Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

International Business > SW 2: Economic Environment > Flashcards

SW 2: Economic Environment Flashcards

1
Q

Name the established methods to measure Wealth and Wellbeing

A

Established methods:
* Gross Domestic Product (GDP) (1937/1944)
* Gross National Income (GNI)
* Gini coefficient (1992)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the newer approaches to measure Wealth and Wellbeing?

A

Newer approaches:
* Human Development Index (HDI) (1990)
* Better Life Index (2011)
* Ecosystem Accounting (standardiesed 2021)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Who was hosting G20 Summit in 2022, 2023 and who will be in 2024

A

2022: Indonesia
2023: India
2024: Rio

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the problem of comparison the GDP and what is a better approach?

A

Problem: to compare => convert with exchange rate (usually $), but fx only reflect int. traded goods/servics and are exposed to short-term spec. / government intervention

Better: calculating GDP using Purchasing Power Party (PPP) method => shows what and how much you can purchase in the country’s currency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What information gives the GDP per capita?

A

information about the income per capita
BUT NOT about its distribution and quality of life

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Calculation of GDP

A

Consumption + Government Expenditure + Private Investment + Exports - Imports

=> only counts income flows

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How to measure (relative) inequality?

A

Gini shows income inequality in a society:
- Iceland 0.26 vs SA 0.63 (2019)
- CH 0.31

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What for can Gini also be used?

A

To measure distribution of wealth or life expectancy
=> wealth inequality in CH 0.86 (2015) > higher compared to income inequality (0.31)

In developing countries and LDC income often hard to guess => better look at consumption

LDC = Least Developed Countries (UN)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What measures GDP?

A

Production (manufacturing)
NOT WELFARE (criticism)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Size of Shadow Economy (not part of GDP)

A
  • Advanced economies: 10-20%
  • Emerging economies: 30-35%
  • CIS countries: 40% or more

CIS = Commonwealth of Independent States (Eurasia after Soviet Union with Belzovah Accords (1991)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is GNI compared to GDP?

A

GNI calculates income vs. GDP that measures output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Why does GDP still matter?

A

o Many policy decisions are based on GDP figures (how bad is the financial crisis?)
o Voting Power at IMF (International Monetary Fund), WB (World Bank), etc. depend on the GDP of member states

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Definition of GNI according to OECD

A

GDP, plus net receipts from abroad of compensation of employees, property income and net taxes less (-) subsidies on production.

=> GNI includes output of nationals abroad: Remittances

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Which nations show a significant difference between GDP and GNI?

A

Nations that have
* substantial foreign direct investment (FDI),
* foreign corporate presence,
* foreign aid (ODA), or
* remittances

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Which institution use GNI / where is GNI the basis?

A
  • EU calculates member states contribution via GNI
  • Human Development Index (HDI) is based on GNI figures. => Educational & Health level (Switzerland is Nr. 1 here)
  • World Bank country classification by income levels is based on GNI per capita (US$)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the 3 dimensions of the Human Development Index (HDI)?

=> New approach to measure wealth and wellbeing

A
  1. Health: Life expectancy at birth
  2. Education: Mean of years of schooling for:
    * adults aged 25 yrs+ and
    * children of entering age
  3. Standard of living: gross national income (GNI) per capita
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

According to United Nations Development Programme (UNDP): What does the HDI not reflect on?

A
  • poverty
  • human security
  • empowerment
  • etc
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is the Better Life Index and who constructed it?

=> New approach to measure wealth and wellbeing

A
  • The OECD
  • containing a range of metrics that* better reflect what constitutes and leads to well-being*
    *
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the System of Environmental-Economic Accounting (SEEA), what does it contain and what is it used for?

