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MG1054 - International Business
Terms in this set (190)
Broadening set of interdependent relationships among people from different parts of the world divided into nations. [interdependent relationship between different countries]
All commercial transactions between two or more countries. Only exists when funds move across boarders. (ex) I bought my plane ticket to Italy from American Airlines- this was NOT considered international business because the funds went to the same country. If I bought my ticket from a foreign country it would be considered international trade.
Two Types of International Business and Differences Between them
Public = has shareholders
Private = does not have shareholders
In what ways does international business influence domestic operations?
(ex) banks- amount of public companies are changing
Fiat- biggest Italian car producer 10% owned by son 10% US stock and 80% Italy
Why engage in international business?
Why is it important to study?
Acquire Resources (better resources, services, products)
Minimize Risk (diversity among diff countries taking advantage of business cycle)
Important to study because = today global events affect almost all companies everywhere.
Reasons for Growth in International Business/Globalization
1) Technology- increase and expansion
2) Transportation- quicker and lower costs
3) Increased Global Competition
4) Communication- control from afar
5) Consumer Pressure
6) Liberal govt policies on trade
7) Development of institutions that support Int'l trade
Modes of International Business
Importing & Exporting = (trade) merchandise is most common but services are also traded. (ex) merch: Italy exports wine, the physical finished product, to the US. (ex) service: tourism and transportation, turn key operations, licensing and franchising (bud wiser gave peroni license to sell bud wiser in Italy (licensing)
Investments = factors of production can be a direct investment (control- joint ventures) and portfolio investments (no control)
Two Types of Investments
Direct Investments (control) joint ventures- new activity started by 2 or more partners
Portfolio Investments (no control) stocks
Example of a French export would be a visit by a
**US citizen to Euro Disney in France
xxx French Citizen to Disneyland in the US
When one party allows another party the use of a trademark and assist that other party on a regular basis the arrangement is known as a
Multinational Enterprise is a global approach to markets and production
Types of Ownership
Propritorship = one owner
Partnership = 2 or more owners
(all three of these could go global)
(ex) nestle chocolate brand is so globalized that you no longer associate it with one country (switzerland)
transferring production abroad (seen as controversial)
Antiglobalists 3 thoughts on Globalization
1) threats to national sovereignty
2) promotes growth that causes environmental stress
3) increase income unequally (skews income distribution)
Why is it important to understand cultural environments facing business?
It is important for companies to unlearns and be sensitive to constantly changing environments.
Major Cultural Issues Occur in International Business when:
1) have subconscious reactions
2) assume all societal groups are similar
3) can't adjust / accept foreign culture
4) insensitive to consumer preferences
(ex) we eat at 6 in US in Italy they eat later. US news is on at 6 but is not in Italy
Behaviour affecting business
Identification and Dynamics of Cultures
Strategies for dealing with cultural differences
Cultural Awareness (Attire, Religion, Language)
Attire: Italians dress more formal than US
Religion: Italians primarily Catholic
Language: Italians have two ways of speaking informal and formal
learned set of norms based on attitudes, values, and beliefs of a group of people (Points of reference: national, geographical, language, religion) * International business often changes cultures (ex) McDonalds has to change their menu in diff countries to adapt
Different types of cultures people belong to
national, ethnic, professional, and organizational
Difference between Ascribed versus Acquired Status
Ascribed = status you cannot change (where you come from, gender, family, caste, ethic)
Acquired = can change status (religion, political affiliations)
Social Stratification Systems
Individuals Status with the culture
Ascribed Group Membership
Acquired Group Membership
United States "Values"
*he said important slide
1) Success (compentence)
2) Intolerance for discrimination of: Gender, Race, Age, Religion
3) US values seem radical to foreigners: It is important that int'l business spend resources to determine what foreign cultures can ethically/effictively conduct in business (ex) case study chapter 2 w/ Saudi
Common Cultural Differences:
Work Ethic, Materialism, Leisure (US not as relaxed as Italians) , expectation of success and reward, assertiveness and masculinity index (Japan vs. Sweden)
Hierarchy of Needs Pyramid
Physiological, Security, Affiliation, Esteem, Self-Actualization.
