. To prove this, he rarely socialized prior to his dog's disappearance; after losing the dog, though, he offered his hand to Meursault in kindness (Camus 46). Meursault, in contrast, does not change his mental attitude at all in the novel. His time was precious, for he could correspond with no one unless arrangements had been made in advance. He was very disrespectful and unsensitive, and he was very open about this fact. One aspect of his attitude was the relationship between him and Marie. She was only a sex object to him. He based their relationship solely on sex and sexuality. He most definitely talked with her, but he did not truly care for her.

Vandy Religion Essay :: essays papers

Vandy Religion Essay I have been around religion all my life, but only recently has it become important to me. I find this ironic, because I recently transferred to a ‘public’ DODDS school from a small, private Catholic school. Only after I was removed from the Catholic school environment did I begin to see what religion really is. I came to the Catholic school system in Leavenworth, Kansas in the fifth grade. Before that time, I was naà ¯ve; I barely knew any swear words and all I knew about sex was that I was interested in cute boys. Ironically, it was this time, all through and every year after fifth grade that I was subjected to and learned vulgarity. By the time I was a sophomore, I was so familiar with all of the four-letter words that I swore casually with my friends when we would discuss sex or gossip about other students. I picked up every slang word for every body part and knew every sexual innuendo there was to know, all during the six years I attended Catholic school. Even though we were not very good examples of church-going youngsters, my friends and I regularly went to Youth Group meetings. I never really listened to what the speaker was saying or to what I was singing, I just went to socialize with my friends. When we moved to Okinawa, I immediately wanted to make friends with the popular crowd, but my mother forced me to go to Youth Group. I only knew one person there, but I met another girl, who introduced me to her group of friends, the exact crowd I wanted to meet. We went out a couple of times, but after a few weeks at school, they decided I was not ‘cool enough’ and dropped me from their group. I was crushed. However, since I was new, I had met other new people, who I brought to the Youth Group so I would not be alone. Soon I met other people at the Youth Group and began to get more involved with that crowd. They did not reject me because of my appearance or because I sometimes said stupid things, but accepted me for who I was and welcomed me into their group.

Ginsters Report

GINSTERS Table of Contents Introduction and Background Ginsters is the main brand of the Samworth Brothers, a privately owned family business active in various food sectors. Its product range includes pasties, savouries, pies, wraps and sandwiches. Ginsters is based in Callington, Cornwall. The brand has been building its credentials as authentically Cornish and a local product with local ingredients. More recently it’s also trying to associate its brand with the image of fresh and quality ingredients. This is reflected on packaging, advertising and new product development (Ginsters Official website, 2010). The task at hand is to discover the Critical Success Factors for Ginsters, therefore analytical tools and frameworks were used such as SWOT, STP and the Marketing mix analysis. The external and competitive environment were also analyzed. The first section includes the critical evaluation of Ginsters’ CSFs, while the second section is concerned with developing recommendations for a three-year strategy for the firm. 1. Ginsters’ Critical Success Factors 1. 1 CSFs According to Rockart and Bullen (1981), Critical Success Factors (CSFs) are the limited number of ways and the factors that are fundamental for the continual successful performance of a company. The identification of CSFs is important because it allows organizations to focus their efforts on building their capabilities to support their CSFs. On the other hand, it may even allow firms to assess whether they have the capabilities to develop the necessary requirements to meet CSFs. Daniel (1961) was the first to introduce the concept of CSF. The concept was then used to assist in defining the CEO’s information needs that are most critical for a business (Rockart, 1979) (Zwikael and Globersonz, 2006). The CSFs method is straight-forward, however it has a complexity as it can be viewed from several perspectives. Geller (1985) points out that CSFs can be generic to a given combination of conditions in the industry, market and external environment. They can also be context specific in terms of the organization. Furthermore, Rockart and Bullen presented five key sources of CSFs, the industry, competitive strategy and industry position, environmental factors, temporal factors, and managerial position. It is also important to note that CSFs can be monitored or measured to ensure they are still important and valid as they can change over time (Brothererton, 2004). 1. 2- Human resources development The first CSF for Ginsters is its ability to develop human resources. Embedded in its strategy is the recognition that people are important assets of the organization (Ginsters Official Website, 2010). This is evident as it achieved the status of top-service supplier to UK supermarket giant Sainsbury’s. Ginsters came up with a way of enhancing the efficiency and productivity of its workforce. It designed and implemented a unique branded management-development program, which it dubbed ‘‘Platinum’’ (Politt, 2006). This cut staff turnover to half, mitigated absenteeism, increased staff stability, reduced production-line down time building on improved relationships between engineering and production, and succeeded in offering higher services to its supermarket customers, following the introduction of a new training course (Politt, 2006). . 3 Brand Image and Advertising A full STP analysis conducted for Ginsters (see Appendix) has derived important conclusions on Ginsters success factors. The decision to produce and distribute products solely in the United Kingdom has ultimately been positive and successful for the company, as it has increased its UK cus tomer base. In 2009, Ginsters spent over 1 million pounds on advertising, which has generated considerable attention for the company (Mintel Report, 2010). Ginsters has consistently used advertising and it leads the pack in the pies and pastries category of the market (Mintel Report, 2010). This is important and is evident through its great brand reputation along with goods that represent quality and trustworthiness. Ginsters has always promoted its Cornish heritage, emphasizing the importance it gives to local sourcing and the use of 100% British ingredients. The brand has also evolved immensely. Ginsters marketing scheme has developed to highlight the importance of quality ingredients that are put in the pasties. This is of critical importance because consumers are confident that Ginsters products will deliver on quality and taste. Understandably, the pie and pastry industry is highly competitive with Ginsters competitors being able to produce virtually all the products that Ginsters is able to produce. That being said, Ginsters success lies in its convenience and impulse sector largely due to sales of chilled savoury pastry. In fact, Ginsters has been recognized as the number one ‘food on the go’ brand in the last four years (Doonar, 2004). 1. 4 Fragmentation of mealtimes and rise of chilled food industry & The ability to target and reach segments of market These are two important and correlated success factors for Ginsters. The chilled and prepared foods market has evolved in the past 10 years and has become a very dynamic area of the food market. This is largely due to the trend in consumer behaviour where lifestyles are influencing mealtime. This has made mealtimes more fragmented, informal and less important. This environmental social change has resulted in suppliers and retailers placing more emphasis on the chilled cabinet. Moreover demand for chilled foods has soared. This is a type of environmental CSF is one in which the firm has no control over. However, looking at Ginsters reaction to this environmental change is also a strategic critical success factor. Ginsters understood the impact of these changes on consumer purchasing behaviour and they adapted their products to meet this demand. This becomes clear in their ability to target the largest group that conforms to this environmental change, which are young people and business professional, and reaching their target by presenting their products in the right locations such as petrol station, convenience stores and university union shops (Keynotes food industry report, 2010). Ginsters has also benefited from getting the right product mix to serve their target market as the SWOT analysis shows that its products are location independent, convenient, deeply filled, easy to eat and not unhealthy (Mintel Report, 2010). 