exam 3 cheat sheet - The distinction between advanced...

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The distinction between advanced economies, developing economies, and emerging markets Advanced economies - post-industrial countries characterized by high per-capita income, highly competit ive industrie s, and well- develop ed commer cial infrastru cture largely transfor med from manufac turing into service- based economi es half of world GDP, half of product trade, 3/4 of trade in services democra tic multipar ty systems capitalis m large purchasi ng power, few restrictio ns, largest MNEs Develo ping econom ies- Low- income countrie s characte rized by limited industria lization and stagnant economi es low discretio nary incomes , high birthrate s, high infant mortalit y, malnutri tion, short life expecta ncy, illiteracy , and poor educatio n systems, lack of adequat e health care - severely indebted governm ents, bureaucr acy and red tape Emergi ng market s- subset of former developi ng economi es that have achieve d substant ial industria lization, moderni zation, and rapid economi c growth since the 1980s - middle class demandi ng consum er products , business demand for technolo gy and equipme nt, home to niche markets, platform s for manufac turing by MNEs, large reserves of raw material s and natural resource s - enjoying rapidly improvin g living standard s and a growing middle class with rising economi c aspiratio ns attractiv e destinati on for exports, FDI, and sourcing usually two sets of economi es- those in urban areas and those in rural ares transiti on econom ies- subset of emergin g markets that have transfor med from centrally planned economi es into liberaliz ed markets low-cost labor, knowled ge workers, governm ent support, low-cost capital, powerful and highly network ed conglom erates privatiz ation- transfer of state- owned industrie s to private concern s provides opportu nities for foreign firms to enter these markets by purchasi ng former state enterpris es - new global challen gers- top firms from rapidly developi ng emergin g markets that are fast becomin g key contend ers in world markets Estimat ing the true potenti al of emergi ng market s Per capita income as an indicat or of market potenti al PPP- in the long run exchang e rates should move toward levels that would equalize the prices of an identical basket of goods and services in any two countrie s adjusted per capital GDP represen ts the amount of products that consum ers can buy in a given country, using their own currency and consiste nt with their own standard of living Big Mac Index: compare s the prices on actual exchang e rates to those based on the PPP price of big macs 4 reasons to be cautious : manager s must adjust the numbers for the existenc e of an informal econom y (transac tions not yet recorded / left out of the nations GDP) great majority of the populati on is on the low end of the income scale in emergin g markets and developi ng economi es househo ld income is several times larger tan per- capita income because of multiple wage earners governm ents in these countrie s may underre port national income
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