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Political Trends

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Spread of Democracy New world order

question

Economic Trends

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Deregulation Privatization Spread of market-based systems

question

Attractiveness evaluation of benefits

answer

Middle class population growth potential Free market economy First mover advantages

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Attractiveness evaluation of Costs

answer

Bribe payments Infrastructure issues resolving contract disputes

question

Spread of Democracy

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Totalitarianism failure New information technologies Emergence of middle and working classes

question

New world Order and Terrorism

answer

Fukuyama Huntington

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Spread of Market-based Systems

answer

Deregulation Privatization Legal system protection of property rights

question

Gross nation Income

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Measures the total annual income received by residents of a nation Tells us how wealthy a country is comparatively Higher - the higher the standard of living

question

Gross National Income per capita

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The higher this is the more goods and services the nation's people can afford

question

Key aspects of major religions

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Christianity - Sons of God Islam - Pilgrimage to Mecca Hinduism - Dharma Buddhism - A path for transformation

question

Folkways

answer

traditions of your culture/society

question

Cross cultural literacy

answer

Learning about the cultures and traditions of a different country

question

Mercantilism

answer

This theory had countries maximizing exports and minimizing imports in circa 1550s

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Absolute advantage theory

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Adam SMith states that countries should specialize in the production of goods for which they can produce most efficiently and then trade these for goods produced by other countries. 1776

question

Comparative advantage Theory

answer

David Ricardo states that it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to buy the goods that it produces less efficiently from other countries. 1817

question

Heckscher-Ohlin Theory

answer

This theory predicts that countries will export those goods that make intensive use of factors that are locally abundant and import goods that make intensive use of factors that are locally scarce. 1919-1933

question

Production life cycle Theory

answer

This theory, initially proposed by Raymond Vernon, points out that where a new product is introduced is important. Over time, cost considerations start playing a greater role in the competitive process. mid-1960s

question

New Trade Theory

answer

Through its impact on economies of scale, trade can increase the variety of goods available to consumers while decreasing the average cost of those goods. 1980s

question

National Competitive advantage theory

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Michael Porter contends that the degree to which a nation is likely to achieve international success in a certain industry is a function of the combined impact of factor endowments. 1990

question

Accounts

answer

Capital Current Financial

question

Current account

answer

Records transactions that pertain to all three categories: 1.Goods that refer to the import and export of physical goods 2. services that are intangible products such as banking and insurance services 3. income receipts and payments that refer to income from foreign investments and payments made to foreigners investing in a country.

question

Corn Laws

answer

Review the various trade milestones and place them in chronological order according to their creation.These laws are often viewed as examples of British mercantilism and their abolition marked a significant step toward free trade British placed tariff on imported corn

question

Smoot-Hawley Act

answer

A 1930 law aimed at avoiding rising unemployment by protecting domestic industries and diverting consumer demand away from foreign producers. US tariff for almost every industry

question

Tokyo Round

answer

The average tariff declined by nearly 92 percent in the United States between the Geneva Round of 1947 and this round of 1973-79. 1970s GATT trade negotiations

question

Uruguay Round

answer

1986-1993 trade negotiations led to reduced tariffs on industrial goods, reduced agricultural subsidies, and more protection for intellectual property rights, etc. Toughest GATT meetings to reduce tariffs

question

WTO

answer

Between 1995 and early 2015 more than 400 trade disputes between member countries were brought before this organization. Members account for 97% of world trade Org that succeeded the GATT as a result of the successful completion of the Uruguay Round of GATT negotiations

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Political Arguments for Intervention (Trade)

answer

Protecting jobs National security Protecting consumers Protecting the environment

question

Economic Arguments for Intervention (Trade)

answer

Infant industry argument promote investment inflows essential industry argument import substitution

question

Types of tariffs

answer

Specific Ad valorem

question

Mercantilism

answer

An economic philosophy advocating that countries should simultaneously encourage exports and discourage imports Old and largely discredited doctrine

question

Free trade

answer

the absence of barriers to the free flow of goods and services between countries Adam Smith theory argued that the invisible hand of the market should determine what a country imports and exports Laissez-faire stance toward trade is the best for the country

question

David Ricardo's theory of comparative advantage

answer

Offers an explanation in terms of international differences in labor productivity

question

Heckscher-Ohlin theory of comparative advantage

answer

Emphasizes the interplay between the proportions in which the factors of production ( such as land, labor, and capital) are available in different countries and the proportions in which they are needed for producing particular goods. It rests on the assumption that countries have varying endowments of the various factors of production.

question

Raymond Vernon life cycle theory

answer

Suggest that early in their life cycle, new products are produced in and exported for the country in which they were developed. As new product becomes widely accepted internationally, however, production starts in other countries.

question

New trade theory

answer

The observed pattern of trade in the world economy may be due in part to the ability of firms in a given market to capture first-mover advantage (developed by Paul Krugman-economist) 1. nations may benefit from trade even when they do not differ in resource endowments or technology 2. specialization allows for scale economies and lower production costs limited number of firms in industries when the output required to attain economies of scale represents a significant amount of total demand

question

Zero Sum Game

answer

A situation in which an economic gain by one country results in an economic loss by another flaw of mercantilism Adam Smith and David Ricardo demonstrate that trade is a situation in which all countries can benefit

question

Absolute advantage

answer

A country has the advantage in the production of a product when it is more efficient than any other country at producing it.

question

Production possibility frontier (PPF)

answer

shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed.

