IB EXAM I

Globalization of Markets

The merging of historically distinct and separate markets into one huge global marketplace

Globalization of Production

Sourcing goods to take advantage of difference in cost and quality of factors of production

What are the four factors of production?

Labor, energy, land, and capital

What is one driver of globalization?

Declining Trade and Investment Barriers.

What is another driver of globalization?

Role of Technology Change.

What is a third driver of globalization?

3rd The Changing Demographics of the Global Economy.

Collectivism

Prioritizing the interest of a group as a whole

Individualism

Prioritizing the interest of individuals

What are the two tenets of individualism?

1. Guarantee of individual freedom and self-expression.

2. Welfare of society best served by letting people pursue their own economic self-interest.

What is FDI?

Foreign Direct Investment is the total value of investments in a country by exterior entities

GDP

Measures the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period

Political systems

The system of government in a nation

Democracy

Government is by the people

Totalitarianism

One person/political party hold all the power and prohibits opposing parties.

Market Economy

Economic decisions are made by individuals or the open market.

Command Economy

An economic system in which the government makes all economic decisions and owns all businesses.

Mixed Economy

Combination of market and command economy

Legal systems

Process through which laws are enforced

What are the three different legal systems?

Common, Civil, and Theocratic law

What distinguishes common law?

It is used in the USA, it is based on tradition and precedent, it was evolved in England, and it is more flexible than other systems.

What distinguishes civil law?

It is based on detailed laws organized into codes.

What distinguishes theocratic law?

It is based on religious teachings.

Which legal system has the most complicated and expensive contracts?

Common Law

Which legal system has the much shorter and less specific contracts?

Civil Law

What is Intellectual Property

Property that is the product of intellectual activity, such as computer software, a screenplay, a music score.

Property rights

legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource.

Which country will become the largest economy within the next decade?

China

What is the HDI?

The Human Development Index is used to measure the quality of human life in different nations.

What factors are measured to find HDI?

life expectancy at birth, educational attainment, and whether average incomes are sufficient to meet the basic needs of life.

What are the engines of economic growth?

Innovation and entrepreneurship

Which Peruvian economist advocated for property rights?

Hernando de Soto

Are democratic regimes more conducive to long-term economic growth?

Yes

Does economic growth lead to the establishment of democratic regimes?

Yes

Does favorable geography and high education promote economic growth?

Yes

Do countries with a young population have greater growth potential?

Yes

What are the three reasons for the spread of democracy?

1. Many totalitarian regimes failed to deliver economic progress

2. New information and technologies.

3. Economic advances leads to a prosperous middle class that pushes democracy.

What does a shift toward a market-based system involve?

Deregulation, privatization, and a legal system to safeguard property rights.

Deregulation

Removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate.

Privatization

Transfers ownership of state property to private individuals

Countries are more likely to have higher sustained rates of economic growth with:

Democratic regimes, market-based economic policies, and strong property rights protection.

What is culture?

A system of values and norms shared among a group of people and that when taken together constitute a design for living

Values

Ideas about what a group believes to be good, right, and desireble.

Norms

Social rules and guidelines that prescribe appropriate behavior in particular situations

Society

A group of people sharing a common set of values and norms

What are the 6 determinants of culture?

religion, political philosophy, economic philosophy, education, language, social structure

What would be the 7th determinant of culture?

History

Social stratification

Social strata are hierarchical social categories often based on family background, occupation, and income

Social mobility

Extent to which individuals can move out of the strata into which they are born

Religion

A system of shared beliefs and rituals concerned with the realm of the sacred

Ethical behavior

A set of moral principles or values that are used to guide and shape behavior

Cross-cultural literacy

Companies must be informed about the culture of another nation when conducting international business.

What did Hofstede study?

Geert Hofstede studied national and organizational cultures. The Hofstede Cultural Dimensions Theory uses six dimensions - Power distance, individualism vs. collectivism, masculinity vs. femininity, uncertainty avoidance, long-term vs. short-term orientation, and indulgence vs. restraint.

What are the two pillars of globailization?

Lower cost and marketing expansion

What is the most important factor to a country being successful?

A productive middle class

Why has the Chinese economy slowed down?

Due to corporate debt

What is sourcing?

The act of obtaining products or services across international boundaries

Is managing an international business more challenging than managing a domestic one?

Yes

Do banks charge interest rates in Muslim countries?

No

What was the Cold War?

A decades-long state of geopolitical tension between the capitalist United States and the communist Soviet Union. The conflict, which lasted from roughly 1947 to 1991, never involved direct combat between the two superpowers but was waged through proxy wars, propaganda, and intense ideological, political, and economic rivalry.