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MANAGING PROJECTS

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Projects represent nonroutine business activities that often have long-term strategic ramifications for a firm. In this chapter, we examined how projects differ from routine business activities and discussed the major phases of projects. We noted how environmental changes have resulted in increased attention being paid to projects and project management over the past decade. In the second half of the chapter, we introduced some basic tools that businesses can use when planning for and controlling projects. Both Gantt charts and network diagrams give managers a visual picture of how a project is going. Network diagrams have the added advantage of showing the precedence between activities, as well as the critical path(s). We wrapped up the chapter by showing how these concepts are embedded in inexpensive yet powerful software packages such as Microsoft Project. If you want to learn more about project management, we encourage you to take a look at the Web site for the Proj...
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The Global Economy

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Emerging markets refer to countries which are between developed and developing status and have low to medium GDP per capita. Limited growth opportunities in developed countries mean that more businesses are turning to investing in emerging economies as the source of future growth. Existing business models often cannot be replicated in emerging markets and as a result more creative and innovative ways of doing business may have to be thought of which meet the needs of populations which have very limited incomes. A common currency area (currency union or monetary union) is a geographical area through which one currency circulates and is accepted as the medium of exchange. The formation of a common currency area can bring significant benefits to the members of the currency union, particularly if there is already a high degree of international trade among them (i.e. a high level of trade integration). This is primarily because of the reductions in transaction costs ...
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Macroeconomics – Fiscal, Monetary and Supply-Side Policy

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The three main policies used to affect economic activity are monetary policy, fiscal policy and supply-side policy. Keynes developed The General Theory as a response to the mass unemployment which existed in the 1930s. He advocated governments intervene to boost demand through influencing aggregate demand. The Keynesian cross diagram shows how the economy can be in equilibrium when E = Y. This equilibrium may not be sufficient to deliver full employment output and so the government can attempt to boost demand to help achieve full employment. Supply-side policies aim to improve the efficiency of the economy and increase the capacity of the economy by shifting the aggregate supply curve to the right. Key elements of a supply-side policy include tax and welfare reforms, improving the flexibility of labour markets including trade union reform, education and training, and investing in improved infrastructure. In developing a theory of short-run economic fluctua...
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Macroeconomics – Inflation and Price Stability

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The overall level of prices in an economy adjusts to bring money supply and money demand into balance. When the central bank increases the supply of money, it causes the price level to rise. Persistent growth in the quantity of money supplied leads to continuing inflation. A government can pay for some of its spending simply by printing money. When countries rely heavily on this ‘inflation tax’, the result is hyperinflation. Many people think that inflation makes them poorer because it raises the cost of what they buy. This view is a fallacy, however, because inflation also raises nominal incomes. Economists have identified six costs of inflation: shoe leather costs associated with reduced money holdings; menu costs associated with more frequent adjustment of prices; increased variability of relative prices; unintended changes in tax liabilities due to non-indexation of the tax system; confusion and inconvenience resulting from a changing unit of account; and ar...
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Macroeconomics – Employment and Unemployment

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The unemployment rate is an imperfect measure of joblessness. Some people who call themselves unemployed may actually not want to work, and some people who would like to work have left the labour force after an unsuccessful search. In many advanced economies, most people who become unemployed find work within a short period of time. Nevertheless, most unemployment observed at any given time is attributable to the few people who are unemployed for long periods of time. One reason for unemployment is the time it takes for workers to search for jobs that best suit their tastes and skills. Unemployment insurance is a government policy that, while protecting workers’ incomes, increases the amount of frictional unemployment. A second reason why an economy may always have some unemployment is if there is a minimum wage that exceeds the wage that would balance supply and demand for the workers who are eligible for the minimum wage. By raising the wage of unskilled and ...
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Aggregate Demand and Aggregate Supply

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All societies experience short-run economic fluctuations around long-run trends. These fluctuations are irregular and largely unpredictable. When recessions do occur, real GDP and other measures of income, spending and production fall, and unemployment rises. Economists analyze short-run economic fluctuations using the model of aggregate demand and aggregate supply. According to this model, the output of goods and services and the overall level of prices adjust to balance aggregate demand and aggregate supply. The aggregate demand curve slopes downward for three reasons. First, a lower price level raises the real value of households’ money holdings, which stimulates consumer spending. Secondly, a lower price level reduces the quantity of money households’ demand; as households try to convert money into interest-bearing assets, interest rates fall, which stimulates investment spending. Thirdly, as a lower price level reduces interest rates, the local currency...
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The Macroeconomic Environment

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Economic prosperity, as measured by GDP per person, varies substantially around the world. Because every transaction has a buyer and a seller, the total expenditure in the economy must equal the total income in the economy. Gross domestic product (GDP) measures an economy’s total expenditure on newly produced goods and services and the total income earned from the production of these goods and services. More precisely, GDP is the market value of all final goods and services produced within a country in a given period of time. The standard of living in an economy depends on the economy’s ability to produce goods and services. Government policies can try to influence the economy’s growth rate by encouraging saving and investment, encouraging investment from abroad, fostering education, maintaining property rights and political stability, allowing free trade, promoting the research and development of new technologies, and controlling population growth. Nominal ...
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