Quiz #9 Review Flashcards
globalization
the development of an increasingly integrated world economy marked especially by increased trade of goods and services, and increased flow of labor and capital
- supply and demand of goods and services
- supply and demand of factors of production: labor and capital
- growth of MNCs
multinational corporation
a corporation that has its facilities and assets in at least one other country other than its home country
- other countries are often referred to as host countries
- facility in home country is parent and other countries are affiliates
the parent operations of US MNCs accounted for what percent of GDP in 2012?
25%
American MNCs employ what percentage of all US workers?
1/5 or 20%
in the last decade, MNCs decreased domestic employment by xx million workers while adding xx million jobs overseas
- 9
2. 4
Foreign direct investment
the purchase (or building) of a facility by a domestic firm in a foreign country
what two reasons do MNCs have for putting a factory in another country?
- because it’s cheaper to make the product there and ship it back here
- actually selling goods over in another country
what six reasons do MNCs have for undertaking foreign investment?
F T R L E C
- serve a foreign market
- avoid tariffs
- gain access to raw materials
- to gain access to low-cost labor
- reduce exchange rate risk
- respond to industry competition
arguments against MNCs
- countries and governemnts often try to attract MNCs
- they say: MNCs increase employment, increase economic activity
- so, governments often offer tax breaks to MNCs that will locate there
- this means individuals must make up the difference in lost tax revenue
- governments may also offer MNCs relaxed environmental standards, relaxed labor regulations
arguments for MNCs
- MNCs often maximize operational efficiency through standardization
- in countries with low environmental standards and no labor regulations, standards of MNCs may exceed required standards
- MNCs pay a lower wage than would be paid in home country, but paying a higher wage than other employment options i host country
Foreign profits as a percent of total US profits are (increasing or decreasing) every year
increasing
3 effects of globaliztion
- convergence effect
- labor effect
- mobility effect
convergence effect
increased globalization allows emerging economies to leap frog technologies
labor effect
reduced transportation and communication costs have brought hundreds of millions of lower-skilled workers into the global labor pool
mobility effect
capital-tools, equipment, factories, etc- are much more mobile than labor
what convergence effect means for MNCs
makes companies more productive quickly, higher profits for MNCs
what the labor effect means for MNCs
increases global labor supply; keeps wages down ….higher profits for MNCs
what the mobility effect means for MNCs
governments compete for capital; give tax breaks…higher profits for MNCs
