Final exam - GBE
Green economics advocates assessing what?
Economic performance in terms of the effect of current choices on long term sustainability
What anchors a market economy?
Capitalism and its advocacy of the private ownership of the factors of production
What are most members of the Organization for Economic Cooperation and development and EU, like Australia, Canada, Japan, New Zealand, Norway, Switzerland, and the United States
Developed countries
Why do managers study the economic environment?
To interpret its development, assess its performance, and estimate its potential
What is the typical range of the economic freedom score for the Repressed class and what are the representative nations?
0-49 Angola, Argentina, Belarus, Burma, Bolivia, Chad, Ecuador, Iran, North Korea, Turkmenistan, Venezuela, Zimbabwe
For some 400 emerging cities what is predicted to happen?
40% of global growth in the next 15 years Low cost resources, productive labor, expanding consumption, pro business policies and enterprising conglomerates power their emergence
How much of the gross world product do emerging economies generate?
50%
How much of the total world output do developing countries' economies generate?
10%
How many developing countries are there?
120 They span Africa, Asia, Eastern Europe, Latin America, South America and the Middle East
What is the typical range of the economic freedom score for the mostly unfree class and what are the representative nations?
50-59.9 Bangladesh, Brazil, Cambodia, Cameroon, China, Ethiopia, Fiji, Greece, India, Lebanon, Nepal, Nicaragua, Pakistan, Russia, Sri Lanka, Swaziland, Tunisia, Vietnam
Despite the benefits of economic freedom, how many countries out of the 180 rank as "free"?
6 Hong Kong Singapore New Zealand Switzerland Australia Ireland
What is the typical range of the economic freedom score for the moderately free class and what are the representative nations?
60-69.9 Azerbaijan, Belgium, Italy, Botswana, Ghana, Jamaica, Kazakhstan, Mexico, Kuwait, Morocco, Oman, Peru, Philippines, Rwanda, Saudi Arabia
What is the typical range of the economic freedom score for the mostly free class and what are the representative nations?
70-79 Canada, Chile, Columbia, Estonia, Israel, Lithuania, South Korea, St Lucia, Sweden, Taiwan, United States
What is the typical range of the economic freedom score for the free class and what are the representative nations?
80-100 Australia, Hong Kong, New Zealand, Singapore, Switzerland, Ireland
What does the track record for economic freedom in countries worldwide indicate?
A direct relationship with higher productivity, greater prosperity, and less poverty
What is gross domestic product?
A monetary measure of the market value of all the final goods and services produced in a period of time, often annually
What is socialism?
A system based on public ownership of the means of production and distribution of wealth
What is the measure of property rights?
Ability of individuals to accumulate, use, trade, and sell private property, protected and safeguarded by clear, specific, and explicit laws that are fully and fairly enforced by the state
What is capitalism?
An economic system characterized by private ownership, pricing, production, and distribution
What is a mixed economy?
An economic system characterized by some mixture of market and command economies; balances public and private ownership of factors of production
What is a market economy?
An economic system in which resources are allocated and controlled by consumers who "vote" by buying goods; emphasizes minimal government involvement
What is a command economy?
An economic system in which the political authorities make major decisions regarding the production and distribution of goods and services
What is state capitalism?
An economic system whereby the state decides how, when and where assets will be valued and resources allocated
What are the general characteristics of the repressed class?
An oppressive bureaucracy administers burdensome regulations Corruption is pervasive and endemic Foreign companies, if permitted navigate extensive barriers to entry and mobility Private property ownership is, at best, weakly protected, at worst, outlawed Supervision and regulation restrict, if not eliminate personal choice in the marketplace The state owns some to all property and directly produces goods and services Coercion and constraint pervade an unfair market system
Importance of balance of payments
Balance of payments is number you get that you can compare to other countries Whole Eu Not just a single number It can change over time Use how much is going up or down of the last couple years The lower the number the more money bringing out than bringing out Foreign direct investment can be great, if making in that country there is less need to import things to that country More going on the higher balance of payments bring more imports in
What is going on in the Emerging Economies: Comeback or Collapse?
