CBA Ch 7
Top 5 largest population in 2020
1. inda, 2. china 3. united states 4. Pakistan 5. Indonesia
Which of the following leads to a favorable condition for foreign investment in terms of labor cost? a. rising labor compensation b. stronger foreign currency c. higher fringe benefits d. higher productivity
D. Higher productivity
What is the difference between GDP and GNI
GNI includes all income from overseas - income paid to entities outside the nation
A Japanese multinational that produces cars in the USA. at the end of the year, the Japanese firm sends 50m in profits back to the shareholders in Japan.
Include in US GDP, not GNI Include in Japans GNI, not GDP
what is population distribution?
Measure of how the inhabitants are distributed over a nation's area
What is population density?
Measure of the number of inhabitants per area unit at a given time
Why did the World Bank adopt the Atlas Conversion?
More stable over time
Characteristics of developed economies
Per Capita national income of $12,056 or more high material standard of living, high quality of life index, substantial middle class well established governmental and legal systems plentiful educational opportunities and low illiteracy adequate or high levels of nutrition and access to health care
Characteristics of developing economies
Per capita gross national income of less than $12,056
Today's market exchange rate is 1 USD = 33 THB Assume 180 USD have the same purchasing power as 1,800 THB. Person A lives in USA and earns a monthly income of 2,000 USD. Person B lives in Thailand and earns a monthly income of 32,000 THB. Which person can buy more goods/services in their county?
Person B. 1800/180 = 10x the difference USD to THB= 2000 x 10 = $20,000 THB monthly THB to USD = 32,000/10 = $320 USD monthly
What is discretionary income?
The money left over after paying for the essentials (i.e., rent, food, clothing, taxes)
What is rural-to-urban shift
The movement of a nation's population from rural areas to cities
Unit Labor Costs
Total direct labor costs divided by units produced
Accounts to 32-46% of world GDP
Worlds largest IMF advanced economies and liberal democracies G7 Group: Canada, France, Germany, Italy, Japan, UK, USA
what is developed economy?
a classification for high-income industrialized nations, which have high living standards and the most technically developed infrastructures
What is developing economy?
a classification for the world's lower-income nations, which have less developed infrastructures and lower living standards.
What is the GINI Index?
a measure of the degree to which family income within a country is distributed equally lower score= income is distributed equally (better)
What is purchasing power parity?
adjusting the exchange rates for two currencies so the currencies have equivalent purchasing power
What are the three factors that affect unit labor costs?
compensation, productivity, exchange rates
What is Atlas conversion factor?
developed to reduce the impact of exchange rate fluctuations
How does age distribution differ for developed versus developing countries?
developing countries generally have younger populations than do industrial countries due to higher birth rates population of many developed countries is projected to fall by mid century due to low birth rates
What is an emerging economy?
economies with per-capita incomes in the low to middle range that are in a transition toward developed status
What does GNI per capita imply?
how advanced an economy is High, middle or low income
What is disposable income?
income after taxes
what countries typically have high/low GINI index?
income is more evenly distributed in richer nations High: South Africa, India, Low: Canada, US, China, lower score= income is distributed equally (better/ A)
What are the other socio-economic dimensions relevant to international business?
increase in number of working women increases labor supply and creates larger family incomes divorce rates indicate formation of single-parent families ethnic groups may require special considerations
low or slowly rising unit labor costs
indicate opportunity to lower production costs may indicate locations of new competition in world markets
What are the implications of a large international debt and government response?
large foreign debts may hinder access to foreign currency to pay for imports billed in foreign currency high debt may cause gov to impose controls, cut gov spending, inpose wage controls= political crisis scarcity of foreign exchange may hinder companies trying to export products to such nations --> indebted gov may impose import restrictions to conserve their foreign exchange for repayment of debt
How is population related to market potential?
most general indicator of potential market size poor indicator of economic strength and market potential
Vertical Integration
production by a firm of inputs for its own manufacturing processes
Why is economic growth rate important to marketers?
rapid and rising rates imply consumer demand
what types of countries typically have larger underground economy?
the higher level of taxation and the more oppressive the government red tape, the bigger the underground economy will be Bulgaria, turkey, croatia, hungary, poland, greece
Because of the importance of economic information to the control and planning functions at headquarters, the collection of data and preparation of reports are usually the responsibility of
the home office
What is underground economy?
the products and income that are not reported as income to the government
What is GDP
the total monetary value of all goods and services produced within a nation (within a country's borders)
What is Gross National Income (GNI)
the total value of all income generated by the residents of a nation, including both domestic production of goods and services and income from abroad, and subtracting income paid to entities outside the nation (regardless of the geographic location of the income)
What does underground economy include
undeclared production of legal and illegal goods and services, their corresponding activities (money laundering), and concealed income in kind (barter)
What is the purpose of international economic analysis?
Assess the overall outlook for the economy and the impact of economic changes on the firm
Which countries are included in BRICS?
Brazil, Russia, India, China, South Africa