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International Business Gr.12 > Unit 3: Economic and Trade > Flashcards

Unit 3: Economic and Trade Flashcards

1
Q

What is the difference between an “economic system” and a “political system”?

A
  • An Economic system: Way a country organizes its resources, goods and services to its citizens.
  • A political system is the type of government.
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2
Q

What is the “Circular Flow Model”?

A
  • Businesses provide income for Labour.
  • That income is then spent by the individuals on goods & services
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3
Q

What are the “four questions” that define a country’s economic system?

A
  • What to produce and quantities?
  • How should resources be allocated?
  • How should goods and services be distributed?
  • What should the price be?
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4
Q

What are the Five Political Systems?

A
  1. Theocracy: Based on religion (Vatican City)
    2.Autocracy: Ruled by one person (North Korea)
  2. Aristocracy: Ruled by wealth, educated class (U.K. - in the past)
  3. Monarchy: ruled by king/queen (Saudi Arabia)
  4. Democracy: Governed by the people (Canada)
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5
Q

What is the difference between “Democracy” and “Autocracy”?

A
  • A democracy includes free and fair elections, rule of law, free speech, the right to assembly, a free press and freedom of religion.
  • An autocracy or authoritarianism means to rule by a single individual or small group of people.
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6
Q

What are the Three UN Classifications?

A
  1. Developed economies
  2. Economies in transition
  3. Developing economies
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7
Q

What are the Four Stages of the Business Cycle?

A
  1. Recession
  2. Trough
  3. Expansion
  4. Peak
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8
Q

What are the Three Indicators of a Business Cycle?

A
  • Leading indicators
  • Lagging indicators
  • Coincident indicator
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9
Q

What are the Two Ways Governments impact the world economy?

A
  • Monetary Policy
  • Fiscal Policy
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10
Q

What are Monetary Policies?

A
  • Monetary policy are decisions a country’s federal government makes through its central banks
  • Examples: Bank of Canada and the United States Federal Reserve
  • Affect money supply (the amount of money in circulation in the country), interest rates, and the inflation rate.
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11
Q

What are Fiscal Policy?

A
  • How the government collects and spends money
  • Money is collected through taxes (income, corporate, property, sales and tariffs).
  • This money is spent on education, health care, defense, welfare, transportation, etc
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12
Q

Define: Competitive Advantage.

A
  • When a country/company can produce cheaper or more efficient then it’s competitors
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13
Q

What are the 9 Factors that contribute to a country/business competitive advantage?

A
  1. Technology
  2. Materials
  3. Marketing
  4. Management
  5. Quality
  6. Price
  7. Productivity
  8. Warranty
  9. Service
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14
Q

What is Absolute advantage?

A

When a company or country has full advantage in production cost and productivity over the competition

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15
Q

What is Opportunity Cost?

A

Whenever one opportunity is chosen or pursued by an organization, others are sacrificed.

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16
Q

What is Comparative Advantage?

A

Comparative advantage is created when a country or company has a lower opportunity cost in producing a product than its competitors.

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17
Q

What roles do governments take in generating international trade/business?

A
  • When an election is imminent (controlling parties often spend money on various social programs to influence voters’ decisions before an election).
  • Fiscal policy can impact the business cycle.
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18
Q

Define Globalization

A
  • The whole become one global market
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19
Q

What are the Three Globalization Strategies?

A
  1. Global Strategy
  2. Multidomestic Strategy
  3. Transnational Strategy
20
Q

What is Global strategy

A
  • Treats the world as one big market
  • Product and marketing are uniform (the same)
  • Ethnocentric view: the idea that all people want the same product and will respond in a similar fashion to the marketing strategies used in the home country
  • Advantage: Companies can take advantage of economies of scale.
  • Disadvantage: Not being able to cater to the local market.
21
Q

What is Multidomestic strategy

A
  • This strategy tries to customize products, services, and marketing for the local culture.
  • Example: In japan there are over 30 kit kat flavors
  • Polycentric view: the idea that local management is the most capable of determining what is best for the local subsidiary
  • Decisions are decentralized and made with locals in mind
  • Advantages include less political and exchange rate risk, increase product differentiation
22
Q

What is Transnational strategy?

A
  • This strategy combines the best elements of the global and multidomestic strategies
  • It attempts to respect the local market while maintaining the efficiencies of the global strategy
  • Geocentric view that values both local differences and what is best for the company
23
Q

What is a Trade Agreement?

A
  • A agreement between countries that addresses the
  • movement of goods and services,
  • eliminates trade barriers
  • establishes terms of trade
  • encourages foreign investments.
24
Q

What is the USMCA?

A
  • The United States-Mexico-Canada Agreement (USMCA) is the replacement of the former NAFTA deal
  • Goods traded between Canada, USA and Mexico are tariff-free
25
Q

How is the USMCA different from NAFTA?

A
  • Country of origin rule: 75% of automobile components must be manufactured in USMCA countries tariffs. NAFTA was 62.5%
  • The Dairy Market: US will be able to export up to 3.6% of Canada’s dairy market. NAFTA was 1%
  • Sunset Clause: Duration of USMCA is 16 years. After six years, the three countries if needed and discuss a possible extension. NAFTA had no ending date.
26
Q

What are the advantages and disadvantages of the USMCA?

A

Advantages:
* Increase in trade
* Lower prices
* Economic growth
* Job creation
Disadvantages:
* Lost jobs
* Lower wages
* Human rights issues
* Deterioration of the environment

27
Q

What is a Tax Treaty?