1. 5 value chain Another critical success factor of Ginsters has been the way it incorporated its value chain. In terms of inbound logistics, Ginsters has chosen a direct channel approach that is characterized by low proximity. The place of Ginsters manufacturing facility is within a 20 mile radius of the raw material providers. It forms a vertical marketing system (VMS) and more specifically an administered VMS. This type of cooperation helps Ginsters have a great degree of control. The system provides 35% of the total raw materials and the target is to reach 50% (Hunt, 2005). Furthermore, concerning operations, increased investments in production technology by introducing automation systems with quality control, ensured the end-quality of the products and also decreased costs (Growth at Ginsters, 2004; Drives cut pastry production costs, 2009; Keeping an eye on the Pie, 2002; Accurate pack coding easy as a pie, 2005). Outbound logistics have also been a subject of focus for the company with a fleet of vans that place emphasis on delivering to 10000 companies during the peak hours (Brooks. 2004). A company-owned distribution system makes it possible to plan and incorporate delivering objectives, as relying on others would have made that difficult. Recommendations for three year strategy The UK has been one of the major economies that are still in recession. Due to the economic crunch, businesses are facing grave troubles to cope with their existing businesses and are trying to raise capital for investment into new businesses. Therefore, Ginsters should focus on improving its existing capacity and making better use of its factors of production. This can be achieved by reducing its working capital, increasing inventory turnover and implementing employee learning and performance improvement training programs similar to the platinum program undertaken 4 years ago (refer to 1. 2). However, the company must establish some long term objectives as there are signs of recovery for the UK economy in the years to come. The Bank of England estimates that the economy will get back on track by 2011 and the HM Treasury has published independent forecasts predicting that by the same year the GDP growth will be a mean 2%. It should plan for the development of smaller markets and target market segments which although less in size, have excellent expected growth rate. Ginsters is targeting youth and working people, but without offering Halal foods as compared to their competitor Pukka pies. According to The Times UK, Muslim population has been increasing 10 times faster than the rest of the communities in the United Kingdom. It has grown by 0. 5 million and reached 2. 4 million in four years from 2004 to 2008 and expected to grow at the same pace as revealed by office of national statistics. Therefore, Ginsters should adopt a market development strategy to target the Muslim community in the UK. It can incorporate this strategy by introducing it into the heavily populated Muslim areas. Ginsters has been spending a lot money on advertisements and has been successful in conveying the positive image of the company to the people. Its latest TV brand shows that it puts quality ingredients in its products, but it does not convey the clear message that its food is more healthy. According to the survey conducted by Mintel, 16 % of people think that Ginsters food is unhealthy as compared to its competitor Pork Farms which was marked unhealthy by only 12 % of them (Mintel, 2010). The reason for this misconception may have arisen from its marketing slogan, ‘Real Honest Food’. This portrays that Ginsters products are of quality and authentic, however fails to demonstrate that it has taken healthy eating into consideration. Therefore, the firm should seriously plan for new advertisements and promotions that give a more clear picture of Ginsters as a healthy food manufacturer. To convey the idea of healthy foods, the company should take advantage of the ongoing and upcoming events that represent Ginsters target market and could be helpful in promoting its message. It is recommended that Ginsters should become an official sponsor of the 2012 Summer Olympic Games. It can make new and innovative advertisements in the Olympic Games that can help produce a healthier image. Sponsorship will also enable the firm to increase the awareness of its products and influence consumer behaviour patterns thereby leading to increased sales. It will also help to enhance the brand image in target groups’ minds and develop a disposition to change behaviour towards buying the promoted brand, thereby leading to improved revenues (Smolianov et al,1999). Ginsters support of a major international event will help in conveying its message to billions of people more accurately and positively. It costs nearly 10 million pounds to become a three tier sponsor. Ginsters had pre-tax profits of 45. 2 million in 2009 and paid dividends amounting to 16. 2 million, up from 14 million in 2008 (Bloomberg Database, 2010). Assuming a stable dividends growth, there is the potential for worldwide promotion and brand recognition. Instead of paying dividends out, it should deposit them with a bank or place them in investment grade securities in order to grow at an amount sufficient enough to secure a place in the top sponsors of the Olympic Games. TV advertising during the Olympics will also increase brand awareness among live audiences who watch TV broadcasts, which will ultimately pave the way to Ginsters going global. In 2008, a record breaking 70 million viewers tuned to NBC to watch the opening ceremony, not mentioning the other international broadcast stations (The Washington Post, 2010). The cost for a 30 second spot is expected to reach the 400. 000 USD level, signifying the importance of the particular event. In Ginsters case, the advertising strategy should include all forms of digital and physical advertising (television, radio, press, online, billboard, in-store etc. . In late 2009 Ginsters decided to redefine its brand image and target a broader market segment. It tried to appeal more to mothers and fathers while dropping its image as simply a snack. To continue to accomplish this, a massive advertising campaign is desperately needed. Along these lines, the company should negotiate a deal with BBC1 and ITV1 to spo nsor the most popular programs in UK television. Programs that aim to captivate the interest of thousands of British families, which comprises the new target group for Ginsters. Such programs would include â€Å"Eastenders†, one of the most watched and long running soap operas, â€Å"Coronation Street†, the longest running drama series in the world still to be in production and â€Å"X Factor† a singing competition with over 13 million viewers each week (Broadcaster’s Audience Research Board, 2010). Appendix STP Analysis: | Ginster’s| Pukka Pies| Segmentation| Products are sold exclusively in the United Kingdom highlighting the fact that Ginsters is a domestic company. Products are grouped towards the younger population of both sexes due its convenience. The family appeal is one in which Ginsters strives to achieve as they portray a family environment in their advertising. Socio-economic class is not of vital importance with Ginsters as they want to cater to the complete market. The upper class can rely on a quality product while the lower class can rest assured that the product is competitively priced. | Products are sold all across Europe. Countries include Austria, Cyprus, France, Gibraltar, Greece, Holland, Hong Kong, Malta, Portugal, Spain, and the United KingdomProducts are grouped for people of all characteristics, specifically the middle-class family. With a wide variety of products including frozen and chilled pastries, it is important for Pukka Pies to capture the full European market, rather than segment. | Targeting| Products are targeted towards the young students as evident in their separate online education portal and their collaboration with different colleges and universities. Also, they are actively involved in surfing, football, and music festivals which appeal to young generation. They targeted the meat eating and non-Islamic sector as they do not have a Halal pastry| Products are targeted towards outgoing events to garner considerable public interest. Examples include the Pukka Pies England band as well as major sponsorships to major sporting events. | Positioning| The pie and pastry market is a competitive one in which each company does not differentiate it s positioning too much. Ginster’s remains unique and relevant amongst its United Kingdom customers by positioning its domestic appeal. Ginsters have strategized to provide quality food for a reasonable price. As compared to competitors, Ginster’s is ranked amongst the top for pricing. Quality is of utmost importance and therefore they position themselves to advertise quality and honesty of foods. Media advertising, over 1 million pounds in 2009, was largely concentrated on the target markets including students and mothers. This was done by adding more sandwiches to cater to women as well as advertisements at sporting and