Sdsu Ba-310 Pennington Exam #2

Front 1

Democracy

Back 1

Form of government in which all citizens have the right to vote

Front 2

Athenian Democracy

Back 2

A pure form of democracy, in which all adult citizens vote directly on matters affecting the community

Front 3

Representative Democracy

Back 3

Form of government in which citizens vote to elect given individuals to serve as their representatives for a certain period of time

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Totalitarian Government

Back 4

System of government in which individuals govern without the support or consent of the citizenry; for example, a military dictatorship

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Communism

Back 5

The government or state owns and controls all major factors of production and philosophically an economically classless society

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Socialism

Back 6

The government plays a strong role in the economy and may own stakes in certain businesses

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Capitalism

Back 7

Businesses are privately owned, strong individual incentives exist, and the government plays very little role in the economy.

Front 8

Do you think, overall, that countries in the world are becoming more democratic, or less democratic, in nature? Why?

Back 8

With the fall of communism probably somewhat more democratic in nature.

Communist: China (declining)

Socialist: China, Denmark, Sweden, Finland

Capitalism: USA

Front 9

Based on the type of government, which countries are doing much better and progressing more than others in comparison?

Back 9

Democratic Countries

Front 10

Are there any places in the world, today, where "pure", "free market" capitalism exists? If so, what is it about these locations that permits this ideological approach to thrive?

Back 10

Hard to find, maybe a country like Singapore with a very stable political structure.

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Civil Law Legal System

Back 11

Based on a comprehensive listing of legal rules in sets of written codes of law

Front 12

Common Law Legal System

Back 12

Compromised of legislative bodies that enact less specific legal rules that give judges or courts considerable authority in interpreting these rules based on precedent and other factors.

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Theocratic Law Legal System

Back 13

Based on religious documents and teachings

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Political Risks

Back 14

The risks that political forces or problems in a given country will have a meaningful negative impact upon the conduct of business in that country

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Micropolitical Risk

Back 15

A political risk that only affects a certain industry or set of firms in a given country

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Macropolitical Risk

Back 16

A political risk that essentially affects all businesses in a given country

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How can we avoid risk?

Back 17

Through careful planning and research

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Terrorism Risk Insurance Act of 2002

Back 18

U.S. law that after a certain deductible provides U.S. businesses government insurance coverage for the risk of terrorism

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Overseas Private Investment Corporation (OPIC)

Back 19

U.S. government agency that sells political risk insurance to U.S. businesses operating in countries with which the U.S. has a bilateral investment treaty

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Corruption

Back 20

A situation where businesses are able to illegally alter relevant private and/or public decision making by way of bribes, kickbacks, blackmail, extortion, and related activities

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Private Corruption

Back 21

Business corruption involving other private businesses, individuals, or groups

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Public Corruption

Back 22

The practice of making illegal payments to government officials or engaging in blackmail, extortion or other related activities to obtain government contracts or governmental approval for business activities

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What are the different types of laws?

Back 23

>Criminal

>Contract

>Tax

>Antitrust

>Product Safety

>Dispute Settlement

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Criminal Law

Back 24

Establishes which violations of a nation's laws are crimes punishable by possible incarceration

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Contract Law

Back 25

Governs legally enforceable agreements between parties to engage in economic exchange

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Tax Law

Back 26

Deal with governmental levying of taxes on individuals and corporations

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Antitrust Law

Back 27

Promote "fair competition" among businesses

Front 28

Collusion

Back 28

The practice of companies acting in a manner which secretly thwarts competition amongst themselves

Examples: Dividing up markets; collaborating to fix prices on goods and services

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Monopoly

Back 29

The situation where there is only a single seller of a product in an industry and there are very high barriers to enter that industry

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Product Safety Law

Back 30

Establishes the standards of product safety to which the manufacturers and sellers of products are held

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Caveat Emptor

Back 31

"Buyer Beware"

Places the burden of determining product safety on consumers

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Caveat Venditor

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"Seller Beware"

Places on manufacturers or sellers the burden of making sure their products are safe or at least clearly and explicitly warning consumers about the potential safety risks of their products

Front 33

How do we settle disputes?

