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Intl Business

International Business

Globalization process by which perceived distance is shrinking, material culture is starting to look the same the world over, national economies are merging into one.
Who has the highest level of ouput in the world? US
US GDP? $42, 129 per capita
How much of the worlds GDP doe the US produce? 20.4
Globalization of markets? refers to the merging of historically distinct & separate natikonal markets into 1 huge global marketplace.
What % of small businesses export? 90%
Globalization of production? Sourcing of goods & services from locations around the globe to take advantage of national differences in the cost & quality of various factors of production.
Factors of production? Components of production such as labor, energy, land, & capital
GATT General Agreement on Tariffs & Trade. Intl treaty that committed signatories to lowering barriers to the free flow of goods across national borders; led to the WTO (World Trade Organization.
What is the WTO responsible for? Primarily policing the world traiding systems and making sure nation-states adhere to the rules laid down in trade treaties signed by WTO member states.
What do critics accuse the WTO of? The org is usurping the national sovereignty of individual nation-states.
What does IMF stand for? International Monetary Fund
What is the difference between the IMF & the World Bank? IMF was setup to maintain order in the international monetary system and the World Bank was set up to promote economic development.
What are considered infrastructure investments Building dams or roads
What stipulations does the IMF make to give loans to cash strapped nation-states? Adopt specific economic policies aimed at returning their troubled economies to stability and growth.
United Nations? Intl org made up of 191 countries charged with keeping internaltional peace, developing cooperation between nations, amd promoting human rights.
What are the four purposes of the UN? To maintain international peace and security, develop friendly relations amoung nations, cooperate in solving international problems and in promoting respect for human rights and to be a center for harmonizing the actions of the nations.
Factors of production Labor, energy, land, & Capital
Intl Trade occurs when a firm exports goods or services to consumers in another country
FDI Foreign Direct Investment occurs when a firm invests resources in business activities outside its home country.
Moore's Law Premise that the power of microprocessor technology doubles & its cost of production drops in half every 18 mo's.
Stock of FDI total accumulated value of foreign owned assets at a given time.
MNE Multinational enterprise any business that has productive activities in 2 + countries.
Political economy political, economic, and legal sytems of a country are interdependent; they interact and influence each other.
Political system system of govt in a nation
Collectivism political system that stresses the primary of collective goals over individual goals
Plato believed that society should ve stratified into classes with those best suited to rule
Socialism political system that believes in state ownership of a country's means of production, distribution, & exchange so that all can benefit
Communits Those who believe that socialism can only be realized through violent revolution & totalitarian dictatorship
Social Democrats Those who believed in achieving socialism through democratic means
Individualism The philosophy that an individual should have freedom in his or her economic & political pursuits.
Representative Democracy Citizens periodically elect individuals to represent them in govt functions
Communist Totalitarian Advocating socialisism can only be achieved through a totalitarian dictatorship
Right-Wing Totalitarianism Politial pwr is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts political freedom & speech
Tribal Totalitarianism Political system that a party or group represent interests of a particular tribe monopolizes political pwr
Market Economy Interaction of supply & demand determines the quantity in which goods & sercvices are produced
Command Economy Govt plans the allocation of resources
Legal System rules that regulate behavior by which the laws of a country are enforced
Common Law System of law based on tradition, precedent, & custom
Civil Law System system of law based on a derailed set of written laws and codes
Theocratic Law System system of law based on religious teachings
Property Rights Bundle of legal rights over the use to which a resource is put and over the use of any income that may be derived
Organization Culture refers to values & norms shared among employees of an org.
Quota Rent extra profit producers make when supply is artifically limited by an export quota
Local Content Requirement A requirement that some specific fraction of a good be produced domestically
Administrative Trade Policies rules adopted by govts that can be used to restrict imports or boost exports
Dumping Selling goods in a foreign market below costs of production
Countervailing Duties Antidumping Policies
Antidumping Policies designed to punish foreign firms that engage in dumping
Helms Burton Act passed in 1996, this law allows Americans to sue foreign firms that use Cuban property confiscated from them during Cuba's 1959 revolution
D'Amato Act Passed in 1996, this law allows Americans to sue foreign firms that use property in Libya or Iran confiscated from Americans
