Global Dimensions Chapter 3

To determine which country is attractive for potential investments, companies need to balance which three considerations?

1. Benefits 2. Risks 3. Costs

What two trends have been noted based on the radical change in the political economy of many nations since the late 1980s?

1. There has been a move toward more free market economies 2. There has been a wave of democratic revolutions

In which type of country is the cost-benefit-risk trade-off likely to be MOST favorable?

A country with a free market system

What statement is accurate with regard to a country's development?

A country's investment in education and subsequent growth rates result in a more productive population.

If growth rates continue as they have in the past, _____ is predicted to surpass the United States and become the world's largest national economy within the next two decades.

China

There are still countries that have a high percentage of industries dominated by state ownership. Which of these countries has 40% of its GDP accounted for by state owned companies?

China

Which countries have the poorest GNI?

China and India

What is an accurate depiction of the economic prospects in a country?

Countries with free market economies in which property rights are protected tend to achieve greater economic growth rates than other economies.

What is one of the steps that pave the way for a shift toward a market-based economic system?

Creation of a legal system to safeguard property rights

What is an accurate depiction of Amartya Sen's arguments regarding development?

Development should focus on expanding the capabilities of and opportunities available to people

True or False: Democracy is always considered to be the cause of initial economic progress.

False

True or false: The base for the adjustment when applying purchasing power parity is the cost of living in the poorest economic sector.

False Reason: The base for the adjustment is the cost of living in the United States.

Identify the accurate statement regarding privatization.

For privatization to work, it must also be accompanied by a more general deregulation and opening of the economy

What does Gross National Income measure?

GNI is regarded as a yardstick for the economic activity of a country

Jeffrey Sachs argued that ______ can have an impact on economic development.

Geography

The privatization movement started in

Great Britain in the 1980s with the sale of British Telecom

What is Francis Fukuyama's argument regarding the "new world order?"

He argued that liberal democracy has triumphed and will become the final form of human government.

Identify the TRUE statement about legal systems in various countries throughout the world.

Institutional weaknesses can subvert contract enforcement

Which statement BEST represents how legal factors determine the cost of business in a country?

It can be more costly to do business in a country where local laws and regulations set strict standards with regard to product saefty

Which countries have the richest GNI?

Japan, Sweden, Switzerland, U.S., and Australia

Which economic system is considered the MOST conducive to innovation and entrepreneurial activity?

Market economies

Any individual who has an innovative idea is free to try to make money out of that idea by starting a business (by engaging in entrepreneurial activity). In what economy?

Market economy

The state owns all means of production in which economy?

Planned economy

______ risk is the possible risk that an investment's returns can suffer as a result of instability or changes in a country's governance.

Political

What is an accurate description of political risk?

Political risk tends to be greater when countries face social unrest and disorder

What statement accurately describes the effects of social unrest on a country?

Social unrest can result in abrupt changes in government which tend to have negative economic implications

According to Map 3.1 in the text, which three countries have high gross national income (GNI) per capita (based on 2018 data)?

Switzerland, Japan, and the United States

Which statement characterizes the changes in the political and economic systems of the world?

The battle between the ideologies of collectivism and individualism is less distinct

The GNI per capita of a country is $5,000, but the PPP per capita is $8,000. What can be inferred from the given data?

The cost of living is lower in that country than the United States

What is Hernando de Soto's main concern with regard to property rights?

The inability of property owners to establish legal title to their property

What is an indicator of economic mismanagement?

The rate of inflation in a country

What is an accurate depiction of the changes in the political systems of nations since the late 1980s?

Totalitarian governments failed and were replaced by democratically elected governments usually supportive of free market capitalism.

What is an accurate depiction of totalitarian states compared to democratic states?

Totalitarian states are detrimental to progress

True or False: Peruvian development economist Hernando de Soto argued for the importance of business and property rights in relationship to receiving the benefits of capitalism.

True

Which situation can make measuring economic activity differences difficult?

Unrecorded cash transactions activity

Which factor is a cause of legal risks?

