WHAT IS BUSSINESS?

Business is a word which is commonly used in many different languages. But

exactly what does it mean? The concepts and activities of business have increased in
modern times. Traditionally, business simply meant exchange or trade for things
people wanted or needed. Today it has a more technical definition. One definition of
business is the production, distribution, and sale of goods and services for a profit.
To examine this definition, we will look at its various parts.
First, production is the creation of services or the exchanging of materials
into products. One example is the conversion of iron ore into metal car parts. Next,
these products will be moved from the factory to the marketplace. This is known as
distribution. A car might be moved from a factory in Surabaya to a car dealership in
Solo or Yogyakarta.
Third is the sale of goods and services. Sale is the exchange of a product or
service for money. Goods are products which people either need or want; for
example, cars can be classified as goods. Services, on the other hand, are activities
which a person or group performs for another person or organization. For instance,
an auto mechanic performs a service when he repairs a car. A doctor also performs a
service by taking care of people when they are sick.
Business, then, is a combination of all these activities: production, distribution,
and sale. However, there is one other important factor. This factor is the creation of
profit or economic surplus. A major goal in functioning a business company is
making a profit. Profit is the money that remains after all these expenses are paid.
Creating an economic surplus or profit is, therefore, a primary goal of business
activity.
Vocabulary:
1. Concept : an idea
2. Increase : grow, expand
3. Exchange : to give and receive, trade
4. Trade : the act of buying and selling goods and services
5. Distribution : the process of physically satisfying the demand for goods and
service
 6. Examine : to inspect carefully
7. Creation : something bought into existence
8. Conversion : change
9. Ore : any naturally occurring mineral from which economically
important constituent can be extracted.
10. Factory : a plant assembly for the manufacture of goods
11. Dealer : a firm engaged in purchase and sale
12. Perform : to carry out an action
13. Mechanic : a person skilled in maintaining machinery
14. Combination : state of being combined
15. Surplus : a quantity in excess of what is required
16. Remain : to stay in the same place
17. Expense : a particular payment of money
Exercise 1: Comprehension Question
Give your answer to the following questions based on the text above!
1. What is one modern definition of business?
2. What does production involve?
3. What example of distribution is given in the reading? Can you think of another
example?
4. How do goods doffer from services?
5. In addition to production, distribution, and sale, what other factor is important
in defining business?
6. What is profit? In general, what do companies do with their profits?
Exercise 2: Determine which of the following statements are true and which are
false. Then put T or F in the blanks!
1. Business is just one activity but a combination of different operations such as
production, distribution, and sale. (…….)
2. From ancient to modern times the definition of business has remained the same.
(…….)
3. Moving of truck load of oranges from the orchard to the supermarket is an
example of production. (……)
4. A salesclerk provides a service by answering customer’s questions is a product.
(……)
Exercise 3: Look at the terms in the left-hand column. Copy the corresponding
letters in the blanks!
1. …… goods a. to carry out an action
2. …… conversion b. trade
3. …… for instance c. grow
4. …… distribution d. look at
5. …… exchange e. change
6. …… on the other hand f. a particular payment of money
7. …… examine g. products
8. …… increase h. however
Exercise 4: Translate the text above into Indonesian!
 HOW PAYMENT BALANCES
A country’s links with the rest of the world can have a big influence on its
economy. World trade grows continually. Capital now moves more freely between
countries. Because of this, economic theorists now pay more attention to what
determines the balance of payments.
People often think that economic theory is unnecessary complicated. In fact,
however, economists often oversimplify their theories. They often analyze a ‘closed’
economy. A closed economy has no trading or financial links with other countries. If
economists analyze an open economy, their economic models become more
complicated. But the models do not change in unexpected ways. For example,
classical economists base their view of the balance of payments on the same
principles that they use in closed economy models.
Before considering balance of payments theories, we will start with some
simple arithmetic and basic economics. A country’s balance of payments has two
main parts. These are the current accounts and capital account.
The current account covers import and export of goods and services. It also
covers the interest, profits and dividends received from abroad and paid to
foreigners; the cash that foreign workers send home; and some minor public sector
transfer.
The capital account is money lend or invested abroad. It can be short term.
For example, Britons with American bank accounts can make deposits or empty their
accounts with a single telephone call. Or it can be long term. For example,
multinational companies and foreign aid agencies invest in big projects that may take
years to complete.
By definition, the balance of payments must balance. A country with a $1
billion deficit on its current account must get $1 billion in foreign currency to
finance it. Often it will do that by running a surplus on its capital account – a
matching inflow of $1 billion. But most countries have official reserves of foreign
currency and gold that they can use to cover their current – account deficit, at least
for a short time. So the current account minus the capital accounts plus any change in
official reserves always adds up to zero.
 This is just the same as any individual’s personal finances. He can spend more
than he earns (a capital – account deficit) provided he can borrow (a capital account
surplus). Otherwise he must use his savings (reserves) to bridge the gap.

