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BEC Pass Notes > Globalization > Flashcards

Globalization Flashcards

1
Q

1- Collusion
2 - Dual Pricing
3 - Predatory Pricing
4 - Transfer Pricing

A

1 - competitors agree to restrict production so as to increase the price they receive for their product
2 - practice of setting different prices for a product dependent on the currency used to buy it. It often is used to set lower-than-normal prices to gain access to a particular foreign market
3 - owering prices to such an extent as to drive competitors out of business
4 - A transfer price is the price charged by one unit within a larger business to another unit in that business.

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2
Q

Using short term loans in useful is refinancing long term debt under what situation

What is risker, long or short-term debt

A

When interest rates have declined

Long-term due to a longer maturation period

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3
Q

Call Option

Advantageous

Used

A

Buy shares at a set price

Good in a period of rising prices

Used when purchasing goods in a foreign currency

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4
Q

Put Option

Advantageous

Used

A

PROVIDE shares at a stated price

Good in a period of declining prices

Used when selling goods in a foreign currency

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5
Q

Dampen the economy

A

Reduce the money supply

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6
Q

Discount Rate

A

the minimum acceptable rate of return on an investment

LOWERING the discount rate is a good thing because you expect less of a return

LOWERING “interest earned”

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7
Q

Foreign Direct Investment

Traditional pattern

Current Pattern

A

Investment in which a resident of one country obtains a lasting interest in, and a degree of control over, management of a business enterprise in another country.

Rich to emerging

Emerging to Rich

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8
Q

Sovereign Wealth Funds

A

Pools of money accumulated from a country’s reserves that are provided for investment purposes that will benefit the country’s economy and citizens.

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9
Q

Business Cycle Items (expansion, recession, trough) are categorized by

A

employment of resources

comparison of potential output to actual output

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10
Q

Inflation

Deflation

A

decrease in money supply/purchasing power of money increase in prices;currency value rises
increase in the money supply decrease in prices; currency value decreases

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11
Q

Black Swan Event

A

Rare event

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12
Q

Marginal Costs

A

Always one higher than the average cost

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13
Q

Emerging Markets Characteristics

A 
1 - low debt-to-GDP ratios 
2 - significant increase in trade among and between  
3 - emerging market economies
4 - low-cost labor, high savings rates
5 - large currency reserves
6 - high investment in infrastructure.
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14
Q

Increased Imports effect on money depreciation

A

As more currency is released it is not a rare and therefore deflation or depreciation of the currency occurs

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15
Q

nation’s economic growth is measured

A

by the output of a nation

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16
Q

Hedge is used for

A

FOREIGN

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17
Q

Receivable in foreign currency

A

Sell currency in the amount of the receivable

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18
Q

Multiplier Effect / Accelerator Principle

A

magnifies small changes in Consumption, Net Investment, or Government Expenditures into larger overall changes to national income.

INVESTMENT AND CHANGES IN INCOME DIRECT EFFECT

19
Q

When using supply or demand curves

A

Y - always price
X - supply or demand

Shift = factor other then price
Movement on curve - price level change

20
Q

Quantity and Price in a period of declining prices

A

Quantity increases proportionally more than the price declines

21
Q

1 - Option risk
2 - Re-pricing risk
3 - basis risk
4 - Yield curve risk

A

1 - firm gives the customer the right (but not the obligation) to change the stream from assets, liabilities, or off-balance sheet items.
2 - when a firm deliberately mismatches in an upsloping yield curve environment by holding assets with a longer duration than that of the liabilities used to fund them
3 - situation where a bank’s interest margins are generally spontaneously enhanced in a period of rising interest rates as loan rates tend to adjust upward more rapidly than the rates on deposits
4 - underlying shape of the yield curve changes (e.g., steepens, flattens, becomes inverted). These changes tend to accentuate any asset-liability mismatches the firm has

22
Q

1 - structural unemployment rate

2 - frictional unemployment rate

3 - cyclical unemployment rate

4 - full employment unemployment rate

A

1 - Changes over time in consumer demand, and technology that alters the structure or composition of the demand for labor, both in terms of occupation and geographic opportunities
2 - due to imperfections in the labor market and relates to workers searching for jobs or waiting to take jobs in the near future
3 - caused by the recession phase of the business cycle, that is, by a decline in aggregate spending
4 - unemployment rate is the sum of frictional and structural unemployment

23
Q

Economic Profit

Accounting Profit

A

Sales - Expenses - Opportunity/Implicit Costs (Opportunities lost)
Sales - Expenses

Accounting profit is always higher than implicit profit

24
Q

1 - fiscal policy

2 - monetary policy

A

1 - Government spending/reduction in taxes

2 - interest rates

25
Q

Firms with few barriers to entry

Pure/Monopolistic

A

MR

26
Q

Economic exposure

A

impact of exchange rate fluctuations on a firm’s future cash flow; unable to afford goods due to a currency increase in value

27
Q

liquidity preference (LP)

A

relates money demand to the rate of interest

28
Q

Capital Account

Current Account

A

deals w/ capital asset purchases

imports/exports/NI/other exchanges NO ASSETS

29
Q

Real GDP

A

nominal GDP/price index

30
Q

Forward Rate %

A

Forward - Spot * 360/# of days

31
Q

Currency Against FOREIGN CURRENCY
Appreciation
Depreciation

A

1 - current is worth less causing more EXPORTS

2 - current is worth more causing less EXPORTS

32
Q

GDP

A

personal consumption expense + gross private domestic investment + gov. purchases + net exports

33
Q

Repatriation

A

converting a foreign currency into local currency

34
Q

Bank reserves are decreased by

A

SALE OF SECURITIES

35
Q

CALL

PUT

A

prices rise

prices decrease

36
Q

marginal costs

A

always one higher then variable costs

37
Q

rise in interest rates and countries currency valuation

A

higher because more interest is earned on investment

38
Q

HOW DOES INFLATION DISORT NI

A

DEPRECIATION IS NOT CHANGED

39
Q

inflation worth

A

amount/ 1 + inflation rate

40
Q

demand pull

cost push

A

demand is increasing quicker then supply can - rising prices
supply of goods decreases

41
Q

multiplier

A

1 / reserve rate

42
Q

money supply and interest

A

inverse proportion

43
Q

primary means of control by the FED gov

A

open mrkt operations, buy/sell securities

44
Q

systemic

unsystemic

A

market

diversifiable

BEC Pass Notes (7 decks)

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