MGT302 Exam 1

  1. Globalization
    The shift toward a more integrated and interdependent world economy.
  2. Globalization of markets
    merging of distinctly separate national markets into a global marketplace
  3. globalization of production
    the sourcing of goods and services from locations around the world to exploit national differences in the cost and quality of factors of production
  4. Drivers of globalization
    declining trade and investment barriers, technological change
  5. technological change
    microprocessors, internet, transportation technology
  6. limits to globalization of production
    very complex, costs of using a nation's factors of production can change (transportation costs, exchange rate fluctuations)
  7. risks in international business
    commercial, political, economic, legal, cultural
  8. positives of globalization
    lowers prices for goods and services, stimulates economic growth, creates jobs
  9. concerns with globalization
    eliminates manufacturing jobs in wealthy countries, decreases wage rates of unskilled workers, encourages companies to move to countries with fewer labor and environmental regulations.
  10. tariff trade barriers
    duties imposed by a government on imported or exported goods
  11. nontariff trade barriers
    any governmental regulation or policy
  12. beggar-thy-neighbor trade policy
    trade policy that results in one trading partner gaining an advantage at the expense of another nation
  13. economies of scale
    cost advantages resulting from increased production
  14. global web of production facilities
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  15. factors of production
    resources used in the production of goods and services (land, labor, capital)
  16. events that contributed to the popularity of Keynsian economic theory
    world war II ended, and the world was in a depression. people were looking for anything to dig them out of it.
  17. events that contributed to the unpopularity of Keynesian economic theory
    stagflation occurred
  18. disadvantages of state-owned enterprises
    greed, political favoritism, quality and quantity of products
  19. Troubled asset relief program (TARP)
    $700 billion bailout program for financial institutions and automakers
  20. american recovery and reinvestment plan
    $787 billion stimulus package to jumpstart the economy and create and save jobs
  21. totalitarianism
    one person or party exercises absolute control over all spheres of life. there is often political oppression, no free elections
  22. socialism
    belief that the state should own enterprises and run them for public good rather than private profit
  23. market economies
    productive activities are privately owned, good produced through supply and demand, role of government is to promote vigorous free and fair competition.
  24. command economies
    good and services produced, and quantity produced is planned by government. all businesses are state owned.
  25. fiscal policy
    attempts to influence the direction of the economy through changes in government taxes or through governmental spending
  26. monetary policy
    attempts to influence the economy by controlling interest rates and the supply of money
  27. monetary policy tools
    banking reserve requirements, buying and selling US securities, discount rates
  28. common law
    • -past court decisions act as precedents to form future policies.
    • -judge plays significant role as a law maker.
    • -an action is legal unless prohibited.
  29. civil law
    • -every law is codified or written into comprehensive codes
    • -an action is illegal unless specifically allowed by code
    • -duty of the judge is to apply the law as enacted
  30. theocratic law
    based on religious teachings (islamic law)
  31. islamic law
    • -quasi-religious system mostly based on the koran and the teachings of the prophet mohammed
    • -crimes have pre-established punishment
  32. mercantilism
    theory contends a country should maintain a trade surplus to accumulate wealth by exporting more than it imports
  33. theory of absolute advantage
    countries should engage in trade when they have an absolute advantage in their ability to produce goods efficiently
  34. ricardo's theory of comparative advantage
    • -demonstrates that countries can benefit from trade even if a country has an absolute advantage of production in all products
    • -a country should specialize in the production of goods that it produces most efficiently and buy other goods
  35. heckscher-olin theory
    countries should export goods that intensively use factor endowments which are locally abundant and import goods made from locally scarce factors
  36. product life-cycle theory
    introduction, growth, maturity, decline
  37. new trade theory
    countries sometimes specialize in the production and export of certain products because of economies of scale and first mover advantages
  38. balance of payment accounts
    national accounting system that tracks both payments to and receipts from other countries
  39. current account
    records transactions involving the import and export of good and services
  40. capital account
    income earned on assets held abroad
  41. financial account
    records transactions that involve the purchase or sale of assets
  42. balance of payments accounts
    the current, capital, and financial account balances should always add up to zero but never do.
  43. subsidies
    governments payments to domestic producers that lower production costs (grants, tax breaks, low-interest loans)
  44. specific tariffs
    fixed charge for each unit
  45. ad valorem tariffs
    proportion of the value of the good
  46. import quotas
    restriction of the quantity of a good to be imported into a country
  47. voluntary export restraints
    quota on trade imposed by exporting country, typically at the request of the importing country
  48. local content requirements
    requires some specific fraction of a good to be produced domestically
  49. administrative trade policies
    bureaucratic rules designed to make it difficult for imports to enter a country
  50. antidumping policies
    designed to prevent foreign firms from selling goods below production costs and fair market value
  51. countervailing duties
    duties assessed if the government believes that the foreign firm has engaged in dumping.
  52. political arguments for intervention
    protecting jobs, national security, protecting consumers
  53. economic arguments for intervention
    infant industry, strategic trade policy
  54. the world trade organization
    it's a set of rules, a negotiating forum, and a forum for settling disputes
  55. current challenges for the WTO
    • -agricultural subsidies
    • -dispute resolution processes
    • -anti-dumping actions
  56. regional economic integration
    preferential trading arrangements in which member countries agree to coordinate their trade, fiscal, and monetary policies
  57. economic case for integration
    • -increases world production
    • -stimulates economic growth
  58. political case for integration
    economic interdependence creates incentives for political cooperation and this reduces potential for violent confrontation
  59. impediments to integration
    nation as a whole may benefit, but groups within countries may be hurt
  60. case against regional integration
    only beneficial if it creates more trade than it diverts
  61. trade creation occurs when:
    free trade leads to substitution of inefficient domestic production for efficient production
  62. trade diversion occurs when:
    efficient non-member production is replaced by inefficient production
  63. GATT's article 24 allows regional trade arrangements if:
    • -an agreement impacts substantially all sectors of trade
    • -non-members are not exposed to more restrictive trade than before the agreement
  64. benefits of the euro
    • -lowers foreign exchange costs
    • -facilitates price comparisons
  65. concerns with the euro:
    • -european central bank controls monetary policy for the euro zone
    • -the EU is not an optimal currency area
  66. north american free trade agreement (NAFTA)
    goals of the agreement were to remove barriers to trade and to expand investment opportunities.
Card Set
MGT302 Exam 1
MGT302 Exam 1