recreation events for students. | The differentiation by Pukka Pies is their international appeal. They strive, not solely to dominate a market, however to diversify themselves into different markets. Penetration strategies is their positioning technique as their products are available across Europe. | Marketing Mix Analysis Products: Ginsters has got a huge product line consisting of 58 types of pasties, slices, pork pies, hot pies, savories, sandwiches and wraps as compare to its competitors, pukka pies and pork farms. All Ginsters raw material comes from the farms and suppliers present in Cornwall. They have different specialize supplier who provides them with fresh and pure raw material. These farms and suppliers includes Hay farm, torpoint for vegetables, Bocaddon farm, Lanreah for Cornish soft cheese, Cornish orchards, duloe for apple juice to capture that authentic west country flavour, jaspers of treburley for beef and David stone creamery for fresh cheese. Ginsters official website, 2010) Ginsters focus on Chilled products whereas Pukka pies have variety of categories including frozen backed, chilled backed, frozen backed wrapped, frozen unbaked range, frozen pastry (Pukka pies official website, 2010) If we analyze Ginsters product line we find that they have 21 types of different sandwiches as compare to pies and pasties which are few in numbers (Ginsters official website, 2010). Whereas Pukka pies and pork farms have less variety than Ginsters. Pukka pies have some additional flavour of pies including kidney and potato and they also sell halal food (Pukka pies official website, 2010). Furthermore pork farms have bakes and scotch eggs (pork farms official website, 2010) Price: Ginsters product pricing is almost same as compare to Pukka pies and pork farms. For example steak pies from Ginsters and Pukka pies cost exactly 1 ? but in some cases Ginsters is expensive for example Ginsters pork pie is 1. 29 ? and Pork farms pork pie is 0. 91 ? (Tesco Official website, 2010). Therefore we can say that Ginsters have a comparable pricing strategy with most of its product line but with some of the market leading products they show skimming pricing strategy as well. Place: Ginsters only Target UK market. They follow wholesale sale strategy. They have distributors all over UK. They keep their products in big super markets like Tesco, Sainsbury etc. The major area where Pukka pies leaves Ginsters behind is its sale locations. Pukka pies are selling in Austria, Cyprus, France, Gibraltar, Greece, Holland, Hong Kong, Ibiza, Lanzarote, Malta, Portugal, Spain and Tenerife other than UK. Pukka pies official website, 2010) Promotions: When it comes to promotions, Ginsters are spending a lot of revenue on advertisement and promotional activities like charity, supporting local teams etc. The differentiating part of Ginsters promotional activity includes collaboration with different universities including Plymouth University and community colleges at Callington, Launcest on, Tavistock and Saltash colleges and universities. Ginsters also have their online educational portal. This shows that they are targeting youngsters from schools, colleges and universities. For the new promotions Ginsters is focusing on introducing some fruit pies as well. Their promotional strategy seems to be product benefit advertisement strategy. As compare to Ginsters Pukka pies have a large variety of souvenirs including footballs, posters, cups, caps etc. They have an online portal where people can buy their souvenirs. As compare to both of them pork farms focus on introducing new packaging and actively conduct live shows with consumers to test their products and tells them of their products taste. Pork farms are teaming up with Peperami and Branston to launch a number of co-branded recipes. The new partnerships will see a Spicy Hit sausage roll with Peperami and two Pickle Hit sausage rolls – one with Branston Pickle and cheese and one with Branston Pickle and sausage meat – available from mid-March 2010. The company is also launching a Pork and Branston Pickle Pork Pie. (Ginsters official website, 2010; Pukka pies official website, 2010; Pork farms official website, 2010) SWOT Analysis: Strengths * Product variety in comparison to competitors places a strong emphasis on new product development to create innovative, exciting products to enhance its core product range. Ginsters launched mini pasties in Q2 2010 to tie in with the upcoming picnic season and the on-the-go snacking market. * Ganisters position in more than one market and covering them successfully due to their diverse products * Ginsters’ products have a number of characteristics that make them a highly popular lunchtime food firstly their products are location independent and can be eaten practically anywhere. Secondly their products are convenient and can be found in many locations. Furthermore their products are filling and positioned as big eats. Finally the products are easy to eat and are pre-packed. * Advertisement and promotion strategy Ginsters’ promotional activities have always highlighted its British provenance and local sourcing. Moreover their brand image Fresh and hygienic food which is and advantage in the current customer behaviour trends. * HRM program that allows for organisational learning * There supply chain is short therefore saves them money and increases quality * Manufacturing processes are fully automated speed up production and inspection and quality programs to be easy. Weaknesses The product range is not comprehensive and there are some niches they did not cater for, such as the vegetarian market the Halal and Kosher markets. * Ginsters operate only in the UK where competitors such as Pukka Pies operate internationally they are pies are selling in Austria, Cyprus, France, Gibraltar, Greece, Holland, Hong Kong, Ibiza, Lanzarote, Malta, Portugal, Spain and Tenerife other than UK. * Although Gins ters are trying to convey that they are a healthy product. This message is not reaching other market segments, such as women and families. There image as a healthy product is not strong. Despite a high rate of new product development, the favourite lines continue to be the BLT, prawn mayonnaise, cheese and pickle, chicken salad and egg and cheese Opportunities * Increase emphasis on health awareness products. Interest in healthy eating will undoubtedly outlive the recession and there is scope to increase the number of functional products in many areas of the market. * Ginsters can explore minority market niches such as, vegetarians and Halal foods. This can be achieved by new product development. * Utilisation of production capabilities by exploring International markets, as competitors are present outside the local market. Despite the recession, sales of indulgence products such as desserts may also grow if suppliers can position the products as relatively inexpensive treats. Threa ts * One of the longer-term challenges that the pies and pasty category will face is whether consumers will stick to the category when the economy improves and they have more disposable income. Pies and pasties offer consumers a low cost meal that is convenient, but does not tick the healthy eating box and so requires manufacturers to find ways to reformulate their product ranges to make them healthier. When looking at the things that worry consumers the most, their financial situation and the economy supersedes any concerns they may have about their health, so while they face financial challenges, the health credentials of the food they are eating may be of less importance if it proves to be more cost efficient. * Ginsters needs to ensure that they maintain their above-the-line support of their brands to ensure they are top of mind when consumers are looking for a quick snack. The recession will strengthen the appeal of own-label products and consequently affect NPD and marketing, which will culminate in undermining value growth in the market. References Accurate pack coding easy as a pie (2005). Packaging Magazine, 8 (1), pp. 18-19. EBSCOhost [Online]. Available at http://web. ebscohost. com (Accessed:10 November 2010) Bank of England Quarterly Bulletin (2007). 