A
  • A Tax treaty is created to prevent tax evasion and to prevent double taxation for people who would pay taxes in Canada and another country with the same income.
  • The treaty determines how much tax each country can collect on income received from pensions, wages, salaries, or interest
  • Tax treaties allow goods, capital, and technology to move more easily across borders
  • Example: Tax Treaty for athletes between the U.S. and Canada states athletes can be taxed a maximum rate of 15% on their signing bonuses.
28
Q

What is the European Union and why does it exist?

A
  • Criteria to become an EU member:
  • Economic stability, market economy, democratic government, positive human rights record, and the ability to administer EU laws and policies
  • Purpose of the EU: to promote peace, economic growth, government co-operation.
  • The single markets allows labor, goods, services, and investments to flow freely across borders
29
Q

What are the Three Major Organizations of the European Union?

A
  • Three major organizations of the EU:
  • Council of the European Union: with one member from each member state, it is the main decision making body
  • European Parliament: Establish laws, budgets, and supervises other EU institutions
  • European Commisions: Manages the day-to-day operation of the EU as a whole, such as trade agreements and international
30
Q

What is the Euro?

A
  • The euro is the common currency of the EU
  • Today 1.00euro = $1.47. $1 Cdn = 0.68 Euro
  • 19 of the 27 members use the Euro
  • Sweden, Bulgaria, Czech Republic, Denmark, Hungary, Poland, and Romania are the EU countries that do not use the Euro
  • Any new member is expected use the euro
31
Q

What are the advantages and disadvantages of the Euro for EU nations?

A

Advantages of the Euro
* Decreasing the risk of exchange-rate fluctuations
* Elimination of transaction costs
* Easy billing
* Economic stability
* Price transparency
* Price Stability
* Increased markets
* Increased trade and travel
* Enhanced labor movement

Disadvantages of the Euro
* Centralization
* Initial costs
* Lack of national control
* Loss of tradition

32
Q

What is Brexit?

A

The United Kingdom’s separation from the European Union

33
Q

What are the three primary reasons the citizens of the UK wanted Brexit?

A
  • Economics: U.K. sends money to the EU which then gets redistributed to various other member states. “Why should we have to pay for that?” attitude
  • Immigration: any citizen of an EU member state can relocate and work in U.K. without needing a work visa
  • Identity: As a member state, the U.K. must abide by various EU policies, some which can seem constricting
34
Q

Define: Trade organization.

A

Trade organizations are groups established to help with the free flow of goods and services

35
Q

What are the seven Trade Organizations that participate with Canada?

A
  • World trade organization (WTO)
  • Asia Pacific Economic Cooperation (APEC)
  • Group of seven (G7)
  • Group of Twenty (G20)
  • Organization of economic development and cooperation (OECD)
  • The World Bank
  • International Monetary Fund (IMF)
36
Q

What are the three Purposes of the WTO?

A
  • A forum for negotiations: it’s a place where countries can discuss disparities and come to agreements
  • A set of rules: Agreements are signed by governments of member countries to promote the flow of goods and services;
  • Dispute Settlement: A forum for countries ro consult, mediate and arbitrate discrepancies
37
Q

What are the seven countries that are part of the G7?

A

Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States

38
Q

Why does the G8 no longer exist?

A

Russia’s invasion of Crimea caused a riff between the nation and the other countries, resulting in their absence in the now G7

39
Q

What is the difference between the G7 and G20?

A

In terms of members, the G7 has less while the G20 acknowledges countries such as Brazil, Russia, India, and China

40
Q

What is BRICS and what countries make up this organization?

A
  • This group is not formal trading bloc but meets annually and attends summits together
  • These countries represent growth opportunities
  • Countries include: Brazil, Russia, India, China and South Africa
41
Q

What are the three activities of the IMF?

A

Three activities of the IMF:
* Encouraging countries to adapt responsible economic policies
* Lending money to emerging and developing countries
* Providing technical training in areas such as banking regulation and exchange rate policies

42
Q

What countries are part of OPEC?

A
  • Founding countries: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela (1960)
  • Countries that joined later: Qatar (1961), Indonesia (1962), LIbya (1962), the UAE (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975), Angola (2007), Equatorial Guinea (2017) and Congo (2018).
43
Q

What is the purpose of OPEC?

A

Opec is a cartel (a group of independent producers who supply and fix prices in an attempt to reduce market competition.)
OPEC sets limits (quotas) on the for daily oil production

44
Q

What is a Market economy

A
  • Market economy is also known as capitalism or private enterprise
  • The four questions are answered by individuals and businesses
  • Limited government involvement
  • Private property: People and corporations can own property
  • Profit: Profit belongs to the owners of the business
  • Competition: Competition encourages business to offer more goods lower prices
45
Q

What is Centrally planned economy

A
  • Centrally planned economy is also known as communism or a command economy
  • The four question are answered by the government
  • Heavy government involvement
  • Cuba and North Korea. China has adopted some market economy
  • Private property: Government owns everything. Some individuals may own some
  • Profit: All profits belong to the government. Profit may go back to the business or to social programs or military
  • Competition: Competition limited as government determines what and who sells
46
Q

What is a Mixed economy

A
  • Is also known as free enterprise system
  • The four questions are answered by individuals and government
  • Government involvement depends on politics, wealth, culture, etc.
  • Examples: Canada and U.K.
  • Private property: Owned by individuals, corporations and government
  • Profit: Profit is taxed to support social programs
  • Competition: Competition is strong and can include the government

International Business Gr.12 (4 decks)

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