Key Words:
- Link : hubungan - Dividend : dividen
- Complicated : rumit - Foreign : asing
- Closed : tertutup - Transfer : pemindahan
- Open : terbuka - invested : investasikan
- Classical : klasik - Short-term : jangka pendek
- Principle : prinsip - Long term : jangka panjang
- Current account : bagian/rekening transaksi berjalan
- Capital account : bagian/rekening lalulintas moneter
- Inflow : masukan - reserves : tabungan, cadangan
- Currency : uang (mata uang) - earn : menerima uang, mendapat
Penghasilan
Exercise 1: Complete the following sentences with the words from the key
words list!
1. A country’s ……….. with the rest of the world can have a big influence on its
economy.
2. People often think that economic theory is unnecessarily ………………..
3. A …………… economy has no trading or financial ………. with other countries.
4. The …… …….. covers imports and exports of goods and services.
5. The current account also includes the cash that ……… ………. Workers send
home and some minor public sector………… .
6. The …….. ………. ………..is money lent or invested abroad.
7. The capital account can be ……… ……….. or it can be ………. …………
8. Most countries have official ……….. of foreign currency and gold.
9. A person can spend more than he ………… .
10. ……….. economists base their view of the balance of payments on the same
…………. that they use in closed economy models.
Exercise 2: Complete the following sentences based on the text above!
1. Capital now moves more……….between countries.
2. If economists ………… an open economy, their economic models become more
complicated.
3. Let us ………….balance of payment theories.
4. We will start with some simple ………. and basic economics.
5. The current account ………. imports and exports of goods and services.
6. The current account also includes the interest, profits and dividends received
from …….
7. The current account also includes cash that foreign workers send home and some
……… public sector transfers.
8. Britons with American bank accounts can make deposits or ………. their
accounts with a ………….. telephone call.
9. ………… companies and ………. ………….. agencies invest in big projects
that may take years to complete.
10. A country can finance a current account deficit by ……….. a ………… on its
capital account.
Exercise 3: Comprehension Questions
Answer the following questions based on the text above!
1. What can have a big influence on a country’s economy?
2. How do economists oversimplify their theories?
3. What is a closed economy?
4. What happens if economists analyze an open economy?
5. What principles do economists base their view of the balance of payments on?
6. What are the two parts of a country’s balance of payments?
7. What does the current account include?
8. What is the capital account?
9. Is the capital account short term or long term?
10. If a country has a current account deficit, what must it do?
11. How do most countries use their official reserves of foreign currency and gold?
12. The current accounts minus the capital accounts plus any change in official
reverses must always equal how much?
13. In an individual’s personal finances, what is like a current account deficit?
14. In an individual’s personal finances, what is like a capital account surplus?
15. In an individual’s personal finances, what is like a country’s reserves?
Exercise 4: Translate the text above into Indonesian!