Back 33

>Dispute Settlement Law

>Litigation

>Arbitration

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Dispute Settlement Law

Back 34

Governs how disputes arising in the conduct of global business are settled

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Litigation

Back 35

Involves bringing a dispute to a publicly or governmentally run court of law for resolution

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Arbitration

Back 36

The disputing parties designate a neutral private person or group of persons to hear and decide their dispute

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Mediation

Back 37

Person who acts on behalf of both party

>Not right or wrong

>Focuses on win-win situation

Front 38

Intellectual Property

Back 38

Property that is the product of intellectual rather than physical activity

Front 39

Intellectual Property Protections

Back 39

The limited monopoly rights legally granted by a nation to the creator of intellectual property

Front 40

What are the three main intellectual property protections?

Back 40

>Patent

>Trademark

>Copyright

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Patent

Back 41

Protects inventor's product or process from others selling, making, or using the invention for a certain period of time

Front 42

Trademark

Back 42

Distinct phrase, name, word, picture, symbol, design, or combination of these, that identifies a given business' service or product and is owned by said business

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Copyright

Back 43

Protects creator's creative work (book, film, art, music, etc)

Front 44

Genericized Trademark

Back 44

Trademark that has become so well known or colloquial that it now describes a general class of product or service, as opposed to a specific product or service as intended by the trademark's owner

Front 45

What are some arguments in favor of permitting at least some levelof “corruption” in the conduct of business throughout the world?

Back 45

It's almost impossible to completely detect and prevent.

Front 46

Criminal laws vary widely throughout the world. What may be a“crime” in one country, may represent permissible conduct in another locale.Why do you think there are such vast global differences in this regard?

Back 46

Different cultural roles and ideologies in different places in the world

Front 47

What are some steps countries can take to better enforceintellectual property rights in their jurisdictions?

Back 47

Better police/customs agents and other enforcement mechanisms

Front 48

Balance of Payment

Back 48

A statement of account that shows all transactions between one country and the rest of the world for a given period of time.

Front 49

The Current Account (of the BOP)

Back 49

Largely driven by activities of consumers and business

>consists of 4 sub-accounts (added up equals current account balance)

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Trade Balance

Back 50

The net of merchandize exports and merchandize imports

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When does a country have a trade deficit?

Back 51

When a country imports more than it exports

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Services Balance

Back 52

The net of exports of services and imports of services

Front 53

What does a surplus in the services balance indicate?

Back 53

It indicates that a country is competitive in its services industry

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Income Balance

Back 54

The net of investment income from abroad and investment income paid to foreigners

Front 55

Balance of Transfers

Back 55

The net transfer payments between countries based on outflows and inflows

Front 56

What is more important: current account balance or trade balance?

Back 56

Current Account Balance

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Financial Account

Back 57

Shows how the country's current account balance is financed

Front 58

What are the three sub-accounts of the Financial Account of the BOP?

Back 58

1. U.S.-owned assets abroad, foreign-owned assets in the U.S., and financial derivatives

Front 59

Foreign Direct Investment (FDI)

Back 59

Encompasses the purchases of fixed assets abroad used in the manufacture and sales of goods and services for local consumption or exports.

Front 60

How is the flow of Foreign Direct Investment (FDI) dictated?

Back 60

It is dictated by opportunities to earn profit overseas.

Front 61

Security Investment

Back 61

>Has a significant impact on the BOP's financial account

Front 62

Statistical Discrepancy

Back 62

Reconciles any imbalance to ensure that all debit and credit entries in the BOP statement sum to zero

>captures statistical inconsistencies in the recording of the credit and debit entries as well as illegal trade

Front 63

What does capital flows represent and why does capital flow between countries?

Back 63

Represents investments for the long term

>Financial Capital flows between countries in search of higher rates of return on foreign stocks and bonds

Front 64

What holds foreign exchange of major countries? Why?

Back 64

Central Banks hold foreign exchange of major countries

>Part of their reserves in addition to their local currency.

Front 65

TRUE OR FALSE: In flow of funds analysis, money moving into a country is a debit (negative sign), while money leaving the same country is a credit (plus sign).

Back 65

False.

Front 66

TRUE OR FALSE: One factor affecting change in currency values is different price levels in different countries for the same goods and services.

Back 66

True.

Front 67

What are some reasons why currency values can change?

Back 67

1. Different price levels in different countries for the same goods and services

2. Price imbalances due to mispricing

3. Varying interest rates across countries

4. Price imbalances due to differential inflation

Front 68

Balance of Payment

Back 68

Statement of account that shows all transactions between one country and the rest of the world for a given period of time

Front 69

Current Account

Back 69

Activities of consumers and businesses in the economy

Front 70

What are the four types of Current Account?

