UNIT 3 Economic Environment Flashcards by Trisha Larrah Mae Inaligo

Q

The most important developments in the international economic environment faced by every country today and in the future.

A

openness, integration and globalization

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Q

the way in which national economies are organized

A

economic system

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Q

these can be measured by some economic indicators/indices

A

level of economic development

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Q

These are established by internationally-recognized organizations to compare the economic performance of countries

A

Economic indicators

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Q

the three economic systems

A

market economy (market-directed economy)
command economy
mixed economy

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Q

the goods/services the country produces and their quantity are not planned by anyone

A

Market economy (market directed economy)

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Q

can be determined by the interaction of supply and demand

A

Market economy (market directed economy)

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Q

there must be no restriction on supply to avoid monopoly

A

Market economy (market directed economy)

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Q

an economic system that market and private ownership dominate the economy

A

Market economy (market directed economy)

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Q

there may be some government control of decision making and government ownership of resources but not in a significant way

A

Market economy (market directed economy)

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Q

T or F. In a market economy, there may be some government control of decision-making and government ownership of resources in a significant way

A

F, but not

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Q

there is communal ownership of the means of production

A

Command economy

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Q

characterized by state control and central planning

A

Command economy

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Q

government sets goals and determines the price and quantity of what is produced

A

Command economy

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Q

T or F. In a market economy, the government is assumed to be a better judge of how resources should be allocated than are businesses or consumers

A

F, command economy

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Q

countries that previously used central planning as their primary economic system but may no longer do so

A

Historically planned economies

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Q

government intervenes in those sectors where it feels that private ownership is not in the best interest of society

A

Mixed economy

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Q

government also tend to take into state ownership troubled firms whose continued operation is felt to be vital to national interests

A

Mixed economy

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Q

Economy moves more balance between market and command or between public and private ownership.

A

Mixed economy

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Q

Government may be active in the ownership of large companies and also encourage private ownership

A

Mixed economy

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Q

T or F. No country is purely market or purely command, but they tend to lean on one direction or another.

A

T

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Q

Enumerate the 14 Economic Indicators/Indices

A

Gross domestic product at nominal value
Gross domestic product at purchasing power parity
Gross domestic product at nominal value per capita
Gross domestic product at purchasing power parity per capita
Population density
Official international reserves or international reserves
Human Development Index (HDI)
Global Peace Index (GPI)
Corruption Perceptions Index (CPI)
Enabling Trade Index
Gender Gap Index
The Ease of Doing Business Index
Global Competitiveness Index
Index of Economic Freedom

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Q

measures the market value of all final goods and services from a nation in a given year calculated at market or government official exchange rates.

A

Gross domestic product at nominal value measures

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Q

measures the value of all final goods and services produced within a state in a given year taking into account the relative costs and the inflation rates of the countries

A

Gross domestic product at purchasing power parity

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measures the value of all final goods and services produced within a nation in a given year

Gross domestic product at nominal value per capita

converted at market exchange rates to current U.S. dollars divided by the average (or mid-year) population for the same year

Gross domestic product at nominal value per capita

It does not take into account differences in the cost of living in different countries

Gross domestic product at nominal value per capita

the results can vary greatly from one year to another based on fluctuations in the exchange rates of the country's currency.

Gross domestic product at nominal value per capita

measures the value of all final goods and services produced within a country in a given year divided by the average (or mid-year) population for the same year.

Gross domestic product at purchasing power parity per capita

the number of people per unit of area

Population density

usually per square kilometer or mile

Population density

these are assets of the central bank held in different reserve currencies

Official international reserves or international reserves

enumerate the different reserve currencies (4)

US dollar, euro pound sterling, Japanese yen

a composite statistic used to rank countries

Human Development Index (HDI)

under the HDI, identify four factors that countries may use to rank their performance. what are these?

level of life expectancy, literacy, education, and standards of living of

T or F. The HDI formula results from 0 to 1, (1 is the best outcome possible).

T

Life expectancy at birth as an index of population

A long and healthy life

Mean years of schooling and Expected years of schooling

Education indeX

indicated by the natural logarithm of gross domestic product per capita at purchasing power parity

A decent standard of living

A decent standard of living:

GNI per capita (PPP US$)

an attempt to measure the relative position of nations' and regions' peacefulness

Global Peace Index (GPI)

It is the product of Institute for Economics and Peace (IEP)

Global Peace Index (GPI)

developed in consultation with an international panel of peace experts from peace institutes and think tanks with data collected and collated by the _______________

Economist Intelligence Unit

T or F. Factors examined by the authors include internal factors such as levels of violence and crime within the country

T

T or F. Factors in a country's external relations such as military expenditure and wars.

