Davis D270 Chapter 4

What are the characteristics of big emerging markets?

Large populations, rapid economic growth, increasing foreign investment, and improving infrastructure.

What moderators influence economic development?

Institutions, culture, geography, and economic freedom.

How is economic freedom measured?

Various indices that assess factors such as property rights, government integrity, and regulatory efficiency.

What are the classifications of economic systems?

Traditional, command, market, or mixed economies.

Why might a highly efficient and clean market not be attractive for expansion?

May lack sufficient demand or growth potential, making it less attractive for expansion.

Why might a large market not always be attractive for expansion?

May have significant competition, regulatory challenges, or economic instability that can deter expansion.

What is the significance of economic freedom for businesses?

Leads to a higher standard of living and fosters entrepreneurship, growth, and competitiveness.

What is the average wealth per person in the wealthiest countries?

Over $100,000.

What is the capital wealth per person in the poorest countries?

Under $1,000 a year.

How do institutions affect wealth in countries?

Rich countries tend to have good institutions, while poor countries have bad institutions, often correlating with levels of corruption.

What cultural factors influence poverty in countries?

Countries with high poverty levels often have populations that strongly believe in religion, which can affect their outlook on improving their current situation.

How does geography impact economic development?

Can create disadvantages for agriculture and livestock, particularly in tropical regions where conditions are harsher.

What are the implications of climate change for poorer countries?

Poses risks to agriculture and photosynthesis, exacerbating challenges faced by poorer countries.

What economic issues should international businesses consider?

International businesses should consider the level of economic development, type of economic system, government control over private enterprise, and the impact on their firm.

What adjustments might a business need to make in a different economic environment?

Businesses may need to adjust their strategies, operations, and marketing approaches to align with local economic conditions.

Why is it important to study the economic environment over time?

Studying the economic environment over time allows for understanding trends and making informed investment choices.

How does inflation affect consumer behavior?

High inflation can lead to decreased consumer purchasing power, resulting in lower spending.

What factors should be considered for better investment choices?

Investors should assess economic stability, growth potential, and market conditions when making investment choices.

What role does foreign direct investment (FDI) play in economic systems?

FDI can indicate how open an economy is to foreign investment and can drive growth and development.

What is the relationship between corruption and economic institutions?

Corruption undermines the establishment of good institutions, which are crucial for economic development.

How can cultural beliefs impact economic progress?

Cultural beliefs, particularly regarding religion, can influence attitudes towards economic improvement and investment.

What factors contribute to better returns with less risk in business decisions?

Optimal operating decisions, effective policy decisions, and strategic location for factories.

What are the characteristics of developed economies?

Efficient capital movement, stable institutions, robust infrastructure, active international trade and investments, advanced technology, high economic and political freedom, and rule of law.

How does capital movement differ in developing countries compared to developed countries?

In developing countries, money does not move smoothly, leading to issues like non-functional ATMs and reliance on specific banks.

What are some challenges faced by developing countries?

Corruption, lower incomes, low literacy rates, poor public hygiene, and nutrition issues.

What is a significant indicator of economic growth in emerging economies?

Accelerating growth and modernization, including improvements in infrastructure.

What does market liberalization refer to in the context of emerging economies?

The process of opening up markets to increase trade and investment.

What role do exports play in the economies of emerging countries?

Increased exports lead to higher revenue from foreign markets.

What is the significance of the G20 in global economics?

It serves as a premier international forum for global economic cooperation, including major economies and emerging markets.

What led to the formation of the G7 from the G8?

Russia was removed from the group, leading to the current G7 of major economic competitors.

What are BRICS countries?

BRICS refers to Brazil, Russia, India, China, and South Africa, which are known for their significant influence on regional and global affairs.

What does 'Rule of Law' imply in developed economies?

It indicates that laws are applied consistently and fairly, ensuring justice and stability.

What does 'Rule of Man' often indicate in developing countries?

It suggests governance based on individual authority rather than established laws, leading to potential abuses of power.

How does political freedom typically compare between developed and developing countries?

Developed countries generally have higher political freedom, while developing countries often experience lower political freedom.

What is the relationship between economic freedom and political freedom?

There is a direct correlation, where higher economic freedom often accompanies higher political freedom.

What are some examples of infrastructure capabilities in developed economies?

Infrastructure capable of handling large volumes of trade and economic activities, such as reliable bridges and transportation systems.

What are the indicators of economic freedom in emerging economies?

Economic freedom varies; it can be high or low depending on the specific country and its policies.

What does 'Open to FDI' mean in the context of emerging economies?

It indicates that these economies are receptive to foreign direct investment, which can spur growth.

What does the term 'middle class' signify in emerging economies?

It indicates a growing segment of the population with increasing consumption and economic activity.

What is the impact of corruption on developing countries?

Corruption can hinder economic growth and stability, often leading to loss of revenue and public trust.

What is a common issue with public services in developing countries?

Lower literacy rates and poor public hygiene and nutrition can significantly affect quality of life.

How does the economic situation in transition economies differ from that in developed economies?

Transition economies are characterized by rapid growth and modernization efforts, unlike the stability often seen in developed economies.

What is the BRICS group an alternative to?

An alternative to G7 for emerging economies instead of developed countries.

What percentage of the world population do BRICS countries makeup?

Over 40% of the world population.

What fraction of global GDP do BRICS countries account for?

About one-third of global GDP.

Which countries are currently part of BRICS?

Brazil, Argentina, Egypt, Saudi Arabia, Ethiopia, Iran, South Africa, India, China, UAE, and Russia.

What common resource do most BRICS countries control?

Most of the countries have control over oil.

What are some common characteristics of Big Emerging Markets?