=> New approach to measure wealth and wellbeing

A
  • The System of Environmental-Economic Accounting (SEEA) => Ecosystem accounting is a coherent and integrated approach to the assessment of the environment
  • It was adopted by the UN Statistical Commission in 2012.
  • Measurement Focus: Involves measuring ecosystems and the flows of services from these ecosystems => into economic and other human activities.
  • Objective: Helps in understanding and quantifying the contributions of the environment to the economy and the impacts of the economy on the environment.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the GDP and what are the limitations ?

A

GDP:
* internationally acknowledged indicator
* measures how much a country is producing in a given year
* is well-defined, long-standing and commonly for international comparisons

  1. Excludes Non-Monetary factors: Does not reflect on the well-being or health of a country => GDP only measures paid activities, not including the informal sector or voluntary activities in homes and communities.
  2. Ignores Environmental Costs: Does not account for the costs of economic growth, such as environmental degradation or climate change impacts.
  3. Silent on Income Distribution: No information about how income from economic activity is distributed among the population.
    * Outflow of Income: Income included in GDP may leave the country, like profits made by foreign investors, which are counted in the local GDP but then transferred abroad (e.g., Apple in Ireland).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

How is an advanced economy determied?

Economic Development Level

A

=> there is no numerical convention

Advanced economies are usually defined as having
1. a high level of per capita income,
2. a varied export base, and
3. a financial sector that’s integrated into the global financial system.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Advanced vs. Emerging Economy:
Who classifies the countries and how?

A
  • The IMF World Economic Outlook classifies 41 economies as “advanced”
  • based on such factors as high per capita income, exports of diversified goods and services, and greater integration into the global financial system
  • The remaining 155 countries are classified as “emerging and developing economies”

=> There is no official definition of an emerging economy.

23
Q

What are the E7 economies?

A

Emerging Economies:
* Brazil
* China
* India
* Indonesia
* Mexico
* Russia
* Turkey

24
Q

Emerging Markets: Background on the definition and examples of classified countries

A

Background: In 1981 Antoine van Agtmael was trying to start a “Third-World Equity
Fund” to invest in developing-country shares
BUT, his efforts to make money were constantly rejected

=> He came up with a term that sounded more positive: emerging markets, which suggested progress, uplift and dynamism

25
Q

Economic Development Level at the World Trade Organisation (WTO, Geneva):
Name the 3 membership categories with examples and why they exist

A

WTO categories:
1. Developed country members (e.g. Switzerland)
2. Developing country members (e.g. PR China)
3. Least developed country (LDC) members (e.g. Angola, Nepal, Zambia)

Problem: There are no WTO definitions of “developed” and “developing” => members announce themselves

=> LDC: low income, highly vulnerable to econmic & environmental shocks, low levels of human asset (->HAI)

=> In several international organisations, members have different privileges or obligations depending on their development status

26
Q

What does Paul Krugman suggest is the primary factor determining why some nations become rich while others remain poor?

A
  • Productivity is key.
  • Long-term standard of living improvements rely on output per worker.
  • Economic growth must be productivity-driven.
27
Q

What is the Three-Sector Hypothesis regarding economic development?

A

=> Another answer to the question “Why do some nations become rich while others remain poor?”

  • Proposed by Colin Clark and Jean Fourastié
  • Economies mature from primary (agriculture), to secondary (industry), to tertiary sectors (services).
  • Progression through these sectors increases productivity and wealth.
28
Q

What caveats (reservations) and modern challenges are noted in relation to the three-sector model of economic development?

A

Ceveat: The model simplifies complex economic realities.

=> It’s still a useful framework for understanding the general patterns of economic development

  • Automation and 3D printing challenge traditional models, affecting labor costs and outsourcing.
29
Q

What is one key driver of globalization?

A

international trade

30
Q

What is the World Trade Organization (WTO), when was it founded, and what are its member statistics?

A
  • Founded: 1995 with 123 nations
  • Original Members: Parties to GATT and the European Communities post Uruguay Round Agreements.
  • Members since July 29, 2016: 164.
  • Scope: Regulates world trade and financial arrangements.
31
Q

What are the main contributors to the growth of internatioal trade?

