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C211 Global Economics Final Exam Latest Study guide 2023/2024

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C211 Global Economics Final Exam Latest Study guide 2023/2024 Top Examinable Questions (Guaranteed A+) Explain the New, Evolutionary, and Pendulum views of Globalization. How do these differ from one another? "New" view on globalization - A force sweeping through the world in recent times. "Ev...

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  • May 20, 2024
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  • 2023/2024
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C211 Global Economics Final Exam Latest Study guide
2023/2024 Top Examinable Questions (Guaranteed A+)
Explain the New, Evolutionary, and Pendulum views of Globalization. How do these differ from one
another?
"New" view on globalization - A force sweeping through the world in recent times.

"Evolutionary" view on globalization - A long-run historical evolution since the dawn of human history.

"Pendulum" view on globalization - One that swings from one extreme to another from time to time


*What different political views exist on Foreign Direct Investment FDI?*
Radical View, Free Market View, Pragmatic Nationalism

*answer includes radicalism*


What is Foreign Direct Investment?
Direct investment in, control, and management of value-added activities in other countries


What benefits exist to a country receiving FDI?
Capital Inflow, Technology Spillover, Advanced Management Know-How, Job creation


What costs exist to a country receiving FDI?
Loss of Sovereignty, Adverse effects on competition,
Capital outflow.


How do resources and capabilities influence the competitive dynamics of a business?
Resource similarity and market commonality can yield a powerful framework for competitor analysis.


*What is resource similarity and how does this impact competitive dynamics?*
The extent to which a given competitor possesses strategic endowment comparable, in terms of both
type and amount, to those of the focal firm.

*Firms with a high degree are likely to have similar competitive actions. (Starbuck's instant coffee &
McDonald's iced coffee)


Give a description of the classical theory of international trade.
Mercantilism, Absolute advantage, and Comparative advantage


How would the modern theory compare to the classical theory?
Modern - Dynamic
Classical - Static


Compare absolute advantage to comparative advantage. What differences exist?
Absolute advantage - The economic advantage one nation enjoys that is superior to other nations

Comparative advantage - The advantage one economic activity nation enjoys in comparison with
other nations (relative, not absolute)

, What is mercantilism and why is this an important term?
A theory that suggests that the wealth of the world is fixed and that a nation that exports more and
imports less will be richer.


*What are the critical features of the product life cycle?*
1. New stage: prod. of a new product (ex. TV) that commands a price premium will concentrate in the
USA, which exports to other developed nations.
2. Maturing stage: demand & ability to prod.; grow in other dev. nations (ex. Australia & Italy), it is
now worthwhile to produce there.
3. Standardized stage: the prev. new prod. is standardized (or commoditized).
Prod. will now move to low-cost dev. nations, which export to dev. nations. In other words,
comparative advantage may change over time.


How would you describe strategic trade?
Intervention by governments in certain industries can enhance their odds for international success.


*How are supply and demand related to the exchange rate of a country?*
The price of a commodity, a country's currency, is fundamentally determined by this. Strong demand
leads to price hikes; oversupply results in price drops.


Which theory came first, mercantilism or modern-day protectionism?
Mercantilism (although both are of the idea that governments should actively protect domestic
industries from imports and vigorously promote exports)


If a company seeks to limit foreign exchange rate exposure in the forward direction, what is the most
effective way to do this?
Forward transactions, an act know as currency hedging.


What is transaction risk?
The exchange rate risk associated with the time delay between entering into a contract and settling it.


Explain the concept of "hedging" as it relates to reducing various types of risk.
A transaction, such as forward transactions, that protects traders and investors from exposure to the
fluctuations of the spot rate.


What is the difference between currency hedging and strategic hedging?
Currency hedging - A way to protect traders and investors from being exposed to the fluctuations of
the spot rate

Strategic hedging - A means of spreading out activities in different currency zones in order to offset
the currency losses in certain regions through gains in other regions (currency diversification)


*What advantages exist with first mover?*
1. Proprietary, technological leadership
2. Pre-emption of scarce resources
3. Establishment of entry barriers for late entrants

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