Once you achieve one level you are no longer motivated to achieve that level so you go to the next level. *in italy the most important is security of the job and security not being fired, Japan's most important is affiliation, US//UK is esteem
Relationship Preferences: Power Distance
Relationship between superiors and subordinates (Distance tends to be greater for Italy compared to US)
Relationship Preferences Individualism vs. Collectivism
US = very individualistic
Japan = collective
Relationship Preferences: Risk Taking Behaviour
1) Uncertainity / Avoidance
2) Trust (ex) you have to pay within 30 days that trust is gone if you don't pay
3) Future Orientation (US sees future others focus is the past)
(Certain countries in the world accept greater risks US is more risky than Italy) - US stock exchange: 5 million companies where as Italy has 250 companies
Mono chronic (how we process information)
People are expected to do one thing at a time, and they will not tolerate lateness or interruptions. - UNITED STATES
Poly chronic (how we process information)
where time is seen as cyclical (reoccuring) , punctuality is unimportant and interruptions are acceptable - ITALY
Low Context Culture (how we obtain information)
Immediately to the point (ex) I want to buy a pair of shoes. I call and am able to immediately pick them up later that day. (UNITED STATES)
High Context Culture (how we obtain information)
Not as immediate to the point (ex) I call to get a price on new tires for my car but end up chatting to the sales person about the upcoming soccer game for fifteen minutes then move on to my question about the tires. (SAUDI ARABIA)
Cultural Orientation (diff attitudes towards diff cultures) : Polycentrism
Sees many counties as the center and conducts business in the way of the local people (regional managers conduct business in a local manner)
Cultural Orientation :(diff attitudes towards diff cultures) Ethnocentrism
Belief that ones own culture is superior (ignores important local factors) (ex) President of Toyota thinks their country is better than all others. Ethno = Race
Cultural Orientation: (diff attitudes towards diff cultures)Geocentrism
Balanced between home and host country (ex) Home country of Apple is US and Host country of Apple is Italy
****START CHAPTER 3
When many people organise the government. Integration of the parts of society into a viable functioning unit.
Leaders of Italian Government
President = Mattarella [unlimited 7 year terms]
Prime Minister (Presidente del Consiglio) = Renzi [unlimited 5 year terms]
The body of ideas, theories, and aims that constitute a sociopolitical program. Most modern societies have different ideologies. Brings the people and the political parts together.
Two Extreme Types of Ideologies
1) Democracy = system of govt that is controlled by the people through voting
2) Totalitarism = centralized government that is dictatorial
-explain freedoms, elections, terms
Elections (Italians do not directly vote for parliament) Limited Terms for Elected Officials (Exists in Italy also). You get to be apart of the decision making process.
Independent Court System
High regard for individual rights
Respect for property
Non Political Bureaucracy
Politicians make the decisions
Indicators of Political Rights
1) Fair and Competitive Elections
2) Ability to vote for a representative with real power
3) Ability to organize political parties
4) Protects the rights of the minorities
Indicators of Civil Liberties
1) Freedom of the Press
2) Equality for all individuals
3) Social Freedoms
4) Freedom from government indifference or corruption
*(A persons right to only be subject to laws for the good of the people)
Who governs the Vatican?
No separate government. All powers are given to the Theocratic Relationship (Italy) TOTALITARIANISM
1) Theocratic (God/religious) or Secular (non religious)
2) Order imposed through Military power
3) Single party in power
4) Neither recorginizes or permits opposition (resistance to totalitarianism rule)
Fascism or Communism
Four People who Formed Italy
Garibaldi = general
Cavour = Prime Minister
King Victor Emanuel II = King
Mussolini = Former Dictator
What was the last area to be added to Italy?
Who convinced King Victor Emanuel II to give him the power?
When did Italy enter into WWI and WWII?
WWI = between allies (UK, US 1917, Italy 1915) and central powers (Germany, Austria, Hungary)
WWII =Axis Powers (Germany, Italy 1940 and Japan) Allie Powers (UK, France, Australia, US1941)
April 25th Significance
Italian Holiday Representing the end of WWII
Presidente della Republica = Elected by Parliament
President of the Council of Ministers = No direct elections
several members of parliament are to be elected per area. citizens vote (if you get 10% of vote you get 10% of the seats) US has this
only one member of parliament is to be elected per constituency. believing in decision by a majority.
1) Started as a Kingdom
5) Mussolini (Fascism/Dictator)
7) Mussolini Arrested/Distrusted
8) Armistice (an agreement made by opposing sides in a war to stop fighting for a certain time; a truce)
9) Liberation (freedom from dictatorship)
10) Republic (king in exile)
Three Parties in Italy
1) PD (democratic party)
2) PDL (centre right party)
3) 5 Star
Political Risks for International Business
Opinions of political leadership
External relations home / host country
Uncodified Traditional / Precedent U.S. and U.K. (Based on tradition / how people behave normally) US has a lot of very big contracts but Italy does not
Codified Rules of Business are apart of that countries code.
