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BUS5 187 Exam 1 Key Terms and Notes.docx - BUS5 187 Exam 1...

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BUS5 187 Exam 1 Key Terms and Notes1.Global firms go through a process ofglobalization: A move away from close circular flows towardinterdependencies; isolated economies become open and integrated.Inputs -> Conversion Process -> Outputs (Closed System)A country’s output becomes another country’s input (Open System)2.Effect of globalization on the profit function:πINCREASES= Total RevenueINCREASES+ Total CostLOWERS3.Because of globalization,living standardsof unskilled workers haveincreased. This is becauseglobalization leads toeconomic developmentwhich creates an offset in the fall of share ofnational income enjoyed by unskilled workers.GDP increase = Standard of Living increase4.Foreign Direct Investment (FDI):Firms engage in investment in a foreign countryThe more FDI a country receives, the more better off they are.5.Criticisms of Globalization:i.Outsourcing:Sending jobs overseas.Reason:When firms look tolower labor cost, they let offworkers and hire cheap labor. Workers who are let off will either bejoblessoraccept a lowerpaid job.ii.Labor Abuse:Employ child labor, ignore workplace safety and health issues.Reason:Firmsfrom advanced nations would be encouraged to move manufacturing facilities to less developedcountries that lack adequate regulations to protect labor and the environment from abuse by theunscrupulous.iii.Environmental Pollution:Not adhering to environmental regulations because 1. Not theircountry. 2. Less developed countries don’t have regulations. 3. All in the name of profitiv.Loss of National Sovereignty:In the sense that when WTO implements a trade agreement,countries will have to follow; thus, they lose their NS and control their own destiny.v.Globalization is a deflationary phenomenon:When demand of jobs is more than the supply,wages decreases; thus, deflationary phenomenon in western wages occur. (Divergence betweenthe rich and poor)6.Joseph Schumpeter’s Creative Destruction (1950)Globalization is good because it lets resources no longer in demand free to be usedefficiently in another place. (Replace outdated with the new)Refers to the incessant product and process innovation mechanism by which newproduction units replace outdated ones.Leads to productivity growth.7.The World Trade Organization (WTO) – EST. 1995, 160 countriesMake sure nation-states adhere to the rules laid down in trade treaties signed by WTOmember states. (Enforce trade laws)Successor toGeneral Agreement on Trades and Tariffs (GATT)
8.Communal property:Public goods are owned by everybody.

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Term
N/A
Professor
RKepple
Tags
Business, International Trade, New trade theory, foreign policy objectives

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