COM 361-Midterm Review

COM 361-Midterm Review - COM 361-International Business...

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COM 361-International Business Midterm Review Globalization -worldwide integration of markets, production and consumers -people can buy the same products from the same companies around the world -emergence of global institutions -World Bank, IMP, UN, GATT/WTO, NAFTA, EU, etc. -MNC -drivers: -declining barriers to travel, trade and investment -changing technology Modern economic growth -drivers -exploration -modern science industrial capitalism -awareness of the rest of the world -results -sustained, widespread rise of per capita income “middle class” -cycles -closed loop -consumption=production; spending=income -depressions -currents -demography: systematic patterns in population growth; consequences -inevitable exhaustion of non-renewable resources John Maynard Keynes Economic Consequences of the Peaces (1919) -lead to the founding of the IMF Economies -measured by ouput (goods and services produced) -nominal GDP vs real GDP (factoring in inflation) -output: flow of goods and services -wealth: stock of cash, stocks, bonds, etc. as of a moment in time, measureing potential claims on goods and wervices GDP = C + I +G + X – M C – goods and services produced and consumed this year I – plant and equipment produced this year and used in future years (investment) G – goods and services produced by the government X – goods and services produced locally but exported M – goods and services produced elsewhere but imported GDP = C d +I d +G d +X Where X=exports-imports *household goods go unreported -ways to avoid double counting -count retail value when final good is sold -count retail value when good is purchased, from household records of expenditures -count the “value added” at each step of production
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-somethings not properly valued -some deliberately hidden Open economy -imports and exports GDP Goods and services produced within a countries borders -geographical concept -actual -potential – estimate of GDP is all resources were fully employed -growth -natural resources discovered/developped -work for expands in size/quality -plant and equipment expands in quantity or quality (technology) GNP Goods and services produced by Canadians -political/administratice concept Economic Cycles -recessions/depressions – arise because markets fail to work well -recession: defined as two or more quarters of negative growth in succession *China is the exception -causes -“creative destruction” Joseph Schumpeter; dramatic, unexpected innovations -> reshuffling of the work force -possible cures -increase G -reduce T (although people may increase S or M) -increase transfer payments -> bursts and dips (ex: cash for clunkers program) -encourage I Foreign direct investment A company invests resouces in business activities outside its home country Country’s economic health -employment -incentives -traditions and institutions -expectations Closed loop C d +I d +G d +X = C d +S+T+M C d – Consume S – Save T – pay Taxes M – buy Imports Pairs: I to S – G to T – X to M Deficits To get out of a deficit:
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COM 361-Midterm Review - COM 361-International Business...

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