Roman Law is the basis of Civil Law. Do not have the right to negotiate.
Set of rules/ways to behave
Based on religious precepts
Legal Issues for International Business
1) Worker relations
2) Employment practices
3) Antitrust (fair business practices) Prohibitations
4) Contractual Relationships
5) Environmental Practices
6) Patents, Trademarks, Intellectual Property Protection
7) Taxes and reporting requirements
Someone is prevented from having an extreme power (ex) Apple can not buy microsoft)
Economic Issues for International Business
1) Type of economic system of the country
2) Market size, growth potential, and stability
3) Is the company's industry in public or private sector?
*important to know the other countries economic standpoint when doing international business
4) Govt. views foreign capital as competition or partnership with locals
5) Govt. controls private enterprise?
6) Is private sector expexted to help govt formulate economic objectves?
Key Economic Forces: Factor Endowments
Physical land, labor, materials we have. Countries with more of these tend to be more prosperous.
Key Economic Forces: Economic Indicators to tell how a country is doing
3) Surpluses (Produce more than you consume)
Key Economic Forces: Availability of Economic Infrastructure
(ex) access to hills, mountains, railroads, ect.
Factor Conditions: Inputs to the Production Process
1) Physical Resources
2) Human Resources
1) Composition-needs of buyer
Gross National Income (GNI)
-The market value of final goods and services newly produced by domestically owned factors of production.
-GNI measures income received by a country both domestically and from overseas.
-Tool to measure a country from one economical point of view
-US uses GNI
-measured by % change
What you can sell the good for
A good or service consumed by the final user. (ex) Pillar done but house is not complete yet. This is NOT a final good
(ex) If i sell a house (new) it benefits the Italian Govt, If it is used it does not benefit the Italian Economy
Gross Domestic Product (GDP)
- The value of production that takes place within a nation's borders (both domestically and foreign factors of production)
-Italy uses GDP
-has to be produced in home country in order to count towards GDP for that country
(ex) Ford produced in US = US GDP
Ford produced in Mexico = Mexico GDP
Difference between GNI and GDP
GNI = Considers the owner not the place of production. It focuses on how much a country produces and considers them only once.
GDP = Considers the place of production Instead of using the actual number they are provided as a percent change (ex) Italy has s GDP of 1.3% that means it went up in production by 1.3% since last year
Purchasing Power Parity (PPP)
*important slide- understand and be able to repeate
-The number of units of a currency required to buy one unit of another currency would buy. (How many units of one currency to you need to buy the same thing?)
-Tells how strong your currency/economy is
(ex) China you can buy a lot of things with a little bit of money that is why jobs get paid less
(ex) How many USD or Euros do you need to purchase something?
-Resources are primarily owned and controlled by the private sector
-Prices are determined by supply and demand (the market)
-Economic activity, including pricing and production decisions, determined by a central government plan
-Government owns and controls all resources
-Prices are determined by the government
-Some degree of government ownership and control
-No economy is purly market or command
-Europe is in the middle of command and market but moving more toward the market econ
When you need more money to buy the same thing (the power/value of the currency goes down)
Balance of Payment
surplus = the amount of something left over when requirements have been met.
Deficit =an excess of expenditures over revenue in a given time period
Balance of Payment =encompasses all transactions between a country's residents and its nonresidents involving goods, services and income
the part of the total government debt in a country that is owed to lenders within the country.
the part of the total government debt in a country that is owed to foreign lenders
*****Start Chapter 5
Foreign Direct Investment (FDI)
an investment made by a company or entity based in one country, into a company or entity based in another country. (ex) an American company taking a majority stake in a company in China
-you have control in direct investment you do not have control in portfolio investment
Multinational Enterprise (MNE)
a corporation that has its facilities and other assets in at least one country other than its home country
-MNEs need to understand the impact of FDI in home / host country
What is the economic impact of a Multinational Enterprise?
