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Commerce > CH3 > Flashcards

CH3 Flashcards

1
Q

Gross National Income (GNI)

A

High GNI: Japan, Sweden, Switzerland and USA.
Low GNI: China and India

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2
Q

Purchasing Power Parity

A

Is a measure of the price of specific goods in different countries and is used to compare the absolute purchasing power of the countries’ currency.

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3
Q

Official figures can be misleading…

A
  • They don’t account for black economy transactions.
  • GNI and PPP are static and do not consider economic growth rates.
  • China and India are currently relatively poor, but their economies are growing more rapidly than many advanced nations.
  • China may become the world’s largest economy during the next decade.
  • India will become among the largest economies in the world.
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4
Q

Economic Development Requirements

A

-Economic development should be assessed by the capabilities and opportunities people enjoy.
- Development requires the removal of major impediments to freedom: poverty, tyranny, poor economic opportunities.
- Economic progress requires the democratization of political communities to give citizens a voice.

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5
Q

Human Development Index (HDI)

A

Based on:
- Life expectancy at birth
- Educational attainment
- Whether average incomes are sufficient to meet the basic needs of life in a country

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6
Q

Engines of Growth

A

Innovations and Enterpreneurship

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7
Q

Innovation

A

Includes new products, new processes, new organizations, new management practices, and new strategies.

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8
Q

Enterpreneurship

A

-First to commercialize innovative products and processes.
-Provides much of the dynamism in an economy.

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9
Q

Innovation and Enterpreneurship require a Market Economy

A
  • Strong relationship between economic freedom and economic growth.
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10
Q

Innovation and Enterpreneurship require Strong Property Rights

A
  • Without strong property rights, individuals and businesses risk having innovations and potential profits stolen.
  • Economist Hernando de Soto claims that inadequate property protection in many developing nations limits economic growth.
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11
Q

Required Political System

A

Democratic regimes are probably more conducive to long-term economic growth.
- Property rights are only secure in well-functioning, mature democracies.
- Economic growth leads to establishment of democratic regimes.
If China adopts a free market system, belief is that the country will have
-Greater individual freedoms
-Democracy
Totalitarian states are detrimental to progress
- They limit freedom and suppress human development.

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12
Q

Countries with favorable geography are…

A

More likely to engage in trade and open to market-based systems.

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13
Q

Countries that invest in…

A

Education have higher growth rates because the workforce is more productive.
- Countries in Southeast Asia have offset their geographical disadvantage by investing in education.

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14
Q

Political economy of nation-states is marked by two trends:

A
  1. Democratic revolutions of the late 1980s and early 1990s:
    - Totalitarian governments fell
    -Replaced by democratically elected governments
    - Greater commitment to free market capitalism.
  2. A move away from centrally planned and mixed economies toward a more free market approach.
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15
Q

The Spread of Democracy

A
  • Many totalitarian regimes failed to deliver economic progress to the bulk of their populations.
  • New information and communication technologies.
  • Reduced state’s ability to control access to uncensored information.
  • Created new conduits for the spread of democratic ideals.
  • Economic advances have led to a prosperous middle class that has pushed for democratic reforms.
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16
Q

Democracy is still rare in parts of the world :

A
  • Sub-Saharan Africa
  • Former communist Eastern and central Europe and former USSR
    Middle East and North Africa.
17
Q

Signs that authoritarianism is gaining ground:

A

Russia, Ukraine, Indonesia, Ecuador, and Venezuela
Egypt

18
Q

Global Terrorism

A

Product of tensions between civilizations and a clash of value systems and ideology.
- It is one of the major threats to world peace and economic progress.

19
Q

The shift toward a market-based system involves:

A
  • Deregulation
  • Privatization
  • A legal system to safeguard property rights
20
Q

Deregulation

A

The process of removing or reducing state regulations.
- Removing price controls.
- Abolishing laws regulating the establishment and operation of private enterprise.
- .Relaxing or removing restrictions on direct investment by foreign enterprises.

21
Q

Privatization

A

The process by which a piece of property or business goes from being owned by the government to being privately owned.
- Started in Great Britain in the early 1980s.
- For privatization to work it must be paired with a general deregulation and opening of the economy.

22
Q

Legal Systems for Economic Transformation

A

A well-functioning market economy requires laws.
- Need to protect property rights.
- Mechanisms for contract enforcement.

23
Q

Countries are more likely to have higher sustained rates of economic growth when they have:

A
  • Democratic regimes
  • Market based economic policies
  • Strong property rights protection
    These markets are more attractive to international businesses.
24
Q

First-mover Advantage

A

A firm’s ability to be better off than its competitors as a result of being first to market in a new product category.

25
Q

Late-mover Disadvantage

A

It is a late-comer into the market, it does not have established brand association.

26
Q

The costs of doing business in a country based on:

A

POLITICAL SYSTEM: is it necessary to pay bribes to get market access?
ECONOMIC LEVEL: are the necessary supporting business and infrastructure in place?
LEGAL SYSTEM: how do local laws and regulations affect business decisions? Are there well-established contract laws?

27
Q

Overall attractiveness of a potential market to international business…

A

Depends on balancing the BENEFITS, COSTS, and RISKS.

28
Q

Benefits

A
  • Size of economy
  • Likely economic growth
29
Q

Costs

A
  • Corruption
  • Lack of Infrastructure
  • Legal costs
30
Q

Risks

A
  • Political Risks: Social Unrest/Antibussiness trends.
  • Economic Risks: Economis mismanagement.
  • Legal Risks: Failure to safeguard property rights.

Commerce (10 decks)

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