2nd Quarter, 47(2), pp. 317-329 Bloomberg Database (2010). Available at: http://www. bloomberg. com (Accessed: 6 November 2010) Broadcasters Audience Research Board (2010). Available at: http://www. arb. co. uk (Accessed: 8 November 2010) Brooks, Bob. (2004). â€Å"Cornish Convenience†, Food Manufacture, 79 (1), pp. 26-27. EBSCOhost [Online]. Available at http://web. ebscohost. com (Accessed: 10 November 2010) Brothererton, B. (2004). â€Å"Critical Success Factors in the UK Corporate Hotels†, Sevice Industries Journal, Vol. 24 NO. 3, 2004, pp19-42. CHENG, E. W. L. and LI, H. (2001). â€Å"Analytic Hierarchy Process: An Approach to Determine Measures For Business Performance†, Mea suring Business Excellence, Vol. 5 No. 3, 2001, pp. 30-37. Daniel, R. H. , (1961). Management data crisis. Harvard Bus. Rev. , 1961, Sept–Oct, 111–112. Doonar, J. (2004). â€Å"Pasties and pastures new: Joanna Doonar interviews Mark Dudderidge, the managing director of Ginsters and discovers that society's preoccupation with obesity is not holding back the growth of the Cornish pasty company† Brand Strategy. EBSCO (Online). Available at http://www. ebscohost. com (Accessed: 01 November 2010) Drives cut pastry production costs (2009). Works Management, 62 (11), p. 29. EBSCOhost [Online]. Available at http://web. ebscohost. com (Accessed: 10 November 2010) Ginsters official website (2010). Available at: http://www. ginsters. co. uk/ (Accessed: 10 November 2010) Growth at Ginsters (2004). Food Manufucture, 84 (2), p. 7 EBSCOhost [Online]. Available at http://web. ebscohost. com (Accessed: 10 November 2010) Hunt, Gail. (2005). â€Å"Local Champion†, Food Manufacture, 80 (2), p. 35. EBSCOhost [Online]. Available at: http://web. ebscohost. com (Accessed: 10 November 2010) Johnson, A. (2010). â€Å"Forecasts for the UK economy: a comparison of independent forecasts† HM Treasury, Issue 281. Keeping an Eye on the Pie (2002). Food Engineering ; Ingredients, 27 (4), p. 47. EBSCOhost [Online]. Available at http://web. ebscohost. com (Accessed: 10 November 2010) Politt, D. (2006). â€Å"Golden Outcome of Ginsters Training† HRM International Digest, 14(1) Pork farms official website (2010). Available at: http://www. pork-farms. co. uk/index. html (Accessed: 10 November 2010) Pukka pies official website (2010). Available at: http://www. pukkapies. co. uk/ (Accessed: 10 November 2010) Rockart, J. and Bullen, C. , 1981. A primer on critical success factors. Center for Information Systems Research Working Paper No 69. Sloan School of Management, MIT, Cambridge, Massachusetts Rockart, F. R. ,(1979). Chief Executives define their own data needs. Harvard Bus. Rev. , 1979, 57(2), 238–241. SUN, H. and CHUNG, W. W. (2005). â€Å"Critical success factors for new product development in the Hong Kong toy industry†, Technovation, Vol. 25, No. 3, March 2005, pp. 293-303. Tesco official website (2010). Available at: http://www. tesco. com (Accessed: 10 November 2010) Zwikael. O. ; Globersonz, S. , (2006). â€Å"From Critical Success Factors to Critical Success Processes†, International Journal of Production Research, Vol. 44 No. 17, 2006, pp. 343-3449.

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Capital is A ) tools, equipment, and factories used in the production of goods and services; one of four factors of production. Economics is the use of what to produce and distribute goods and services? Correct D ) resources Want is Correct B ) way of expressing a need that leads to a preference for some goods over others The fundamental economic problem is Correct B ) scarcity. Why do economists need to find the answer to all three of these questions? Correct D ) there are not enough resources to satisfy people's seemingly unlimited wants Markets where productive resources are bought and sold are ______ markets.Correct A ) factor The key feature of the circular flow of economic activity is the Correct C ) market. Economics is based on Correct B ) scarcity. includes the tools, equipment, machinery, and factories used in the production of goods and services. Correct B ) Capital Twenty percent of the world's people in the wealthiest nations consume ____ percent of the world's goods and services. Correct A ) 86 In this passage, â€Å"Too much marketing today focuses on awareness rather than reasons to buy. In the old days, awareness advertising was more effective.There was less competition. All you had to worry about was whether or not people remembered your product. As technology and more kinds of media have come about, it's no longer enough to be remembered. The consumer has too many choices. Your marketing has to send the message that you are relevant. You need to be sending reasons to buy. † Advertisers are advised to focus on the economic concept of Correct C ) utility Manufactured goods needed to produce other goods and services are called Correct B ) capital goods. The dollar value of all final goods and services and the ost comprehensive measure of a country's total production output is Correct D ) Gross Domestic Product (GDP). The three basic economic questions everyone must answer are Correct C ) WHAT to produce, HOW to produce, FOR WHOM to produc e. Human capital is Correct B ) the sum of the skills, abilities, health, and motivation of people. According to Alice Rivlin in this passage: â€Å"Economic literacy is like having a working knowledge of a foreign language. If you are with a group of foreigners and don't speak their language at all, you feel excluded.If you have a rudimentary working knowledge of the language, you can at least follow the drift of the conversation, ask a few questions and feel that, even if you are not getting the fine points, you are not totally left out and you have a basis for acquiring more knowledge. That, it seems to me, is what economic literacy means-a rudimentary working knowledge of the concepts and language of economic activity. If you have a rudimentary working knowledge of economic concepts, you will be Correct B ) able to ask questions to gain more knowledge. Factors of production is/are CorrectB ) productive resources that make up the four categories of land, capital, labor, and entr epreneurship. â€Å"There Is No Such Thing As A Free Lunch† reminds us that Correct A ) resources are scarce and that we must make careful economic decisions regarding WHAT, HOW, and FOR WHOM to produce. In this passage, â€Å"To take an example,†¦ One man draws out the wire, another straightens it, a third cuts it, a fourth points it;†¦ and [the making of] a pin is, in this manner, divided into about eighteen distinct operations. † Adam Smith is describing the basic economic concept of CorrectC ) division of labor. The situation in which some necessities have little value while some non-necessities have a much higher value is known as Correct A ) paradox of value. The money used to buy the tools and equipment needed for production is known as Correct C ) financial capital. In which type of economy do consumers and privately owned businesses make the majority of the WHAT, HOW, and FOR WHOM decisions?. Correct B ) free enterprise Division of labor is a charact eristic of Correct B ) assembly line production. The free market economy has developed a strong CorrectB ) system of banks. In modern economies, the medium of exchange is Correct B ) money. Which of the following lists the four factors of production? Correct D ) land, labor, capital, entrepreneurs Actions in one part of the country or world that have an economic impact on what happens elsewhere are examples of Correct D ) economic interdependence. Uneven distribution of oil reserves around the world is an example of scarcity of Correct C ) geography. One advantage of a ___________ economy is that it gradually adjusts to change over time. Correct A ) market A traditional economy is an CorrectB ) economy in which the allocation of resources and nearly all other economic activity from ritual or habit. The high degree of freedom in a market system is illustrated by the fact that Correct A ) producers can make whatever they think will sell. To arrive at an economic decision, a decision-m aking grid may be used to evaluate Correct C ) alternative choices of action. Who makes economic decisions in a command economy? Correct C ) the government An example of a market economy is Correct C ) the United States Economics is the use of what to produce and distribute goods and services? Correct D ) resourcesIn the cost-benefit analysis described in this passage: â€Å"Research has long demonstrated the educational value of early intervention for America's at-risk children, but a new study also shows the federal programs are a wise public investment. who are the investors A cost-benefit analysis of the federally funded Chicago Child-Parent Center program, which serves children from low-income families in Chicago's inner city [shows that] an average annual cost of $6,730 per child generated a total return to society at large of $47,759 per participant. † Who benefited from the savings? Correct C ) all of societyA popular model used to illustrate the concept of opportunit y cost is Correct A ) the production possibilities frontier. Which of the following best describes the relationship between trade-offs and opportunity costs? Correct A ) Opportunity costs are incurred when trade-offs are made. The study of economics is important because it enables us to Correct C ) become better decision makers. The most important function of a distribution system is to link _____. Correct C ) producers and consumers Which term refers to the idea that if you have more of one thing, you must have less of another? CorrectB ) opportunity cost What type of economic system does this passage: â€Å"So long as mankind lived by raising crops and herding animals, there was not much need for measuring small units of time. The seasons were all important-to know when to expect the rain, the snow, the sun, the cold. Why bother with hours and minutes? Daylight was the only important time, the only time when men could work. † describe? Correct A ) traditional economy The pu rpose of government in a command economy is to Correct C ) make