-If i import something the balance of my country goes down
-If i export something the balance of my country goes up
Ethical Behavior 2 objectives
- develop competitive advantage
-avoid being perceived as irresponsible
-countries differ in ethical behavior
the doctrine that knowledge, truth, and morality exist in relation to culture, society, or historical context, and are not absolute.
universal standards of behavior
Bribes are used to
1) get govt. contracts
2) get officials do what they should do anyway
Problems with Bribery
1) affects performance of company and country
2) ruins government authority
3) damage reputations when disclosed
4) increases cost of doing business
Ethics and the Environment
-Global Warming: the Kyoto protocol
****** Chapter 6
General Types of Trade Theories
the natural order of trade (Laisses-Faire) let them do it no restrictions
Government should interfere
International Trade Theories
2) Absolute Advantage*
3) Comparative Advantage*
4) Factor proportions
5) Product life Cycle
6) Country similarity
how it wealth measured
-International Trade theory from 1500 to 1800 (most historical approach)
-Nations wealth is measured by its holding of treasure (gold)
-Nations Maximize exports Minimize imports
-Advantageous: Trade surplus with "colonies"
(ex) US exports to argentina but does not buy from argentina. eventually argentina will no longer be able to pay US
favorable balance of trade
Favorable balance of trade exports > imports
Unfavorable balance of trade exports <imports
countries that try to run favorable balances of trade by exporting a lot and importing as little as possible they do this for social or political gains (ex) china
how is wealth measured?
- Wealth is measured by how many goods are available to citizens
-Adam Smith "Invisible hand"
-Goal is to maximize goods and services available to citizens (not treasure) all around the world
-Different countries produce some goods more efficiently than others (ex) Italy & wine, UK and Germany & beer, you cannot produce certain goods in certain areas
How can you increase global efficiency according to the Absolute Advantage theory?
Specialization + international free trade
Specializaion- Why do countries increase efficiency?
1) Labor becomes more skilled by repeating the same tasks
2) Labor would not lose time in switching production
3) Develop more effective working methods
- Specialization leads to better and more production
Apply to trade
-Countries have inherent advantages (climate, natural resources, labor forces)
-Two countries that have opposite natural advantages should trade with one another
-Most trade today is manufactured goods & services (few agricultural goods)
-Countries with acquired advantage produce competitively: Product Technology and Process Technology
Absolute Trade Advantage
Example in notes:
1) countries each have the same inputs/resources (100 units)
Italy can produce 1 ton of wheat with 10 units.
Italy can produce 1 ton of tea with 4 units
US can produce 1 ton of wheat with 5 units.
US can produce 1 ton of tea with 20 units.
--Italy can produce 10 tons of wheat with 100 units
--Italy can produce 25 tons of tea with 100 units
--US can produce 20 tons of wheat with 100 units
--US can produce 5 tons of tea with 100 units.
-Theory says that global efficiency gains may still result from trade if a country specialises in those products-- regardless of whether those countries can produce those same products more efficiently or not.
1) Full Employment ( have to assume you are using all of your resources)
2) Economic efficiency is sought
3) Division of Gains
4) Two countries/Two Commodities
5) Transportation Costs
6) Static (not constant)
7) Commodities: todays services
8) Mobility of goods
* All of these factors limit trade
-Land labor relationship
-Labor capitol relationship
Product Life Cycle Theory
Limits of Product Life Cycle
-Products with extremely short PCLs
-Companies with differentiation strategy (no price competition)
-Products that require specialised tech labor for subsequent generations (ex) watch produced in Switzerland not China because you want it properly done
Country Similarity Theory
Most trade today occurs among similar countries: why?
1) Economic (France & Italy money situation is similar)
3) Culture (ex) dress tie vs. jeans
4) Politics (tends to change) (ex) Rome and Austria
Who makes the majority of trade?
Majority of trade is made between rich countries
Why does the government have to intervene with trade?