Violation of property rights

According to Samuel Huntington's thesis, global terrorism is caused by _____.

a clash of value systems

Purchase Power Parity allows

a more direct comparison of living standards in different countries

An international firm, entering a country's market early, may achieve a significant payback if that country

achieves sustained high economic growth rates

Purchase Power Parity (PPP)

an adjustment in gross domestic product per capita to reflect differences in the cost of living

Human Development Index (HDI)

an attempt by the United Nations to assess the impact of a number of factors on the quality of human life in a country

How can GNI per person figures be misleading?

because they don't consider differences in the cost of living

How does innovation and entrepreneurial activity help increase economic activity?

by creating new products and markets that did not previously exist

A "shadow economy" would be present in a country where _________.

certain cash transactions are not recorded

Political costs of doing business in a country would include _____.

corruption

The rationale for economic transformation has been consistent throughout the world and is based on the idea that

countries adopting market-based systems had more continuous economic growth than those adopting command economies.

______ involves removing or reducing government regulations, typically in the economic sphere.

deregulation

Innovation

development of new products, processes, organizations, management practices, and strategies

Amartya Sen would agree that

development should address basic health care and education needs

First-mover advantages are accrued by those who enter ____ into a market.

early

When comparing early and late entrants doing business in a country, it can be said that

early entrants build loyalty and gain experience in a country's business practices

A(n) ______ risk is the chance that conditions like fluctuating exchange rates affect an investment.

economic

Gross national income is used as a measure of a nation's ___________.

economic activity

It has been asserted that the nations that invest more in ______ will have higher growth rates because a literate population is a more productive population.

education

According to Huntington, ______ is a conflict that results from the strong ideological boundaries separating civilizations from one another.

global terrorism

A country's economic system and property rights regime are _____ predictors of economic prospects.

good

It has been argued that the economic freedom associated with a market economy creates

greater incentives for innovation and entrepreneurship than either a planned or mixed economy

One common measure of economic development is a country's _________ per head of population.

gross national income (GNI)

Late-mover disadvantages refer to the _____ that a company might incur.

handicaps

Mallory's company was the first to introduce fresh-food meal kits in a box that are delivered directly to consumers who put the meal together at home. Since her company was the first to introduce this idea, it is an example of _____.

innovation

The development of new products, new processes, new organizations, new management practices and new strategies is called ______.

innovation

What are the engines of long-run economic growth?

innovation and entrepreneurship

A(n) ______ risk is the risk that arises from failure to follow statutory or regulatory obligations and, therefore, one that can impact a trading partner.

legal

Without a legal system that protects property rights, and the machinery that enforces those rights, there is substantially _____ incentive to engage in economic activity.

less

Due to the economic freedom associated with it, the business environment that provides the strongest base for innovation and entrepreneurial activity is a _____ economy.

market

The Heritage Foundation's index measures the degree of economic freedom in the nations -- in other words, the degree of shift to ______ economic systems.

market-based

Gross National Income (GNI)

measures the total annual income received by residents of a nation

Hernando de Soto argued that

much of the developing world will fail to reap the benefits of capitalism until property rights are better defined and protected.

Kendrick lives in a country in which his basic freedoms are denied and the political process is tightly controlled. This country is an example of a _____ country in terms of political freedom.

not free

Economic progress can be characterized as

often leading to adoption of a democratic government

To account for differences in the cost of living:

one can adjust GNI per capita by purchasing power

A country in which some restrictions are placed on political rights and civil liberties would be labeled _____.

partly free

When Hugo Chavez took over power in Venezuela, he railed against American imperialism. Western enterprises doing business in that country were concerned how this would affect their interactions with Venezuela. This demonstrates how ______ can impact the economics of a country.

political change

South Korea was considered an impoverished country in 1960. Yet in 2017, it was the world's fifth largest economy. This demonstrates how international businesses must consider future potential as well as the

present wealth of the consumers

______ is one of the steps necessary for a country to shift toward a market-based economic system.

privatization

______ is seen as a transfer of ownership of a business, property or enterprise from the public sector to the private sector.

privatization

The long-run monetary benefits of doing business in a country are MOST influenced by the

purchasing power of consumers

Privatization

refers to the process of selling state-owned enterprises to private investors

A country is embracing deregulation when it _____.

removes legal restrictions to the free play of markets

Innovations in production and business processes lead to an increase in

the productivity of labor and capital, which further boosts economic growth rates

With regards to the new world order, Samuel Huntington would argue that

there is no universal civilization based on acceptance of Western democratic ideals

What is one thing that the fastest-growing economies of China, South Korea, Taiwan, Singapore, and Hong Kong had in common at the start of their economic growth?

undemocratic governments