Back 70

1. Trade Balance

2. Services Balance

3. Income Balance

4. Net Transfers

Front 71

Financial Account

Back 71

How the account balance is financed

Front 72

What are the three types of Financial Account?

Back 72

1. U.S. Assets Abroad

2. Foreign Assets in the U.S.

3. Net Financial Derivatives

Front 73

What are the three types of Exchange Rate Systems?

Back 73

1. Floating Exchange Rate System

2. Managed Floating Exchange Rate System

3. Fixed Exchange Rate System

Front 74

Floating Exchange Rate System

Back 74

Determined by the demand and supply of currencies

Front 75

Managed Floating Exchange Rate System

Back 75

Government intervention (e.g. Russia, India)

Front 76

Fixed Exchange Rate System

Back 76

Pegged to another currency (e.g. Malaysia)

Front 77

Exchange Rate

Back 77

Price at which one currency can be converted to another currency

Front 78

What are the two types of FOREX Markets?

Back 78

1. Spot Market

2. Forward Market

Front 79

What's the difference between Spot Market and Forward Market?

Back 79

Spot is real time rate where Forward Market is previously established rate

Spot is Immediate delivery where Forward is in the future

Front 80

What are the Spot Rates?

Back 80

>Direct Quotes: Prices of a foreign currency in dollars

>Indirect Quotes: The reciprocal of the direct quote

>Bid-Ask Spread: Transaction fee earned by bank; difference b/t bid (buy) and ask (sell) prices of a currency

Front 81

When does discount selling occur?

Back 81

When...

Spot Rate < Forward Rate

Front 82

When does premium selling occur?

Back 82

When...

Spot Rate > Forward Rate

Front 83

Smithsonian Agreement 1971

Back 83

>U.S. devalued the dollar against other's currencies

>Temporary regime of central rates by IMF

Front 84

Jamaica Agreement (1976)

Back 84

>Floating currencies, gold no longer a standard

>Countries adopted exchange rate systems

>Members adopted SDR (Special Drawing Right)

Front 85

Money and Inflation

Back 85

>Printing more money can increase economic activity
>Excess supplies of money could cause inflation

>When supply of money exceeds demand for goods and services, prices of goods and services can rise

Front 86

Bretton Woods Agreement

Back 86

Slide 26 of Week 10

Front 87

Special Drawing Right (SDR)

Back 87

>Primary reserve asset of international monetary system

> Basket of currencies (dollars, euros, pounds, and yen) used a benchmark to value different currencies

Front 88

Dollar, Euro, and Yen account for how much percentage of the world economy?

Back 88

60%

Front 89

Clean Float

Back 89

Currency monetary system with minimal government intervention; largely market determined

Front 90

Dirty Float

Back 90

Currency monetary system with varying degrees of government intervention to maintain a range of acceptable values against other currencies

Front 91

What are the potential problems with valuing or devaluing currencies?

Back 91

Liabilities denominated in foreign currency, while assets denominated in local currency

Front 92

Hard Currencies

Back 92

Leading world currencies of developed industrialized countries, including dollar, euro, yen, and pound

Front 93

Soft Currencies

Back 93

Emerging market countries' currencies that are less stable in value than

Front 94

Dollarization

Back 94

Practice of using the dollar or some other foreign currency together with, or instead of, a domestic currency in a country

Front 95

Purchasing Power Parity (PPP)

Back 95

Theory stating that a basket of goods should have approximately the same prices across different countries

Front 96

Law of One Price

Back 96

Principle stating that identical goods should sell for the same price in different countries according to local currencies

Front 97

The Big Mac Index

Back 97

Calculation using the cost of a Big Mac sandwich to assess the relative values of currencies

Front 98

The difference between forward and spot exchange rates reflects expectations by investors about future exchange rate movements.

Back 98

True

Front 99

According to the Big Mac Index, the dollar interest rate on U.S. and European bonds should be the same. Otherwise, there would be no arbitrage opportunities for investors.

Back 99

False. It regards to the ingredients and is FAR from being related to bonds.

Front 100

__________________ encompasses purchases of fixed assets (such as factories and equipment) abroad used in the manufacture and sales of goods and services.

Back 100

Foreign Direct Investment

Front 101

A system that sets the values of major currencies based on their demand and supply in world currency markets are referred to as a(n) ______.

Back 101

Independent Floating Exchange Rate System