1) prevent unemployment
2) Protect infant Industries
3) Promote industrializaion
4) Relationship with other countries
5) Maintain essential industries
6) Deal with unfriendly countries
7) Maintain spheres of influence
8) Preserve National Identity
Action: Impact restrictions (we buy less from another country to keep jobs in our home country)
Possible Impact: If you don't buy from me, I won't buy from you and price in home country will end up being higher because of less competition
Protect Infant Industries (developing countries)
Action: import restrictions
Rationale: So competition increases overtime and increase economies of scale and increase workers efficiency
Promote Industrialization (developing countries)
Action: import restriction
Rationale: in industries:
-surplus workers can more easily increase output
-foreign investments promote growth
-prices/sales fluctuate less
-markets grow faster
-decrease imports increase exports
-help nation building process
Actions: (buy less and increase export prices & decrease import prices)
-balance of payment adjustments
-comparable access or "fairness"
-restriction as bargaining tool
-price control objectives (dumping & optimum tariff theory)
exporting goods below their value or price (ex) Korea produces a car for $10,000 but sells it to Italy for $8,000. How does the importing country react to dumping? they apply a tariff to make the price back to $10,000
(dumping hurts the home country because it causes people to only want to buy the korean car because its cheaper so to keep competition fair, italy will add a tariff)
Difference between Tariff and Non Tariff
A tariff influences the price
A non tariff influences both the price and the quantity
(ex) Italian car makers do not want Korean cars imported so Italy places a tariff on Koreanc ars
(ex) Tariff on something that is very important so the government does not want it to leave the country (ex) energy transit
(ex) Tariff between boarders in territories in italy
Country decides to not trade with another country
Buy Local Legislation
no longer exists in EU (ex) before EU Italian price "only bought" Italian cars because it was "bought local"
Standards & Labels
When you have standards you go to that country and by and establish the company there
3 Ways of Economic Integration
1) Global- WTO (GATT) [whole world]
2) Bilateral - 2 (or 1+group) countries [us and italy can sign a treaty that will avoid a double taxation] - if i am a US citizen working in italy my tax deduction from my income will only go to one country- (ex) Italy and one country or Italy and EU (group)
3) Regional (ex) European Union/ NATO: mex, can, us
GATT & MFN clause (definition and issue)
General Agreement on Tariffs and Trade (1947) = the objective of this was to increase trade by decreasing tariffs and abolishing quotas (replaced by WTO in 1995)
Most Favored Nation Clause = a decrease in tariff to one country had to be extended to all countries
ISSUE = there was no way to enforce the MFN clause so the WTO was created
World Trade Orginization = 1995
-150 current members
-adopted principles from GATT
-Covers trade in services/investments/intellectual prop.
-countries can bring charges of unfair trade practices to WTO and rulings are binding
-Normal Trade Relations (NTR) replaced MFN clause
-GATT & MFN
-WTO & NTR
Normal Trade Relations
is a WTO concept
Most Favored Nations
is a GATT concept
Why do we have regional agreements?
because of short distances (its a pain to check goods being transported every day across borders) this is why you don't get your passport stamped by other counties within EU
What are the basic types of Regional Economic Integration we can have?
1) Free trade area
2) Customs union
3) Common market
4) Economic (+ political) integration
Free Trade Area
FTA = no internal tariffs (ex) no tariffs for close area territory but we can have diff tariffs for farther countries
Customs Union = a free trade area + common external tariff
-group of states that have agreed to charge the same import duties as each other and usually to allow free trade between themselves.
a group of countries imposing few or no duties on trade with one another and a common tariff on trade with other countries.
Economic (+political) Integration
harmonisation of policies
(ex) common currency- Euro in EU
Who were the six founding countries of the European Union?
6) The Netherlands
Why are there 12 stars on the EU flag?
Because they represent the first twelve solid members:
Germany, Italy , France, Belgium, Luxembourg, The Netherlands, Denmark, Ireland, UK, Greece, Spain, Portugal
Who was never in the EU?
Who is not in the EU or in UN?
Switzerland but they are apart of no tariff on no need to show your passport within the EU
European Union Structure
1) EU parliment - located in Strasburg Germany because it was the center place of the first 6 founding members. Parliment has 736 members elected by 500 million citizens (Pres of Parliament = Schultz)
2) Council of the EU- Decision making body within parliment
European Union Structure
3) European Council- Heads of State/Government of all 28 member countries + President of the commission (Donald Tusk) General Political Directions
4) European Commission- They propose legislation, enforce European laws, and set objectives and priorities for action. (President Jean Claude Junker)
Who is the President of the European Commission?
Who is the President of the European Council?
Official Language of EU
is all of the member languages
When and what started the use of the Euro?
1992 The Treaty of Maastricht
Criteria (Stability and growth path):
Government Deficit < 3% GDP
Government Debt < 60% GDP
Inflation < 1.5% over the best 3 countries
Interest Rates < 2% over the best 3 inf co.
What is the EU's focus?
Minimize Debt and Deficit
The amount by which money spent is more than money recieved
The sum of all deficit
********Start Chapter 9 Foreign Exchange
Money determined in the currency of another nation (or group)
The price you pay to get one unit of another currency
(ex) $1.088 gets you 1 Euro
Exchange now (ex) Go to a counter and exchange money immediately at the same time
Outright Forward Transaction
Exchange in the future (3 or more days)
Rate at which traders buy foreign currency
Rate at which treaders sell foreign currency
Difference between the Bid and Offer (this is what the trader makes off of the trade)
The exchange rate between two currencies that are not the official currencies of the country that the exchange was quoted in. Cross rates usually do not involve the U.S. dollar.