A
  • reduction of trade barriers
  • continuing liberalization of markets
32
Q

Why should government intervene in the trade?

A
  1. National defence: e.g. weapons, food is crucial in war
  2. To protect new domestic industries from foreign competition
  3. **To save jobs **(“)
  4. **To Protext against over-dependence **on a narrow base of product: comparative advantage
  5. Political motives: e.g. US has an embargo on trade with Cuba bc it disagrees with cuba’s politics
  6. To protect domestic producers from dumping by foreign companies or governments
  7. To prevent the import of undesirable products: e.g. drugs, animals
  8. To resist cultural imperialism / maintain a particular lifestyle: e.g. US film industry
33
Q

What are the main principles and criticisms of the World Trade Organisation (WTO)?

A

Principles:

  • Non-discrimination: Treat imported and domestic goods equally.
  • Reciprocity: Members should offer comparable access and tariff reductions.
  • Transparency: Trade regulations must be public.
  • Predictability and stability: Existing tariffs cannot be raised without negotiation.
  • Freeing of trade: Reduce all trade barriers.
  • Assistance for developing countries: Offer special concessions and aid.

Criticisms: Favors developed nations

  • Exclusion of less developed countries from decision-making.
  • **Market access challenges **for less developed countries.
  • Rise in anti-dumping measures.
  • Substantial agricultural subsidies in developed countries.
  • Disregard of labor standards and environmental concerns (in general)
34
Q

What opportunities does globalization offer and how do companies use them?

A
  • Entry into new markets
  • Utilization of cost and quality differences in labor and resources
  • Achievement of economies of scale
  • Access to raw materials

=> leads to: Globalizing production and reorganizing supply chains for cost benefits.
* Reduction in transport costs, notably due to *shipping containers *(one of the most important global merchandise enabler)

X BUT International sourcing of supplies means that companies have to pay more attention to the maintenance of quality standards

35
Q

Which threats occur to businesses through globalization?

A
  1. Financial risks
  2. Political risks
  3. Natural disasters
36
Q

What financial risks do international firms face due to globalization?

A
  • Exchange rate fluctuations affecting company performance evaluation
  • Profit and asset value impact due to exchange rate changes
37
Q

What are the political risks associated with globalization for businesses?

A
  • Terrorism and cyber-attacks can target businesses, especially U.S. companies
    => the impact of terrorism is most severe in Somalia, Iraq, and Afghanistan
  • Attacks can sabotage infrastructure and disrupt supply chains
  • Security measures post-terrorism can increase costs and delivery times => as a solution the JIT method has been created
38
Q

How do natural disasters pose threats to international business and trade?

A
  • Disasters like hurricanes can cause extensive damage to infrastructure and disrupt industries (and prices, e.g. oil)
  • Some sectors may benefit, like producers of portable power generators and mobile homes after hurricanes.
39
Q

Why do international firms scan their environment and what strategies might they adapt to remain competitive?

A
  • To identify influential forces
  • Environmental changes can impact operations
  • Adapt strategies to stay competitive

Choose between
* industry-based view (external => macro & micro environment) and
* resource-based view (internal => analysis of resources and capabilities)

40
Q

What can be used to determine important factors of the macro-environment?

A

the PESTEL Framework:
* external analysis
* often used to identify opportunities (O) and threats (T)

=> can be combined witht the SWOT’s internal analysis: of a firm’s strengths (S) and weaknesses (W)

41
Q

What is the G20, and who are its members?

A
  • “Premier forum for international economic cooperation”
  • Founded in 1999 new, informal international platform
  • Members include 19 countries and the EU, plus the African Union since 2023
  • Spain is a permanent guest country.
  • Regular high-profile summits since 2008.

Members:
Argentina, Australia, Brazil, Canada, China, France, Germany, Great Britain, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the USA as well as the EU and, since 2023, also the African Union (AU)

Note: China, Russia, and Saudi Arabia are members of the G20 BUT NOT part of the OECD (Organization for Economic Co-operation and Development).

