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Global MKT Ch 2

Terms in this set (24)

Market Capitalism
Individuals and firms allocate resources. Resources are privately owned. Government promotes competition. Driven by consumers
Centrally Planned Socialism
State holds broad power to serve public good. It decides what goods and quantities are produced in certain areas. Demand typically exceeds supply. (State ownership and command)
Centrally Planned Capitalism
Economic system in which command resource allocation is used extensively in an overall environment of private resource ownership. (Government makes decisions on allocation)
Market Socalism
Market allocation policies are permitted within an overall environment of state ownership.
Economic Freedom
Variables considered are trade, taxation, banking policies, wage and price controls and property rights. Hong kong is most free. Iran is most repressed.
Gross National Income
A Measure of a nation's economic activity that includes GDP plus income generated by non-resident sources.
Low Income Countries
GDP $825 or less.
Limited industrialization
High farm population
High birth rates
Low literacy rates
Heavily dependent on foreign aid
Low/Middle Income countries
GDP $826-3255
Rapidly expanding consumer markets
Cheap Labor
Mature, standardized, labor intensive industries like textiles and toys
Upper Middle Income Countries
GDP $3256-10,065
Rapidly industrializing, less agricultural employment
Increasing urbanization
Rising wages
High literacy rate and advanced education
Lower wage costs than advanced countries
Known as newly industrializing countries
High Income Countries
GDP $10,066 or more
Advanced, developed, industrialized, post industrial
Info processing
Knowledge or capitol,intelectual over machine
Future oriented
Assumptions of LDC
Have no money
Poor will not use money on nonessential goods
People in BOP countries cannot use technology
Companies going to BOP will be seen as exploiting the poor
The Triad
Japan, Western Europe, and United States. 75% of world income is measured within this.
Ex- Coke
Product Saturation levels
Percent of potential buyers that own a certain product. Typically low in emerging market.
Balance of Payments
Record of all economic transactions between residents of a country and the rest of the world
Current Account
Broad measure (merchandise and service trade and humanitarian aid)
Negative account balance =Trade deficit
Positive account balance = trade surplus
Merchandise Trade
In Balance of payments statistics, entries that pertain to manufactured goods.
Top exporting-china
Top importing- US
Services Trade
The buying and selling of intangible experience-based economic output
Trade deficit
A negative number in the balance of payments showing that the value of a country's imports exceeds the value of its imports
Trade Surplus
A positive number in the balance of payments, showing that the value of a country's exports exceeds the value of its imports
Capital Account
All Long-term direct investment, portfolio investment, and other short-term and long term capital flows.
Devaluation
The decline in value of a currency relative to other currencies.
Can result from gov intervention
Purchasing Power Parity (PPP)
A concept that permits adjustment of national income measurements in various countries to reflect what a unit of each country's currency can actually buy
Hedging
An investment made to protect a company from possible financial losses due to fluctuating currency exchange rates
Organization for Economic Cooperation and Development (OECD)
Economic think tank/rich mans club
Enable members to achieve the highest sustainable economic growth and improve the economic and social well-being of their populations
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