Biggest economies will be in greater Asia Like China, India, Japan, Indonesia, and Russia Before it was in the West (Primarily in Europe and the US) After World War II began gaining speed in the east Emerging economies are applying more potent pro growth Some 400 midsize emerging market cities will produce about 40 percent of global growth over the next 15 years Many emerging economies are giving new perspectives on economic freedom and free markets Leading with state capitalism and authoritarianism Markets started leading early on in China but industrial revolution britain and other western areas boomed Emerging economies made up a bulk of the global output China has greatest share of goods US previously held that Trading partners US - 76 Trading partners China -124 China's One Belt One Road program 70% of global population 35% GDP 90 countries Commercial empire
What is the measure of fiscal health?
Extent that a government institute systematic policies that manage taxation, public revenues, and public debt to support and sustain stable economic conditions
State capitalism
China Do things that are all the way market or command Command control major corporations Enforce people to work there Some businesses some free - open a restaurant Government tells banks to make sure money flows to businesses they want to control
Who are the 10 largest economies by GDP?
China US India Japan Germany Russia Indonesia Brazil United Kingdom France
What are the big two emerging economies?
China and India
For the free class what are the characteristics?
Companies, both domestic and foreign, face none to few restrictions making or selling products Government institutes enforces extensive property rights Negligible government interference in the market place Slight corruption or risk of expropriation Government endorse openness to international trade and investment Regulation is minimal and centers on improving transparency, fairness, and firm conduct
For businesses what does economic freedom support?
Confidence in the legitimacy of property rights, liberty to use the factors of production, flexibility to organize goods and services, and protection from undue political interference Managers not the state, decide investments, allocate resources, hire and fire and compete with rivals
What are the general characteristics of the mostly unfree class?
Considerable state action interferes with individual choice Government owns or controls some to many companies Foreign companies are subject to cursive polices Regulations restrict repatriation of funds foreign headquarters Private use of capital faces significant barriers Laws are often opaque and arbitrarily enforced The court system is inefficient and subject to delays The state hinders the free flow of foreign commerce
What is foreign direct investment?
Controlling ownership in a business enterprise in one country by an entity based in another country Promotes development, job expansion, industrialization, and exports. Transfers skills and technologies
What is the measure of judicial effectiveness?
Degree that the judicial system impartially interprets the legal framework and justly applies the law in order to sustain the public's confidence that the legal system operates with an absence of bias against parties
What does the economic freedom index estimate?
Economic freedom in 180 countries worldwide Measures the degree that a nation accept's Adam Smith's thesis that "basic institutions that protect the liberty of individuals to pursue their own economic interests results in greater prosperity for the larger society
What are emerging economies?
Economies experiencing rapid growth, expanding industrialization, and improving standard of living
What are developed economies?
Economies marked by a comparatively higher standard of living, advanced technological infrastructure, and broader range of productive activities relative to developing economies High standard of living, social stability, long lives, educational opportunities, reasonable nutrition, advanced health care, public hygiene, and a variety of goods and services 41% of gross world product
What is a developing economy?
Economies typically marked by low industrialization and low standard of living relative to other countries: also referred to as less developed or underdeveloped countries
What does a mixed economy system combine?
Elements of the market and command economic systems; both government and private enterprise influence production, consumption, investment, and savings
What are the components of a limited government?
Fiscal health Government spending Tax burden
What does purchasing power parity control?
For differences in the relative cost of living between countries
Among monetary aggregates, what provides the broadest measure of economic performance
GNI
What is deflation?
General decline in prices often caused by a reduction in the supply of money or credit or declining aggregate demand Slows economic growth; anticipating lower prices, consumers defer purchases, thereby risking a deflationary spiral. Increases the real value of debt
What are the characteristics of a mixed economy?
Government and private ownership of economic resources mixed in varying proportion Advocates optimizing economic efficiency, promoting egalitarianism, and preempting self interest Philosophical anchor: communism
What are the characteristics of a command economy?