Forward < Spot
*expects another currency to depreciate against another foreign currency
Forward > Spot
The right but not the obligation to trade for a foreign currency
Why do we buy on credit? (wine example)
(ex) I buy wine at $50 (pretend the Euro and USD are equal $1= 1 euro) & I pay 50 euros for the wine but i sell it for 60 euros. I do this on credit so that i recieve the 60 before i have to pay for the actual wine
USD $ is the currency for:
1) Investments: Capital Markets\
2) Reserve: Central Banks
3) Transactions: Commodity Markets
4) Invoice: Contracts
5) Intervention: Monetary Authorities
What is the most important currency?
USD it is used for the main currency that wheat and oil are traded in
Why do large companies use multiple banks to deal with foreign currency exchange?
They do this to spread risk
Business Use of Foreign Exchange
2) Interest Arbitrage
The purchase of foreign currency on one market for immediate resale on antoher marker to profit from a price discrepancy
(ex) you are able to buy a toy doll for $15 in Tallahassee, Florida, but in Seattle, Washington, the doll is selling for $25. If you are able to buy the doll in Florida and sell it in the Seattle market, you can profit from the difference without any risk because the higher price of the doll in Seattle is guaranteed.
The investing in debt instruments, such as bonds, in different countries
Speculation is the act of trading in an asset, or conducting a financial transaction, that has a significant risk of losing most or all of the initial outlay, in expectation of a substantial gain.
******Chapter 10 International Monetary Fund
-institution established in Bretton Woods, New Hampshire in 1944
-goal: to ensure stability in the international monetary system, promote countries to cooperate with regards to exchange rates, balance the growth of int. trade, help members with Balance of Payments
Bretton Woods Agreement
1944 (Implemented the IMF) Established a par value (benchmark value) for each currency initially quoted in terms of
gold and USD
in order to join the IMF each country needs to contribute a certain amount of money that goes into a pool. This pool helps to assist other countries with their balance of payments.
IMF can lend to countries in need if the country agrees to adopt certain policies in order to stabilize its economy
Special Drawing Right = special asset created by IMF to increase international reserves
-This allowed countries to print more money
Evolution to Floating Exchange Rates
* THIS ALL HAPPENED BEFORE THE EURO (1990s)
-1970s US Balance of Trade deficit worsened so Nixon proposed: no longer trade of USD for gold
-Smithsonian Agreement :
-Jamaica Agreement :
1971 - Devaluation of USD and revaluation of others
1976 -formalized the break from fixed exchange rates now we will have floating exchange rates
** went from FIXED to FLOATING
Foreign Exchange Convertibility
- Fully Convertible : both residents & nonresidents are allowed to purchase unlimited amounts
-"Hard Currencies" : fully convertible (developed countries)
-"Soft Currencies" : Not fully convertible (weak underdeveloped countries)
-Black Market : People are willing to pay more than official rate
Purchasing Power Parity (PPP)
a change in inflation rates must cause a change in exchange rates to keep the prices of goods in 2 countries similar (ex) if Japanese inflation rate were 2% and US inflation was 3.5%, the dollar would be expected to fall by the diff in inflation rates
Inflation Rate Strength* (added from book)
If domestic inflation rate is lower than foreign inflation rate the domestic currency should be stronger than the foreign currency
The nominal interest rate is determined by the real interest rate and the inflation rate
Nominal Inflation Rate
Nominal Inflation Rate: real int. rate + inflation rate (we now know if interest rates increase the value of the dollar goes down)
Real Interest Rate
Real Interest Rate = Nominal interest rate - inflation rate
*** REMOVES INFLATION
Role of Central Banks
-Responsible for the countries policies affecting the value of its currency
-Central Bank Reserves are [GOLD, FOREIGN EXCHANGE RATES, IMF ASSETS]
(US central bank = "fed" federal reserve
What is your ascribed status?
you are born with it - family, gender, ect
Hierarchy of needs model stipulates that:
People must satisfy basic needs before they will work for higher needs
The assumption by management that home country practices will easily work abroad is:
In a democracy...
citizens participate in the decision making process
A form of govt. where minority parties group together to gain majority control is known as:
A legal system based on tradition, precedent, customs, and usage, & interpretation by courts is known as:
Common Law (US)
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