T

annually ranks countries "by their perceived levels of corruption

Corruption Perceptions Index (CPI)

determined by expert assessments and opinion surveys

Corruption Perceptions Index (CPI)

A wise instructor in accountancy generally defines corruption as "the misuse of public power for private benefit."

measures the factors, policies and services that facilitate the trade in goods across borders. It is made up of four sub-indexes

Enabling Trade Index

Four sub-indexes: Market access Border administration Transport and communications infrastructure Business environment

T or F. Each of these sub-indexes contains two to three pillars that assess different aspects of a country’s trade environment.

T

assesses countries on how well they are dividing their resources and opportunities among their male and female population

Gender Gap Index

meant to measure regulations directly affecting businesses and does not directly measure more general conditionS

Ease of Doing Business Index

Starting a business

Coffee

procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse

Getting electricity

Procedures, time and cost to register commercial real estate

Registering property

Strength of legal rights index, depth of credit information index

getting credit

Indices on the extent of disclosure, extent of director liability and ease of shareholder suits

protecting investors

Paying taxes

Number of taxes paid, hours per year spent preparing tax returns and total tax payable as share of gross profit

Trading across borders - no. of documents cost and time necessary to export and import

Trading across borders

Procedures, time and cost to enforce a debt contract

Enforcing contracts

Index of recovery rate which is a function of time, cost and other factors such as lending rate and the likelihood of the company continuing to operate

Resolving insolvency

measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels

Global Competitiveness Index

stages in global competitive index

factor-driven stage efficiency-driven stage innovation-driven stage

factors under the factor-driven stages

Institutions Infrastructure factor-driven stage Macroeconomy Health and primary education

factors under the efficiency-driven stage

Higher education and training Market efficiency Labor markets efficiency-driven stage Financial markets Technological readiness Market size

factors under the innovation-driven stage

Business sophistication innovation-driven stage Innovation

measures the degree of economic freedom in the world's nations.

Index of Economic Freedom

The highest form of economic freedom provides an absolute right

Index of Economic Freedom

absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself.

Index of Economic Freedom

10 broad factors of economic freedom

business freedom trade freedom monetary freedom gov't size/spending fiscal freedom property rights investment freedom financial freedom freedom from corruption financial freedom labor freedom

a quantitative measure of the ability to start, operate, and close a business that represents the overall burden of regulation as well as the efficiency of government in the regulatory process.

Business Freedom:

a composite measure of the absence of tariff and non-tariff barriers that affect imports and exports of goods and services.

Trade freedom

Different imports entering a country can, and often do, face different tariffs.

Trade freedom

combines a measure of price stability with an assessment of price controls.

Monetary freedom

Both inflation and price controls distort market activity. Price stability without microeconomic intervention is the ideal state for the free market.

Monetary freedom

This component considers the level of government expenditures as a percentage of GDP.

gov't size/spending

Government expenditures, including consumption and transfers, account for the entire score.

gov't size/spending

a measure of the tax burden imposed by government.

fiscal freedom

The property rights component is an assessment of the ability of individuals to accumulate private property, secured by clear laws that are fully enforced by the state.

Property Rights

In an economically free country, there would be no constraints on the flow of investment capital.

Investment Freedom

Individuals and firms would be allowed to move their resources into and out of specific activities internally and across the country’s borders without restriction.

Investment Freedom

a measure of banking efficiency as well as a measure of independence from government control and interference in the financial sector.

Financial Freedom

Corruption erodes economic freedom by introducing insecurity and uncertainty into economic relationships.

Freedom from Corruption

The higher the level of corruption, the lower the level of overall economic freedom and the lower a country’s score.

Freedom from Corruption

a quantitative measure that looks into aspects of the legal and regulatory framework of a country’s labor market.

labor freedom

The _____ factors are averaged equally into a total score. Each one of the ____ freedoms is graded using a scale from 0 to 100, where ___ represent the maximum freedom. A score of 100 signifies an economic environment or set of policies that is most conducive to economic freedom.

10, 10, 100