Government owns most or all resources Advocates centralized, large scale capital-intensive production Applies the invisible hand of the state, central planning, and collectivism Philosophical anchor: communism Low economic freedom
Managers improve the usefulness of economic indicators by adjusting the what?
Growth rate of the economy, The nation's population Local cost of living
What do developed economies generally have?
High income levels, advanced technologies, sophisticated infrastructure, high living standards, but slowing growth
What does higher growth in economic freedom support?
Higher personal income, more than double the worldwide average and four times higher than that in mostly unfree and repressed economies
What is the measure of government integrity?
How does corruption, in forms such as cronyism, extortion, graft, bribery, patronage, nepotism, and self-dealing, by creating insecurity, coercion, uncertainty, and opportunism, subvert economic transactions, activities, and relationships
What are the four principal components of the GNI?
Personal consumption, business investments, government spending and net exports of goods and services
What is the development level of a country centered on?
Improve living standard, increase per capita income, institute civil stability, and provide social amenities like education, medical care, social services
What do emerging economies exhibit?
Improving productivity, rising income, and growing prosperity, particularly relative to slower growing developing economies Accelerating growth in productivity, industrialization, and per capita income Financial systems, political institutions and market infrastructure steadily modernize Promotes foreign investments and growing exports, deregulation and privatization improve business efficiency and expanding opportunities encourage entrepreneurship Growing middle class
What is Laissez-faire?
The concept of minimal government intervention in a society's economic activity
For the moderately free class what are the general characteristics?
Inflexible, often rigid labor regulations Inward and outward capital movements face restrictions Moderate government interference in economic affairs Regulations are somewhat burdensome and costly The government exercise ownership and control of significant economic sectors The judiciary may be unduly influenced by public officials and private agents
What are the components of regulatory efficiency?
Labor freedom Business freedom Monetary freedom
Richer countries typically regulate business activities _______. Poorer countries typically regulate them _____.
Less, more
For the mostly free class what are the general characteristics?
Limited state interference in the movement of labor, capital, and goods Property rights are acknowledged and protected Foreign companies are subject to few discriminatory restrictions Judicial system is subject to delays and may inconsistently enforce contracts Corruption is unusual: the risk of expropriation is low Sizable government ownership of companies in key sectors
Generally what do developing economies have?
Low incomes, limited industrialization, basic infrastructure, challenging living standards, and chronic civil difficulties Inefficient capital movement, suspicions of foreign ownership, trade barriers, imperfect competition, and patchy infrastructure Corruption, cronyism, and crime complicate efforts to regulate society consistently or implement prudent policies Strong communities and social ties, extraordinary self sufficiency Higher infant mortality, shorter life expectancy, lower literacy levels, poorer public hygiene, insufficient health care, and inadequate nutrition
What is the measure of monetary freedom?
Measure of price stability and scale and scope of price controls in terms of their support and distortion of market activity
What are the characteristics of a market economy?
Mostly private (individual or business) ownership of resources Advocates decentralized, entrepreneurial innovation Applies the invisible hand, laissez faire, property rights, and individualism Philosophical anchor: capitalism
What has been the dominant trend for developed economies in regards to factories?
Offshoring manufacturing to higher productivity factories in lower cost emerging and developing countries
What are the components of rule of law?
Property rights Government integrity Judicial effectiveness
Managers watch key events to gauge the contest between economic freedom and state control. These include how the government?
Regulates the economy Protects property rights Sets fiscal and monetary policies Promotes transparent decision making
What is balance of payments?
Summary of an economy's trade and financial transactions, as conducted by individuals, businesses and government agencies, with the rest of the world Indicates if a country has sufficient savings to pay for its imports as well as if it produces enough income to finance growth
What average freedom scores are higher for developing and emerging countries?
Tax burden Government spending
What does green economics argue?
That fully measuring growth, progress, prosperity calls for assessing the consequences of economic choice on sustainability and stability
What does economic freedom hold?
That one has the right to work, produce, consume, save, and invest in the way that one prefers
Sustainability and stability perspectives hold what?