42
Q

How does the G7 differ from the G20 in terms of membership and purpose?

A
  • G7 is a group of high-income economies with 7 representatives including the EU (with 2 seats)
    => Canada, France, Germany, Italy, Japan, the United Kingdom and the United States; additionally, the European Union (EU) is a “non-enumerated member”
  • Key platform for coordinating actions like sanctions against Russia.
  • G20 is more representative with a broader economic spectrum.
43
Q

Which countries are represented from:
- low income economies
- upper-middle income economies
- high income economies?

A
  • 2 lower-middle-income members:
    India & Indonesia
  • Upper-middle income economies
    Latin and Central America, China, Russia, Turkey, SA
  • High income:
    North America, European countries, Australia, Saudi-Arabia
44
Q

What is BRICS and what are its objectives?

A
  • BRICS represents the first letter of the founding countries: Brazil, Russia, India, China, and South Africa.
  • Seeks greater voice and representation for emerging economies.
  • Challenges Western dominance in international financial institutions like the IMF and World Bank.
45
Q

South Africa is only the 38th largest economy in the world (GDP in current USD, WB) in 2022, but a member of the G-20.

If only economic size would matter, which other African economies would be more suitable members in the G20?

A

Egypt and Nigeria

46
Q

Which two economies are among the 20 largest global economies (in GDP current USD 2022), but not part of the G20?

A

Netherlands and Switzerland

47
Q

What are the statistics of South Korea’s economy and its workforce distribution across sectors?

A
  • 12th largest economy globally, 6th in Asia
  • Service sector: 58.3% of GDP; agriculture: 2.2%; industry: 39.3%.
  • Over 70.6% of the workforce employed in the service sector (2018)
48
Q

What has been the long-term economic policy focus of South Korea?

A

Manufacturing sector development

=> essential for rapid economic transformation of poorer countries!

49
Q

Why is the manufacturing sector critical to the economic transformation of poor countries?

A
  1. Because of the poor countries’ biggest constraint: the lack of a high level of productivity
    human skills    , which are often needed in the service sector.
    2.** Manufactures are more globally traded than services.**

=> global market in manufactures as a channel for quick technological learning

50
Q

What are the steps involved in climbing up the value chain according to economic development strategy?

A
  1. Increase productivity in the agricultural sector (1st sector).
  2. Transition of workers from agriculture to manufacturing (1st to 2nd sector).
  3. **Adopt an export-driven growth strategy **(support from the state only for businesses successful in the global market)
  4. Work up from the bottom to the top of the value chain (Progress from labor-intensive to capital-intensive, and from low-tech to high-tech manufacturing)
  5. Move the labor force from manufacturing to the service sector (2nd to 3rd sector).
51
Q

What was the strategy behind South Korea’s long-term industrial transformation plan?

A

5-year industrialization plans starting 1962

STEP 1 (1962-66): Focused on exports with low value-added, labor-intensive goods like textiles and shoes.
STEP 2 (1967-71): Shifted to heavy industry **such as steel and shipbuilding.
*STEP 3-4 (1972-81): Invested in high value-added, capital
technology, and capital
technology-intensive industries.
*STEP 5-7 (1982-96): Further investment in high-tech industries like electronics and IT
STEP 8 (1996-present): Focused on service sectors and international high-end consumer goods.

52
Q

What is the Chaebol system in South Korea?

A
  • A form of Korean business conglomerates, typically controlled and managed by the same founding family
  • In 1960, Korea created Chaebols by giving them cheap loans, regulatory privileges, and infrastructure access (further close cooperation)
53
Q

What is the economic impact of the largest Chaebols in South Korea?

A
  • The top thirty Chaebols account for more than half of South Korea’s GNP.
  • Samsung alone contributes to 20% of the GNP.
54
Q
A

International Business (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions