C211 Global Economics for Managers (WGU) Cengage Text questions and answers

Globalization The close integration of countries and peoples of the world. Purchasing Power Parity (PPP) A conversion that determines the equivalent amount of goods and services that different currencies can purchase. Scenario Planning A technique to prepare and plan for multiple scenarios (either high or low risk). Risk management The identification and assessment of risks and the preparation to minimize the impact of high-risk , unfortunate events. Gross National Income (GNI) GDP + income from non-resident sources abroad. GNI is the term used by the World Bank and other international organizations to supersede the term GNP. Gross National Product (GNP) GDP + income from non-resident sources abroad. reverse innovation An innovation that is adopted first in emerging economies and is then diffused around the world. International Business (IB) (1) A business or firm that engages in international crossborder economic activities and/or (2) the action of doing business abroad. semiglobalization A perspective that suggests that barriers to market integration at borders are high, but not high enough to insulate countries from each other completely. BRIC Brazil, Russia, India, and China base of the pyramid (BOP) Economies where people make less than $2,000 per capita per year. emerging economies A term that has gradually replaced the term "developing countries" since the 1990's. emerging markets A term that is often used interchangeably with "emerging economies" nongovernmental organizations (NGO's) An organization that is not affiliated with governments. Expatriate Manager A manager who works "abroad", or "expat" for short. Gross Domestic Product (GDP) The sum of value added by resident firms, households, and governments Foreign Direct Investment (FDI) Investment in, controlling, and managing value-added activities in other countries. Group of 20 (G-20) The group of 19 major countries plus the European Union (EU) whose leaders meet on a biannual basis to solve global economic problems. liability of foreignness The inherent disadvantage that foreign firms experience in host countries because of their non-native status. global business Business around the globe. international premium A significant pay raise when working overseas. multinational enterprise (MNE) A firm that engages in foreign direct investment (FDI) Triad North America, Western Europe, and Japan Expatriate Manager (expat) A manager who works abroad, or "expat" for short. Nontariff Barriers (NTB) Trade barrier that relies on nontariff means to discourage imports. tariff barrier Trade barrier that relies on tariffs to discourage imports. deadweight costs Net losses that occur in an economy as a result of tariffs. free trade The idea that free market forces should determine how much trade with little or no government intervention. infant industry argument The argument that if domestic firms are as young as "infants", in the absence of government intervention, they stand no chances of surviving and will be crushed by mature foreign rivals. product life cycle theory A theory that accounts for changes in the patterns of trade over time by focusing on product life cycles. theory of mercantilism A theory that suggests that the wealth of the world is fixed and that a nation that exports more than imports less will be richer. theory of comparative advantage A theory that focusses on the relative not the absolute advantage in one economic activity that one nation enjoys in comparison with other nations. strategic trade theory A theory that suggests that strategic intervention by governments in certain industries can enhance their odds for international success. merchandise (goods) Tangible products being traded. services Intangible services being traded. trade deficit An economic condition in which a nation imports more than it exports. factor endowments The extent to which different countries possess various factors of production such as labor, land and technology. classical trade theories The major theories of international trade that were advanced before the 20th century, which consist of (1) mercantilism, (2) absolute advantage, and (3) comparative advantage. Comparative advantage Relative not absolute advantage in one economic activity that one nation enjoys in comparison with other nations. export selling abroad theory of national competitive advantage of industries A theory that suggests that the competitive advantage of certain industries in different nations depend on four aspects that form a "diamond". import tariff A tax imposed on imports. resource mobility Assumption that a resource used in producing a product for one industry can be shifted and put to use in another industry. theory of absolute advantage A theory that suggests that under free trade, a nation gains by specializing in economic activities in which it has an absolute advantage. balance of trade The aggregation of importing and exporting that leads to country-level trade surplus or deficit. trade embargos Politically motivated trade sanctions against foreign countries to signal displeasure. factor endowment theory or Heckscher-Ohlin Theory A theory that suggests that nations will develop comparative advantages based on their locally abundant factors. opportunity cost Cost of pursuing one activity at the expense of another activity, given the alternatives (other opportunities). import Buying from abroad antidumping duties Tariffs levied on imports that have been "dumped" first-mover advantages Advantage that the first movers enjoy and do not share with late entrants. absolute advantage The economic advantage one nation enjoys that is absolutely superior to other nations. modern trade theories The major theories of international trade that were advanced in the 20th Century, which consists of (1) product life cycle, (2) strategic trade, and (3) national competitive advantage of industries. subsidies Government payment to domestic firms. Administrative policies Bureaucratic rules that make it harder to import foreign goods. voluntary export restraints (VER's) An international agreement that shows that exporting countries voluntarily agree to restrict their exports. Strategic Trade Policy Government policy that provides companies a strategic advantage in international trade through subsidies and other supports. local content requirements A requirement stipulating that a certain proportion of the value of the goods made in one country must originate from that country. trade surplus An economic condition in which a nation exports more than it imports. import quotas Restriction on the quantity of imports protectionism The idea that governments should actively protect domestic industries Administrative policy Bureaucratic rules that make it harder to import foreign goods. Antidumping duty Tariffs levied on imports that have been "dumped" (selling below costs to unfairly drive domestic firms out of business) Deadweight cost Net losses that occur in an economy as a result of tariffs. dissemination risks The risk associated with unauthorized diffusion of firm specific know-how. management control rights The rights to appoint key managers and establish control mechanisms. Internalization The replacement of cross-border markets (such as exporting and importing) with one firm (MNE) locating and operating in two or more countries. technology spillovers Technology diffused from foreign firms to domestic firms. sunk costs cost that a firm has to endure even when its investment turns out to be unsatisfactory. oligopoly Industry dominated by a small number of players free market view A political view that suggests that FDI unrestricted by government intervention is the best. upstream vertical FDI A type of vertical FDI in which a firm engages in an upstream stage of the value chain in a host country. OLI advantages A firms quest for (O) ownership advantages, (L) location advantages, and internalization (I) advantages via FDI. pragmatic nationalism A political view that only approves FDI when its benefit outweighs its costs. horizontal FDI A type of FDI in which a firm duplicates its home country-based activities at the same value chain stage in a host country. FDI Outflow Outbound FDI moving out of a country in a year. radical view A political view that is hostile to FDI market imperfections (market failure) The imperfection of the market mechanisms that make transactions prohibitively costly and sometimes make transactions unable to take place. Location Advantages enjoyed by firms operating in a certain location. FDI Stock Total accumulation of inbound FDI in a country or outbound FDI from a country across a given period (usually several years) downstream vertical FDI A type of vertical FDI in which a firm engages in a downstream stage of the value chain in a host country. ownership An MNE's possession of leveraging of certain valuable, rare, hard to imitate, and organizationally embedded (VRIO) assets overseas in the context of FDI. Knowledge spillovers Knowledge diffused from one firm to others among closely located firms.