Infant Industry Argument Proposal that developing countries have a potential comparative adcantage in manufacturing
Strategic Trade Policy Govt policy aimed at either helping the countries domestic firms retain first-mover gains
Corn Laws placed a high tariff on imports of foreign corn
Smoot Hawley Act passed in 1930, US law erected a wall of tariff barriers against imports
Greensdield Investment establisment of a new operation in a foreign country
Stock of FDI total accumulated value of foreign owned assets at a given time
Gross fixed capital formation summarizes the totsl smount of capital invested in factories, stores,etc
Oligopoly Industry component of a limited number of large firms
Multipoint Competition arises when two or more enterprises encounter each other in different reional markets, etc
Eclectic Paradigm Theory that combining localtion specific assets or resource endowmenrs and the firms own unique assets often requires FDI.
Exporting sale of products produced in 1 country to residentsof another country
Licensing occurs when a firm (licensor) grants a foreign entity (licensee) the right to produce its product, use its production processes, etc
Location-specific advantages advantages that arise from utilizing resource endowments or assets thar are tied to a particular foreign location & that a firm finds valuable to combine with its own unique assets, etc
Pragmatic Nationalism FDI has both benefits & costs
Balance of Payment Accounts national accounts that track both payments to and receipts from foreigners
Current Account in the balance of payments, this records transactions involving the esport or import of goods & services
Offshore Production FDI undertaken to serve the house market
Regional Economic Integration Agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barrirtd to the free flow of goods
Free Trade Area Area in which all barriers to the trade of goods & services among member countries are removed
EFTA includes norway, iceland,switzerland; most enduring free tade agreement
Customs Union group of countries committed to eliminating tade barriers & adopting a common external trade policy
Common Market has no barriers to trade ntwn member countries Pg. 265
Economic Union involes the free flow of products and factors of production btwn member countries & the adoption of a common external trade policy
Political Union central political apparatus coordinates the economic, social, & foreign policy
Trade creation occurs when high cost domestic producers are replaced by low cost producers within the free trade area.
Trade diversion occurs when lower cost external suppliers are replaced by higher costs suppliers w/in the free trade area
Treaty of Rome provided the cration of a m\common market
Maastricht Treaty Treaty committing members of the EC to adopt a common currency
Andean Pact Agreement unites Bolivi, Chile, Ecuador, Peru
Mercosur Free trade pact btwn Brazil, Argentina, Paraguay, Venezula, etc
Foreign Exchange Rate Rate @ which 1 currency is converted into another.
Foreign Exchange Market A market for converting the currency of 1 country into that of another country.
Foreign Exchange Risk Ris that changes in exchange rates will hurt the probabibility of a business deal
Currency Speculation Moving funds from one currency to another over the short term in hpoes of profiting from shifts in exchange rates
Hedging Insuring 1's bus against froeign exchage risk by using forward exchanges or currency swaps.
Spot Exchange Rate Rate @ which a foreign exchange dealer converts currency on any particular day.
Forward Exchange When 2 parties agree to exchange currency & execute a deal @ some specific date in the future.
Currency Swap simultaneous purchase & sale of a given amount of foreign exchange for two different value dates. pg. 301
Arbitrage Purchase of securitir\es in 1 market for immediate resale in another market to profit from a price discrepancy.
Law of 1 Price principle that in comparative markets free of transportation costs & barriers to trade, identical products sold in diff countries must sell of the same price
Efficient Market Market in which prices reflect all avail info & trade is not restricted.
Relatively Efficent Market Market in which few impediments to intl trade & investment exists.
PPP theory predicts that changes in relative prices will result in change in exchange rates
PPP theory predits that exchange rates are determined by relative pricesm & changes in relative prices will result in a change in exchange rates.
Govt policy determines whether the rate of growth in a country's money suppky is grater then the rate of growth in output.
Purchasing Power Parity Puzzle failure of a strong link betwn relative inflation rates & exchange rate movements pg 309
Fisher effect Theory that nominal interest rates in 4ach country equal the required real rate of interest & expected rate of inflation.
Mercantilism Economic philosophy advocating that countries should simultaneously encourage exports and discourage imports.
Zero sum game A situation in which a gain by one country results in a loss by another.
Absolute Advantage When 1 county is more efficient than another country in producing a particular product. pg 161
PPF Production Possibility Frontier Various output possiblities a country can produce from its resource pool. pg 161
Factor Endowments Extent to which a country is endowed with such resources as land, labor, and capital.
Created by: kembap



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