They have lots of territory, high population, natural resources, increased consumption, liberalization (FDI), infrastructure needs, aspirations of technological leadership, and political influence.

What significant economic trend is observed in emerging economies?

Constantly growing statistics and huge reductions in global poverty.

What is China estimated to achieve in the global economy?

Estimated to take over as the largest global GDP.

What are some of China's leading production sectors?

Largest producer of solar panels, food, and cotton.

What challenges does China face regarding its workforce?

Rising wages and an aging workforce, leading to the need for a younger workforce.

What are some big challenges in international business (IB)?

Communication, power generating, transportation infrastructure, distribution channels, financial markets, volatility, and finding suitable business partners.

What does measuring economic freedom involve?

The degree of economic freedom an individual has to use their initiative, effort, and competencies to pursue their ambitions.

What is a significant implication of BRICS countries having more purchasing power than G7?

They can influence global economic dynamics more significantly.

What are the aspirations of Big Emerging Markets regarding technology?

They aspire to achieve technological leadership.

What infrastructure needs are common among emerging economies?

They require improvements in communication, transportation, and financial markets.

How has the growth of BRICS countries impacted global poverty?

It has contributed to huge reductions in global poverty.

What are the characteristics of a Command Economic System?

Centrally planned, large-scale capital-intensive production, visible hand of the state, low economic freedom, with communism as its philosophical anchor.

What is an example of a Command Economic System?

China owning over 50% of Disney Parks.

What defines a Market Economic System?

Individuals make the majority of economic decisions, decentralized entrepreneurial innovation, high economic freedom, with capitalism as its philosophical anchor.

What does the term 'Invisible Hand' refer to in a Market Economy?

The concept that individuals pursuing their own interests can lead to positive economic outcomes without government intervention.

What is a Mixed Economic System?

A system that falls between command and market economies, with varying degrees of government and private ownership, aiming for economic efficiency and egalitarianism.

What philosophical anchor is associated with a Mixed Economic System?

Socialism.

What is State Capitalism?

A system where political officials shape asset valuation and usage, state owns national champion businesses, and reduces political freedom to expand economic prosperity.

How does State Capitalism affect the financial system?

It forces the financial system to provide low-cost capital, with government dictating loan amounts.

What is a key feature of India's growing economy?

India is expected to hold as much as 15% of global wealth by 2050.

What demographic advantage does India have in its economy?

A large pool of young workers willing to work for less.

What is 'Catch-Up Growth'?

The phenomenon where poorer countries develop technology already created by larger companies.

What are Free Market Reforms?

Changes that benefit economies by promoting free market principles and reducing government intervention.

What is Gross National Income (GNI)?

The market value of all goods and services produced by the domestic economy plus income received from other nations, minus payments made to other nations.

What are some challenges faced by workers in India's economy?

6-day work weeks, no retirement age, and lack of child labor regulations.

What is the impact of outsourcing on India's economy?

Many companies are moving their factories to India due to its potential for lower work quality from China.

What does the term 'Visible Hand of the State' imply in a Command Economy?

Government intervention and control over economic decisions and production.

What is the significance of the term 'Laissez-Faire' in a Market Economy?

It refers to minimal government intervention in economic activities.

What does the spectrum of economic systems indicate?

There is a range of economic systems from command to market, with mixed economies falling in between.

What is the relationship between political freedom and economic prosperity in State Capitalism?

State Capitalism often reduces political freedom in order to promote economic prosperity.

What is a notable trend in the economic growth of third world countries in the 70s and 80s?

These economies, including India, began growing faster than developed countries.

What is a broader measurement than Gross National Product (GNP)?

Gross National Income (GNI), which includes investments.

How does GNI differ from GNP in terms of production value?

GNP only accounts for products/services produced by businesses based in the home country, whereas GNI also accounts for investments.

What does Gross Domestic Product (GDP) measure?

The market value of all production within a nation's borders, regardless of whether it is done by domestic or foreign factors.

What is a limitation of GDP measurement?

It does not account for the shadow economy.

What is the Global Competitiveness Index (GCI)?

A measure of national competitiveness defined by institutions, policies, and factors that determine productivity.

What does Purchasing Power Parity (PPP) indicate?

The number of units of a country's currency needed to buy the same amount of goods and services as one unit of income would buy in another country.

What is the Big Mac Index used for?

To measure a country's Purchasing Power Parity by comparing the price of a Big Mac around the world.

What does the Genuine Progress Indicator (GPI) assess?

It evaluates what a country is doing to improve its economy.

What is the Human Development Index (HDI) focused on?

It measures factors such as life expectancy and nutrition to assess human development.

What is the difference between mean and median in economic measurements?

Mean can be skewed by outliers, while median focuses on the middle value, eliminating the effect of outliers.

What is the shadow economy?

It includes the black market and gray market, operating openly without regulation.

What is System D?

An economy of self-reliance and DIY, often associated with informal markets.

How does the informal economy affect companies like P&G?

P&G generates 20% of its revenue from small businesses in the informal economy, which is the only growing segment.

What is the average price of a Big Mac in the U.S.?

$4.79 USD.

What is the significance of the price of a Big Mac in Sweden?

It costs 44 Krona, equivalent to $5.13 USD, which is used to compare purchasing power.

What is the expected growth source for the economy in the next few years?

Developing countries, due to their larger workforce.

What does sustainability in economics refer to?

It includes concepts like Green Economics and how resources are used over time.

What does the Net National Product (NNP) measure?

It assesses how quickly resources are being used and their sustainability.

What is Happynomics?

An approach to measure well-being and quality of life in economic terms.

What does Your Better Life Index (YBLI) evaluate?

It assesses various factors contributing to a better quality of life.