major economic decisions. A market economy Correct A ) does not provide for everyone's basic needs.Opportunity cost is the Correct D ) cost of the next best alternative use of money, time, or resources when one choice is made rather than another. An economy at its production possibilities frontier is operating Correct B ) at full potential. The term â€Å"standard of living† refers to Correct A ) quality of life in a country. Bar graphs Correct A ) shows relationships between different data series is the bar graph. Here the height of the bar represents the measured value or frequency: The higher or longer the bar, the greater the value. The main drawback of the traditional economy is that itCorrect A ) tends to discourage new ideas and ways of doing things. In the economic system described in this passage: â€Å"Diaguita Indians have lived in this region for generations†¦ We grow beans, corn and potatoes on the mountain slopes. To irrigate these crops, we still use the channels built centuries ago by our ancestors. We also breed llamas. In our community, the more llamas you own, the richer you are† . answers to the basic economic questions would be determined by Correct A ) habit and custom. All of the following are characteristics of a command economy EXCEPTCorrect B ) public services are available at little or no cost. In a ____________ economy, a central authority makes most of the WHAT, HOW, and FOR WHOM decisions. Correct B ) command What do we call a way of thinking that compares the cost of an action to its benefits? Correct A ) cost-benefit analysis What is the single largest source of revenue for the federal government? Correct C ) individual income taxes The benefit principle of taxation states that Correct D ) people who benefit from government goods and services should pay taxes according to the benefit they receiveFICA includes taxes to pay for Correct A ) Social Se curity and Medicare. Personal individual income tax is a _____________ tax. Correct B ) regressive An exception or oversight in the tax law that allows some people and businesses to avoid paying taxes is called a Correct C ) tax loophole The three criteria for effective taxes are Correct D ) equity, simplicity, and efficiency A ________ tax paid by corporations on their income. Correct D ) corporate income tax This passage: â€Å"We'll cut your taxes† is the most repeated campaign promise in the history of American politics.Yet somehow it is still considered visionary, worth a fight. Worth, indeed, a crusade. Why? It's in our blood. Historically, Americans have hated taxes, and not merely because we had to pay them. We've hated taxes because we've perceived them to be an infringement on our liberty-and the source of big, powerful, and mischievous government. This was true from the beginning. It wasn't just â€Å"taxation without representation† that bothered us so much . It was taxation. Period. † compares the feelings of Americans toward taxation today to those same feelings around the time of the Correct C ) American Revolution.The incidence of a tax can more effectively be shifted from the supplier to the consumer if Correct A ) the demand curve is inelastic. The ability-to-pay principle of taxation states that Correct C ) people should be taxed according to their ability to pay. Iowa residents can take solace in knowing that they'll likely help the state with its budget crunch if President Bush cuts federal taxes. Iowa's softening economy has left state government revenue stagnant, a problem caused by a lack of spending by Iowans. Sales-tax receipts have barely bumped up from last year, and it's coming back to hit the state budget.In Iowa, residents get to deduct their federal income taxes from their state income taxes. So if the federal government saves Iowans $1 billion in income a tax, that's $1 billion that the state will get to tax. According to the passage, how will a cut in federal income taxes help the Iowa state budget crunch? Correct A ) The state can tax more of residents' income. Intergovernmental revenues are generally intended for Correct A ) education and public welfare. According to the passage: America can celebrate Tax Freedom Day ® on May 3, 2001, according to the Tax Foundation's annual calculation.That means that the nation's taxpayers have to work from January 1, 2001, to the 123rd day of the year before earning enough money to pay for government-federal, state, and local-and start spending money on themselves. †¦ Individual income taxes represent the largest component of Americans' tax bills†¦. what is the meaning of â€Å"Tax Freedom Day†? Correct D ) By that day, you have earned enough to pay your income taxes for the year. The authority to levy a federal income tax comes from Correct B ) the Sixteenth Amendment. An excise tax is a Correct B ) tax on the manufacture and s ale of selected items. The â€Å"incidence of a tax†Correct B ) refers to those who bear the final burden of taxation. A _____________ tax is tax on tangible and intangible possessions, such as real estate, buildings, furniture, stocks, bonds, and bank accounts. Correct B ) property The three largest sources of revenue for local governments are Correct A ) utility and liquor store income, property tax, and intergovernmental revenues. FICA is Correct D ) tax levied on employers and employees to support Social Security and Medicare According to the passage: â€Å"Back in 1940, when the Social Security program was just getting under way, average life expectancy was less than 64 years.The program's designers expected that most people would contribute to the program most of their lives and die before collecting a dime in retirement benefits. Today, average life expectancy in the United States is more than 75 years. As life expectancy has soared, birthrates have declined, leaving fewer and fewer workers to support the ballooning number of retirees. In 1950, [the system] was solidly supported with 16 workers paying for each retiree; today, there are just over three workers per beneficiary. † The increase in average life expectancy has created a problem for the Social Security system becauseCorrect B ) more people are collecting retirement benefits. The two broad categories of government spending are Correct B ) the purchase of goods and services and payments to disadvantaged groups. Although direct mail and special events are typical fundraising methods, one senator who was challenging an incumbent got the most money from his own personal phone calls to donors. Correct A ) True Transfer payments from the government to individuals or other levels of government might be used for all of the following EXCEPT Correct C ) maintenance of the armed forces. A Value-added tax is CorrectA ) tax placed on the value that manufacturers add at the end of production. B ased on this passage: â€Å"Every year at this time, Congress discovers, with a great public show of dismay and indignation, the existence of the American tax code and the agency that administers it, the Internal Revenue Service. There are high-minded calls for abolishing the current tax system and replacing it. Around April 15, Congress likes to pretend that the tax code just sort of appeared or just happened. But the Constitution puts the burden of taxes solely, exclusively and entirely on Congress' shoulders.The tax code is the way it is because a majority of Congress wants it that way. Members of Congress probably like to pretend that the tax code just â€Å"sort of appeared† because they Correct B ) don't want voters to associate them with taxes. Leisure and creative pursuits are called Correct D ) culture The Taxpayer Relief Act of 1997 Correct D ) did little to benefit people without children or capital gains. Overall, who benefited most from tax reform in 1997? Corre ct C ) the top 20 percent of wage and income earners __________ is the part of the economy made up of federal, state, and local governments. CorrectB ) Public sector The flat tax Correct D ) simplifies the tax process. A value-added tax (VAT) is Correct B ) tax on the value added at every stage of the production process The alternative minimum tax Correct B ) requires people to pay a minimum tax of 20 percent. The VAT is a ______ tax. Correct D ) federal All of the following are effects of increased government spending EXCEPT Correct D ) a decrease in competition between the public and private sectors. The flat tax Correct C ) departs from ability-to-pay principle of taxation. All levels of government combined consume about Correct B ) one-third of the nation's output.All of the following EXCEPT one are advantages to a value-added tax. Correct B ) it is invisible to consumers All of the following are effects of the federal debt EXCEPT Correct D ) interest rates are lowered. An examp le of mandatory spending is financing for Correct A ) interest payments on the federal debt. The pay-as-you-go provision is Correct D ) requirement that new spending proposals or tax cuts must be offset by reductions elsewhere. Who pays for the maintenance on the state highway linking Tyler, Texas, with Corsicana, Texas? Correct C ) Texas The sequence for the approval of the federal budget is CorrectB ) president to Congress back to president. Based on the facts given in the passage: â€Å"One result of the current Social Security debate has been to concentrate the public's mind on the true economic condition of the elderly. While the top 20% of seniors are relatively affluent? almost all of the rest are highly dependent on Social Security. The program provided at least half of the total income of more than 55% of senior citizens and at least 75% of the total income of more than a third. Social Security lifted 11. 