That the objective of economic activity is to create an environment for people to enjoy long, healthy and happy lives
What is economic freedom?
The "absolute right of property ownership, fully realized freedoms of movement for labor, capital, and goods, an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself Diffusing economic decision making from the state throughout the economy and, in doing so, empowering ordinary people with more opportunities and more choices.
What is sustainability?
The ability to meet the needs of the present without compromising the ability of future generations to meet their own needs, while taking into account what is best for the people and the environment
What is economic freedom?
The absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty
What does economic freedom measure?
The absence of government constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty
What is the measure of investment freedom?
The absence of investment restrictions, such as burdensome bureaucracy, private property regulation, and foreign exchange controls, that complicate or control an individual's choice to allocate resources to activities and opportunities
What is the base of the pyramid?
The billions of people living on less than a few dollars per day yet who some see as the next market frontier of the global economy
What is the measure of government spending?
The burden imposed on the economic system by the monies spent by government agents in acquiring goods, providing services, and transferring income payments to its citizens
What is income distribution?
The distribution of income among a nation's population; estimated by the GINI coefficient
What does the greater the degree of economic freedom mean?
The greater freedom of an individual has to decide how to work, produce, consume, save, invest, and innovate.
What does a market economy endorse?
The ideals of economic freedom, the doctrine of capitalism, and the principle of the invisible hand
What is the measure of financial freedom?
The independence an individual or company attains that buffers, deffends, and protects them from interference by government agents, officials and policies
What is the base of the pyramid in regards to people?
The largest, but poorest, socioeconomic group in the world
What is the measure of labor freedom?
The legal codes and regulatory polices that influence workers' rights in the workplace on matters such as occupational safety and health, wages and hours of work, collective bargaining, and employment discrimination
What is the measure of business freedom?
The legal, regulator, infrastructure contexts that influence an enterprise's efficient management of matters such as the ease of starting, operating, and closing a business
What is the measure of trade freedom?
The openness of an economy to the export and imports of goods and services as moderated by the scale and scope of tariff and nontariff barriers applied by the government to regulate trade
What does an economic system organize?
The production, distribution, and consumption of goods and services
What is the measure of tax burden?
The proportion of total income and profits that residents and companies pay, in the form of taxes such as income, payroll, consumption, tariff, sales, and property, to the local, state, regional, and federal government
What is the misery index?
The sum of a country's inflation and unemployment rates. The higher the sum, the greater the economic misery Higher misery discourages spending and investment in the face of growing austerity
What is inflation?
The sustained rise in consumer prices against a standard level of purchasing power Influences interest rates, living costs, consumer confidence, and ultimately, political stability
What is an economic system?
The system concerned with the allocation of scarce resources
What is the economic freedom index?
The systematic measurement of economic freedom in countries throughout the world; sponsored by the Heritage foundation and the Wall Street Journal
What is gross national income?
The total domestic and foreign output claimed by residents of a country, consisting of gross domestic product, plus factor incomes earned by foreign residents, minus income earned in the domestic economy by nonresidents
What is the GDP?
The total market value of goods and services produced by workers and capital within a nation's borders; it provides the truest measure of a nation's economic activity
What is Gross national product?
The total of incomes earned by residents of a country, regardless of where the productive assets are located
What is GNP?
The total value of all final goods and services produced within a nation in a particular year
What are the components of open markets?
Trade freedom Investment freedom Financial freedom
What are Green economies?
Transdisciplinary field that studies the interdependence and coevolution of human economies and natural ecosystems
What are the 10 largest economies by GDP?
United stats China Japan Germany India France United kingdom Italy Brazil canada
What are examples of a shadow economy?
Unlicensed shuttle, covert payoffs, travel visa violations, under the table activity, unregistered day care centers, and similar sorts of shady transactions
In the command economy what controls the market?
Visible hand - government
Are there variations in income throughout the world?
Yes Singapore, developed country makes 54K US on average makes 40K Chad, Uganda, Tajikistan make 744 - developing country