question

If a first mover has sufficient market share,

answer

1. customer loyalty can allow it to maintain the lion's share of the market 2. it can dominate in the export of goods 3. it can gain a scale-based cost advantage

question

Free trade

answer

A country's government does not restrict imports from, or exports to, other counties

question

In countries like Mexico, with access to cheap labor and diverse plant life, it makes sense to ___________ agricultural goods

answer

export

question

According to new trade theory, the first mover's ability to benefit from increasing returns _________ for other firms

answer

creates a barrier to entry

question

Free trade permits ________, which allows a country to manufacture and export in those areas where they have a comparative advantage

answer

specialization

question

According to Porter, some nations achieve international success in particular markets because of:

answer

1. factor endowments 2. domestic demand 3. domestic rivalry

question

Theories that support unrestricted free trade between countries

answer

Hecksher-Ohlin's theory Ricardo's theory Smith's theory

question

When a country is more efficient at producing a product than any other country, the country has an _______ advantage in the production of that product

answer

absolute

question

The primary problem with mercantilism is that its supporters claimed that trade should

answer

show a gain by one country that results in a loss by another

question

Four national attributes that Porter theorizes shape the environment that local firms compete in.

answer

1. Related and supporting industries 2. Demand conditions 3. FIrm strategy, structure and rivalry 4. Factor endowments

question

T/F Government can detract or improve a country's advantage by choice of policies

answer

True

question

Initial advantages encourage investment in _________ factors of production Porter argues that it has very important influences on a country's competitive advantage

answer

advanced

question

Firms that are typically most sensitive to the needs of their closest customers

answer

Demand conditions

question

Porter's basic factors of production

answer

Natural resources climate location demographics

question

Porter's advanced factors of production

answer

communication infrastructure sophisticated and skilled labor research facilities technological know how

question

In an industry, national advantage can be gained by the support of the competitive ____________ industries

answer

related and supporting

question

according to Michael Porter, domestic ___ creates pressures for companies to innovate, improve quality, reduce costs, and invest in upgrading advanced factors

answer

rivalry

question

Preempting demand, gaining volume cost advantages, building the brand, and establishing a long-term competitive advantage are associated with

answer

first mover advantages

question

Economies of scale include

answer

1. the ability of large volume producers to use more effective, specialized employees 2. spreading fixed costs over a larger volume 3. the ability of large volume producers to use more specialized equipment

question

Merchantilism

answer

This theory had countries maximizing exports and minimizing imports.

question

Absolute advantage theory

answer

Adam Smith states that countries should specialize in the production of goods for which they can produce most efficiently and then trade these for goods produced by other countries.

question

Comparative advantage theory

answer

David Ricardo states that it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to buy the goods that it produces less efficiently from other countries.

question

Heckscher-Ohlin Theory

answer

This theory predicts that countries will export those goods that make intensive use of factors that are locally abundant and import goods that make intensive use of factors that are locally scarce.

question

Product life-cycle theory

answer

This theory, initially proposed by Raymond Vernon, points out that where a new product is introduced is important. Over time, cost considerations start playing a greater role in the competitive process

question

New trade theory

answer

Through its impact on economies of scale, trade can increase the variety of goods available to consumers while decreasing the average cost of those goods

question

National competitive advantage theory

answer

Michael Porter contends that the degree to which a nation is likely to achieve international success in a certain industry is a function of the combined impact of factor endowments.

question

Factors of production

answer

Inputs into the productive process of a firm, including labor, management, land, capital and technological know-how

question

General Agreement on Tariffs and Trade (GATT)

answer

international treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO Superseded by the WTO, its membership grew from 19 to more than 160 nations 1947 entity set up to liberalize trade

question

International Monetary Fund (IMF)

answer

International institution set up to maintain order in the international monetary system

question

World Bank

answer

International institution set up to promote general economic development in the world's poorer nations

question

United Nations

answer

An international org made up of 193 countries headquartered in New York City, formed in 1945 to promote peace, security, and cooperation

question

Group of Twenty

answer

Established in 1999, comprises the finance minister and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank

question

foreign direct investment

answer

direct investment in business operations in a foreign country

question

Moore's Law

answer

The power of microprocessor technology doubles and its costs of production fall in half every 18 months

question

multinational enterprise (MNE)

answer

a firm that owns business operations in more than one country

question

collectivism

answer

a political system that emphasizes on collective goals as opposed to individual goals

question

socialist

answer

those who believe in public ownership of the means of production for the common good of society

question

Privatization

answer

the sale of state-owned enterprises to private investors

question

Individualism

answer

an emphasis on the importance of guaranteeing individual freedom and self-expression

question

Democracy

answer

political system in which government is by the people, exercised either directly or through elected representatives

question

totalitarianism

answer

form of government in which one person or political party exercises absolute control over all spheres of human life and opposing political parties are prohibited

question

representative democracy

answer

a political system in which citizens periodically elect individuals to represent them in government

question

communist totalitarianism

answer

a version of collectivism advocating that socialism can be achieved only though a totalitarian dictatorship

question

theocratic totalitarianism

answer

a political system in which political power in monopolized by a party, group, or individual that governs according to religious principles

question

tribal totalitarianism

answer

a political system in with a party, group, or individual that represents the interests of a particular trip (ethnic group) monopolizes political power

question

Right-Wing Totalitarianism

answer

A political system in which political power is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts individual political freedom, including free speech, often on the grounds that it would lead to the rise of communism.

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