Unit 3 Flashcards
What is international economic analysis?
+ More complex than domestic as there are a few things to consider:(1) more than just one economy, (2) interaction between them, (3) different values
What is the purpose of economic analysis? And how is it done ?
+To assess the overall Outlook and the impact of economic changes on the firm
Management requires economic and socioeconomic data.
Analysts gather this from governmental and international organizations and industry associations like:
Central or international banks
UN
World bank
IMF
OECD
Explain what is meant with levels of economic developments.
It is a possible way of grouping countries by level of economic development
+A method to assist economic analysis\
+A common basis used in GNI
Gross national income: Total value of all income generated by residents from both domestic and from abroad
What are the levels of development?
(1)High income economies:+GNI per capita > $12 375
(2)Upper-middle income:+GNI per capita $3 996 - $12 375
(3)Lower middle income:+GNI per capita $1 026 - $3 996
(4)Low income:+GNI per capita < $1 026
Distinguish between developing and developed countries.
(1)Developing:+Lower incomes Nations, less developed infrastructure and low living standards
(2)Developed:+High income, developed infrastructure, high living standards
Possible additional differentiators:
Government and legal systems
Educational opportunities and literacy
Unemployment or underemployment levels
Nutrition and health care
What is an emerging market?
Emerging market:+ economies in the low to Middle income brackets transitioning towards developed status
To be a potential market what are two factors required?And how does researchers aquire this data?
+ The market requires 1. sufficient people with 2. the means to buy
+ Socio-economic data =1 and economic data helps assess 2
What economic indicators show and mean in terms of economy growth rates.
+ data struggles to capture growth rate
+ higher growth rates imply demand
What 5 economic indicators are used to measure the size of an economy?(Look at slides and textbook for calculations)
(1)Gross Domestic Product(GDP):+Size of economy based on products and services produce, their market value within that year in that nation
Based on location
(2)Gross national income(GNI):+Based on ownership
+Better reflect economy wealth
Based on ownership (FDI)
(3)GNI/Capita:
+Captures purchasing power
+Is a snapshot
Supplement with growth rate
(4)Purchase power parity(PPP):+A means to mitigate the influence of exchange rate in GNI/capita and GNI/GDP
(5)Informal/Underground economy:+Part of Nations income that isn’t measure
What is meant when income distribution is discussed as an economic indicator?
+ it is a measure of how a Nation’s income is apportioned to among its people
+ income more even in a richer Nations
+ more inequality during initial development and then equalizes
+ income redistribution process is slow, means: Older data can be relevant longer
▪ Measures of Income Distribution;
* Percentiles
* GINI Index
o A measure of the degree to which family income within a country is distributed equally, with a lower score of GINI indicating a more equal distribution.
o Wide range around the world
What does the economic indicator ‘private consumption’ concern?
Disposable income:+ after tax personal income
Discretionary income:+Amount left after tax and necessary purchases
What is labour costs as an economic indicator?
Unit labor costs:+ total Direct labor costs divided by units produced
▪ Low or slowly rising unit labour costs may indicate an opportunity to lower production costs
and may indicate locations of new competition in world markets
▪ Changes in wage rates may cause companies to change their international sources of supply
What is socioeconomic indicators and what are the 3 indicators?
+ provides info on number of people
(1)Total population
(2)Age Distribution
(3)Population density and distribution
describe the economic growth rate
▪ Data about the size of an economy do not capture how fast an economy is growing/shrinking
▪ GNI and GNI per capita only provide a snapshot of an economy
▪ Managers should supplement their analyses by assessing economic growth rates as
measures of an economy’s absolute size
▪ Rapid and rising rates imply consumer demand
Discuss Economic Indicators: Other Economic
Dimensions
▪ Large and growing international debts of middle- and low-income nations cause problems for
their governments and for multinational firms
▪ Large foreign debts may hinder access to foreign currency to pay for imports billed in foreign
currency, if such currency is being used to pay foreign debt, hindering access to raw materials,
spare parts, and other inputs
▪ High debt may cause governments to impose price controls, cut government spending, and
impose wage controls, sometimes encouraging political crises
▪ Scarcity of foreign exchange may hinder companies trying to export products to such nations,
as indebted governments may impose import restrictions to conserve their foreign exchange
for repayment of debt