4 million seniors-or nearly half of the 65-and-older population-out of poverty, cutting the elderly's poverty rate from 47. % to 11. 9%. ,† approximately how many Americans are age 65 or older? Correct C ) slightly under 22. 8 million Of the four categories listed below, which accounts for the largest amount of local expenditures? Correct B ) public utilities Which of the following statements best describes the relationship of the federal deficit to the federal debt? Correct B ) The federal deficit leads to borrowing, which adds to the federal debt. According to the passage: â€Å"One result of the current Social Security debate has been to concentrate the public's mind on the true economic condition of the elderly.While the top 20% of seniors are relatively affluent? almost all of the rest are highly dependent on Social Security. The program provided at least half of the total income of more than 55% of senior citizens and at least 75% of the total income of more than a third. Social Security lifted 11. 4 million seniors-or nearly half of th e 65-and-older population-out of poverty, cutting the elderly's poverty rate from 47. 6% to 11. 9%. ,† about what percentage of the elderly would be living in poverty if the Social Security system did not exist? Correct A ) 47. 6% The United States government accumulated huge deficits during the 1980's due toCorrect C ) a doubling of spending on national defense. All of the following are differences between the federal debt and private debt EXCEPT Correct C ) the federal debt is the total amount of money borrowed from investors. Interest on debt is Correct D ) costs incurred by both state and local governments for borrowing money Which of the following is NOT an example of a local government? Correct C ) neighborhood associations The federal debt is Correct D ) amount borrowed to finance deficit spending budget with neither a surplus or deficit Which of the following is an example of an entitlement payment?Correct B ) federal money given to a senior citizen as a Social Securit y payment All of the following are local officials with approval power for spending EXCEPT Correct D ) the tax assessor. Which of the following statements best describes the relationship of the federal deficit to the federal debt? Correct B ) The federal deficit leads to borrowing, which adds to the federal debt. From the choices below, identify when the federal government began significant deficit spending. Correct C ) 1980's Of the four categories listed below, which accounts for the largest amount of state expenditures?Correct D ) higher education Who formulates the federal budget? Correct C ) the president Of the four categories listed below, which accounts for the largest amount of local expenditures? Correct B ) public utilities Based on the passage: â€Å"The Aztec in Central America used cacao beans, from which chocolate is made, as money. Prices varied from a few beans for a piece of fruit to several thousand for an enslaved person. Aztec merchants had to take care when se lling expensive items. Payment usually came stored in sacks, and the sacks might contain counterfeit money-bean husks filled with mud. What type of money did the Aztec use? Correct D ) commodity money Which of the following statements about a gold standard is FALSE? Correct C ) It is easier to expand the money supply. The United States government ended the gold standard in Correct B ) 1934. Based on the passage: † To get its new Sacajawea dollar into circulation, the U. S. Mint has issued more than 500 million of the golden coins since the end of January, not only to banks, but also to Wal-Mart and Sam's club stores. But in what may be the greatest coin trick ever, the dollars have all but vanished.People are making them into jewelry, auctioning them off on eBay, and leaving them under pillows on behalf of the tooth fairy-anything but spending them†¦. The Mint expects Sacajawea to be back in circulation by year-end, when more than a billion of the dollars will have been m inted and the novelty, it hopes, will have worn off. † Sacajawea dollars have disappeared because many people believe they are Correct A ) worth more as a commodity than as currency. According to the passage: â€Å"After the collapse of the Soviet Union in 1990, Russian currency was not trusted. Real money played a fairly small part in Russia's economy.Most business was conducted by barter or with IOUs. For example, workers rarely received wages in the form of cash. A bicycle factory outside the city of Perm paid its workers in bicycles! To get cash, the workers had to sell their â€Å"paychecks† More often than not, they simply traded the bicycles for the products they want. † most business in Russia, at that time, was conducted without currency because Russian currency was not Correct A ) accepted. Greenbacks and United States notes were issued to Correct A ) raise money to finance the Civil War. The value of fiat money is Correct D ) faith in the government.Th ese passages in the United States Constitution† â€Å"Article 1, Section 8: The Congress shall have the power: To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures; To provide for the punishment of counterfeiting the securities and current coin of the United States; To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof and in Article 1, Section 10: No State shall coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts†¦. † made which of the following statements true at that time? Correct C ) The government could not print paper money.Which of the following statements about a gold standard is FALSE? Correct C ) It is easier to expand the money supply. The problem with Continental dollars was that Correct A ) so much was printed they became nearly worthless. Money that has an alternative use as an economic good is Correct A ) commodity money. Money functions as all of the following EXCEPT Correct D ) a measure of value. One disadvantage of using gold as a standard for money is Correct D ) paper currency holders could exchange it for gold. What is the origin of the American dollar? Correct B ) the Spanish peso and shillings Money by government decree; has no alternative value or use as a commodity is called Correct C ) fiat moneyFiat currency is also known as ________. (hint: look at the paper money in your possession. ) Correct A ) legal tender The part of modern money that we can touch consists of Correct B ) Federal Reserve Notes. Local banks in the 1800's that printed too much money were called Correct A ) wildcat banks. ________ is/are the monetary standard under which the basic currency unit is equivalent to, and can be exchanged for, a specific amount of gold Corr ect D ) Gold standard To make a difference with the Spanish peso, Benjamin Franklin and Alexander Hamilton divided the dollar into Correct B ) tenths (10 equal pieces). Most stocks in the United States are traded on theCorrect B ) over-the-counter market. In what city was America's first stock exchange located? Correct B ) Philadelphia To determine Gross National Product, Correct C ) add to GDP all payments received by Americans outside the U. S. and subtract payments made to foreign-owned resources in the U. S. In 2001, the national debt was $5. 1 trillion dollars. When President Obama was inaugurated in January of 2009, the national debt was $10. 6 trillion. Sixteen months later the national debt is Correct A ) $13. 1 trillion dollars. In the Gross Domestic Product defense spending is in which sector? Correct B ) governmenGross Domestic Product is CorrectD ) dollar amount of all final goods and services produced within a country's borders in a year. Which is the best measure of th e nation's income? Correct B ) GNP Which stock exchange the largest electronic screen-based equity securities trading market in the United States. Correct D ) NASDAQ A bull market is a Correct C ) period during which stock market prices move up for several months or years in a row. The Efficient Market Hypothesis argues that Correct A ) stocks are always priced about right and bargains are hard to find. A bear market is a Correct A ) period during which stock market prices move down for several months or years in a row.The great majority of stocks in the United States are traded on Correct C ) the over-the-counter market. The Efficient Market Hypothesis argues that Correct A ) stocks are always priced about right. According to the United States Treasury, the US national debt is the Correct A ) principal amount owed by the US to its lenders, for example, China and Japan A stock transaction that is made immediately at the market price is made in the Correct B ) spot market. The larges t sector of the macroeconomy is the Correct D ) consumer sector. The Dow Jones Industrial Average (DJIA) represent what market value of all U. S. stocks on the New York Stock Exchange Correct A ) fifth (20%)Which of the following is the most important aggregate of how a country is doing economically? Correct C ) gross national produce Investors who sign a contract guaranteeing them the option of selling shares of stock at a specified price in the future have agreed to a Correct D ) put option. In the model GDP = C + I + G + F, the â€Å"F† represents the Correct B ) difference between the dollar value of goods sent abroad and goods purchased from abroad. Since colonial times, the average size of a household in the United States has Correct B ) decreased. Which best describes the movement of the center of population of the United States? Correct C ) east to westBy April 2000, the population of the United States stood at about 281. 4 million people. This year's anticipated cens us will be _____ million people. Correct D ) 309 The official count of all people in the United States is called Correct D ) the decennial census. A price index is a ______________. Correct C ) a statistical series that can be used to measure changes in prices over time Real GDP is Correct D ) GDP adjusted to remove the distortion of inflation. Life expectancy is the Correct A ) average remaining life span in years for persons who attain a given age. Since colonial times, the rate of growth of the United States population has Correct B ) steadily decreased.What is the implicit GDP price deflator? Correct A ) a price index that measures price changes in GDP All of the following factors affect population growth EXCEPT Correct A ) demographers. All of the following statements about real GDP are true EXCEPT Correct C ) real GDP is the same as current GDP. Which of the following is the correct way to calculate real GDP? Correct B ) Divide current GDP by the implicit GDP price deflator an d then multiply by 100. The United States lost 600,000 soldiers during World War II and another 37,00 in the Korean War. In the years from 1946 until 1964 there were 76 million babies born. This era has been named the Correct B ) baby boom.The official count of all people in the United States is called Correct D ) the decennial census. Economists know it is important to track inflation because it Correct B ) distorts statistics about overall economic performThe mean center of United States population (using the centroid definition) has been calculated for each U. S. Census since 1790. Currently this point is located in Correct D ) Missouri. All of the following factors affect population growth EXCEPT Correct A ) demographers. To construct a price index, all of the following are needed EXCEPT Correct B ) the current inflation rate. Business cycles are Correct A ) nonsystematic upturns and downturns of real GDP.Real GDP per capita is the preferred measure of economic growth over the l ong run because Correct B ) prices and the population change over time. This marked the beginning of the Great Depression in 1929: Correct D ) stock market crash The United States experienced almost no growth in real GDP per capita Correct A ) between 1929 and 1939. Which of the following factors affect economic growth? Correct D ) all of the above Which of the following statements about economic growth is FALSE? Correct C ) Economic growth decreases the tax base. Increasing productivity results in Correct A ) increasing economic growth. An econometric model is a CorrectD ) macroeconomic model that uses algebraic equations to describe how the economy behaves. A number of factors are important to economic growth-especially the quantity and quality of the Correct C ) factors of production (A)(An) ___________ is a monthly statistical series that anticipates changes to the real GDP. Correct D ) index of leading indicators The United States experienced almost no growth in real GDP per ca pita Correct A ) between 1929 and 1939. A period during which real GDP declines for two quarters in a row, or six consecutive months, is call a(n) ___________. It begins when the economy reaches a peak, and ends when the economy reaches a trough. Correct A ) recession The passage: â€Å"A key gauge of future U. S. conomic activity declined 0. 5% last month, as the Sept. 11 terrorist attacks in New York and Washington weakened an already troubled economy. The Conference Board said Monday its index of leading economic indicators fell to 109. 2 in September,†¦ the largest one-month decline since January 1996†¦. The index indicates where the overall U. S. economy is headed in the next three to six months†¦. The economy had been struggling for several months before the Sept. 11 attacks. Many economists have said they believe that a recession is unavoidable with the new uncertainties raised by the disaster. † discusses a business fluctuation influenced by Correct D ) external shock.The _____ is a composite index of 11 economic series that move up and down in advance of changes in the overall economy; statistical series used to predict business cycle turning points. Correct C ) econometric model Your ________ is the quality of life based on the possession of necessities and luxuries that make life easier. Correct B ) standard of living Increasing productivity results in Correct A ) increasing economic growth. The business cycle since World War II has been characterized by Correct A ) extended expansions alternating with brief recessions. Changes in ____________ expenditures are one cause of business cycles. Correct D ) capital A major feature of a __________ is its ability to increase real per capita output enough to allow people to raise their standard of living.This system also increases people's free time, allowing them to devote more attention to families, hobbies, and recreational activities. Correct C ) free enterprise economy When product ivity grows, people produce relatively ______ with the same amount of inputs, and the prices of goods and services tend to stay _______. Correct D ) more, low The change in price level is the _______. Correct B ) an increase in the general price level Prices tend to _______ during expansions and then ________ during recessions. Correct A ) rise faster, slow down To measure the price level, economists select a market basket of goods and then construct a price index such as the Correct B ) consumer price index, producer price index, or implicit GDP.Because there are always some workers who are in the process of changing jobs, there will always be some ____________ unemployment in the economy. Correct D ) frictional According to the passage: â€Å"The nation's unemployment rate rose to 4. 5 percent in June as manufacturers continued to suffer heavy job losses and demand for workers in service industries fell to the lowest level in 10 months. The Labor Department reported Friday that t he jobless rate rose 0. 1 percentage point from a 4. 4 percent rate in May. The 4. 5 percent level matched the unemployment rate in April with both months representing the highest level the jobless rate has reached in the year-long economic slowdown. † what was the highest level that unemployment reached that year? Correct D ) 4. % All of the following are theories regarding the cause of inflation EXCEPT Correct C ) cost-pull. Unemployment that occurs when a fundamental change in the operations of the economy reduces the demand for workers and their skills is called ___________ unemployment. Correct A ) technological The ________ curve is a curve that shows how much the actual distribution of income varies from an equal distribution. Correct B ) Lorenz At the peak of the Great Depression 1 out of ____ were unemployed. Correct A ) 4 A relatively low rate of inflation, usually 1 to 3 percent annually is Correct A ) creeping inflation A booming economy. Record-low unemployment.A blizzard of pink slips [a note stating that a person has been fired]. What's wrong with this picture? The fact is, even in the best of times hundreds of thousands of people lose their jobs through no fault of their own†¦. You might not get any advance warning, so don't be caught off guard. Have an up-to-date resume and networking system†¦. You want to be able to launch your job search soon after you get the bad news. What type of unemployment does this passage describe? Correct D ) frictional The unemployment rate understates employment conditions for all of the following reasons EXCEPT Correct A ) some workers are â€Å"between jobs† for one reason or another. Galloping inflation is CorrectB ) intense form of inflation that can go as high as 100 to 300 percent The passage: â€Å"For all the recent talk of cutting taxes, Congress rarely cuts them when the economy is growing robustly, as it is now, and unemployment is low. The worry among economists is that the extr a money in people's pockets may make an already strong economy too strong, finally stoking inflation after a long period of relatively stable prices. † describes rising inflation as a possible result of Correct B ) a booming economy. According to the demand-pull theory, inflation is caused by Correct D ) consumers. Full employment is reached when the employment rate drops below _____ percent. Correct B ) 4. 5 Changes in technology and changes in consumer tastes can cause Correct B ) structural unemployment.According to the demand-pull theory, inflation is caused by Correct D ) all of the above. Unemployment that is directly related to swings in the business cycle is Correct C ) cyclical unemployment According to the passage: â€Å"The Bank of Amsterdam was established in Holland in 1609. At that time, Amsterdam was a center of world trade. More than 340 different kinds of silver coins and about 500 types of gold coins circulated throughout the city. Dutch merchants had little idea how much these coins were worth, so the Bank of Amsterdam was set up under a charter from the city to standardize the currency. The Bank of Amsterdam operated as Holland's central bank for more than 200 years.After making a series of bad loans, however, it failed and went out of business in 1819-almost 100 years before America's central bank was founded. † why did the Bank of Amsterdam stop operating? Correct C ) It made bad loans. actions by the Federal Reserve System to expand or contract the money supply in order to affect the cost and availability of credit Correct D ) monetary policy A portion of the deposits in the form of coins and currency that banks and other depository institutions are required to hold are called ________ reserves. Correct D ) legal The quantity theory of money holds that excessive increases in the monetary supply Correct C ) lead to inflation.Federal Reserve Chairman Alan Greenspan decided seven years ago to publicize the central bank's intere st-rate moves once they were made. Now, each meeting of the Fed-whether the central bank changes rates or not-triggers a chorus of instant analysis of what it means for the economy and the financial markets. Which function of the Federal Reserve is the subject of this passage? Correct C ) regulating the money supply The Fed remains largely independent from politics for all of the following reasons EXCEPT Correct D ) the president and Congress appoint new members to vacant seats on the Board of Governors. he dilemma faced by the Fed when considering monetary policy is the choice between Correct A ) inflation and interest rates.Based on this quotation: â€Å"Not too many years ago, Federal Reserve officials conducted monetary policy as if they were members of the Politburo plotting behind the thick walls of the Kremlin. † the author believed that the Federal Reserve had been too Correct D ) secretive. When command economies make the transition to capitalism, they face all of th e following challenges except Correct A ) the Gosplan. Correct B ) debts and obligations. The Fed has defined different categories of money, M1 and M2, according to the money's Correct B ) function. Repeated short-run attempts to keep interest rates low result in a _________ of the money supply, making inflation _________. Correct A ) long-term expansion, worse e FED has defined M2 as Correct A ) represents the components of the money supply that most closely conform to money's role as a. store of value. Which letter designations mark Fed actions that will expand the money supply? Correct B ) Lower reserve requirement, Buy bonds, Lower discount rate. The ___________ is the interest the Fed charges on loans to financial institutions. Correct D ) discount rate Assets are Correct A ) properties, possessions, and claims on others. n the long run, changes in the supply of money affect the ____________. Correct C ) general level of prices Which letter designations mark Fed actions that wi ll contract the money supply? CorrectC ) Raise reserve requirement, Sell bonds, Raise discount rate For a bank to be profitable, how much of a spread must it maintain between the rate it charges on loans and the rate it pays for borrowed funds? Correct B ) 2-3 percent A balance sheet shows all of the following EXCEPT Correct A ) bank assets on the right of the T account. All of the following are tools of monetary policy EXCEPT Correct C ) tight money controls. The dilemma faced by the Fed when considering monetary policy is the choice between Correct A ) inflation and interest rates. The price of credit is the ______. Correct A ) rate of interest At times the Fed monetizes the debt in order to CorrectB ) keep interest rates from rising. In the short run, monetary policy affects Correct C ) interest rates and available credit. The social costs of economic instability include all of the following EXCEPT Correct A ) stagflation. Those who favor supply-side policies would tend to suppor t the government playing Correct B ) a reduced role in the economy. Monetarism is described as Correct D ) emphasis on the role of money and its growth as a key to controlling inflation and unemployment. Deregulation is most closely associated with Correct D ) supply-side economics. Economic instability wastes all of the following EXCEPT Correct C ) tax revenues.According to John Maynard Keynes's theory of the multiplier-accelerator effect, a decline in investment spending will Correct B ) lead to a downward spiral of the economy. ____________ policies are federal policies designed to increase or decrease total demand in the economy by shifting the aggregate demand curve to the right or to the left. Correct D ) Demand-side Aggregate demand will increase Correct D ) if consumers save less and spend more. Unlike demand-side economics, supply-side economics Correct A ) advocates reduced government involvement in business. The unofficial statistic that is the sum of monthly inflation an d the unemployment rate; same as discomfort index is Correct B ) misery indexAccording to Keynesian economics, only the _________ sector is big enough to step in and offset changes in investment sector spending. Correct B ) consumer The ____________ is the sum of the monthly inflation and unemployment rates. Correct A ) misery index Which is an example of the uncertainty caused by economic instability? Correct B ) A consumer delays a purchase. Social costs are Correct D ) price of economic instability in human terms. The _____________ like unemployment insurance and Social Security protect consumers and the economy in general if economic conditions worsen. Correct A ) automatic stabilizers Which of the following statements is FALSE? Correct B ) Economic instability is at the root of all social problems. John Maynard Keynes CorrectD ) introduced his theories in 1936. The social costs of economic instability include all of the following EXCEPT Correct A ) stagflation. Economists measu re the cost of economic instability with Correct D ) both a and b Wage price controls are Correct B ) regulations making it illegal for businesses to give workers raises or to raise prices without the explicit permission of the government. Stagflation is ________. Correct B ) period of stagnant growth combined with inflation The use of government spending and taxing to influence economic activity is called _ Correct B ) fiscal A period of stagnant growth combined with inflation is known as ____________. CorrectB ) stagnation The basis for international trade stems from Correct B ) the differences in production costs from one country to another. The Council of Economic Advisers Correct C ) advises the president on economic developments and strategy. The three-member group that reports on economic developments and proposes strategies to the president is called the Correct A ) Council of Economic Advisers. Which is the best description of the role of the Council of Economic Advisers? C orrect A ) report economic developments and propose strategies The nation's monetary policy Correct A ) often comes under attack from politicians. The United States imports CorrectC ) billions of dollars in products each year. Which of the following is proof that international trade is beneficial? Correct C ) the fact that free nations choose to trade vThe three-member group that reports on economic developments to the president is called the Correct B ) Council of Economic Advisers. A country has a(n) ___________ whenever it is able to produce more of a given product than another. Correct A ) absolute advantage ____________ economic policies grew out of the unemployment and other problems that occurred during the Great Depression of the 1930's. Correct D ) Demand-side All of the following describe economists EXCEPT CorrectB ) economists are sharply divided into competing schools of thought with little overlap of ideas and beliefs. If a country wants to trade a product with another country, it must have a(n) ___________ in the production of that product. Correct D ) comparative advantage Alpha can produce either 10 apples or 3 oranges. Beta can produce either 12 apples or 3 oranges. Correct C ) Beta has an absolute advantage in the production of apples. Imports are Correct B ) goods and services that one country buys from other countries. The ability of a country to produce a product with greater output per unit of input is Correct A ) absolute advantage. . A country has a comparative advantage when it can