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MGT302 Exam 1 Study Guide

MGT302 Exam 1 Study Guide - MGT302 Exam 1 Study Guide...

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MGT302 Exam 1 Study Guide Commanding Heights – Began in India; all areas of heavy industry were part of the public sector; became a model for most newly developing countries During this period, countries throughout the world believed that socialism would help rebuild their economies o Hayek’s ideas were shunned during the next 30 years as Keynes’s command economies were dominant throughout the world Keynesian Economic Theory (including the specific political events and economic conditions that contributed to its popularity and then unpopularity) Keynes worked with British government, instructing them on how to rebuild their economy; tried to get Germany to pay for the war causing his unpopularity Keynes suggested that government should step up spending in time of economic hardship – running up debt, etc. – to help restore full employment o During WWII government began investing heavily and saw economy rebound and a reduction in unemployment Keynes promised of reducing unemployment while increasing productivity encouraged his followers War Reparations At end of WWI, Germany and Austria were forced to pay outstanding War Reparations. Governments printed more and more money creating hyperinflation. Examples of people having to carry baskets of money to pay for goods. Stagflation – Rise of inflation and unemployment at the same time; economy going nowhere; occurred after about 30 years of Keynes’s command economies began Disadvantages of State-Owned Enterprises – No incentive for focus on costs or innovation because government won’t let them go out of business Key historical events in the road to the global economy Globalization began with the first world war After second world war, world philosophy on dealing with threats and hostility changes creating a more globally connected environment Bretton Woods Conference – Discussed GATT, IMF, and World Bank Held in 1944, established the World Bank, IMF, GATT, and Bretton Woods Exchange Rate Regime Moral hazard – Bailout mentality; government will step in an rescue company as needed during recession Troubled Asset Relief Program (TARP) a. $700 billion bailout program for financial institutions and automakers – As of Dec. 2009, $175 billion has been repaid b. Fed used funds to purchase commercial paper and mortgage-backed securities c. Controversial provision of the program is that the employee compensation programs at the firms receiving financial support are subject to review b a special master of compensation American Recovery and Reinvestment Plan
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Expendeture of about $2 Trillion to correct the self inflected situation Investing in infrastructure projects (New roads, bridges, etc..) Creates jobs to build and supply the projects.
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