BUSI 3250 Test 3 (Ch. 7-9) Exam
Questions with Latest Update
Foreign environment - Answer-all the uncontrollable forces originating outside the home
country that surround and influence the firm
International environment - Answer-interaction between domestic and foreign
environmental forces or between sets of foreign environmental forces
Gross Domestic Product (GDP) - Answer-The total monetary value of all goods and
services produced within a nation
-measures overall economic output of a nation
-does not account for foreign flows of income and investment
Gross National Income (GNI) - Answer-The total value of all income generated by the
residents of a nation, including both the domestic production of goods and services and
income from abroad, as well as subtracting income paid to entities outside the nation
-Economists choose this over GDP as a common basis for assessing economic
development
Developing economies - Answer-A classification for the world's lower-income nations,
which have less technically developed infrastructures and lower living standards
-low and middle incomes
-Per capita GNI of <$12,056
Developed economies - Answer-A classification for high-income industrialized nations,
which have high living standards and the most technically developed infrastructure
-industrialized or postindustrial, service-based nations
-nations with high per capita incomes that support access to health care, education, and
other necessities
-per capita GNI of >$12,056
Emerging market economies - Answer-Economies with per capita incomes in the low to
middle range that are in a transition toward developed status
-subcategory of developing economies
-most prominent emerging economies: China, India (others: Brazil, Russia, Mexico,
Indonesia, Malaysia, south Africa)
Economic Indicators - Answer--GDP
-GNI
-Economic growth rates
-distribution of income
-personal consumption expenditures
-discretionary spending
, -unit labor costs
-level of national debt
GNI vs. GDP - Answer-most international organizations prefer GNI because GDP
measures only the market value of goods and services produced within a nation in a
particular year
GNI per capita - Answer-assesses purchasing power of a nation by dividing their total
GNI by the population
-generally, the higher this value the more advanced the economy
-rate of growth is also important to marketers
Purchasing Power Parity (PPP) - Answer-a means of adjusting the exchange rates for
two currencies so the currencies have equivalent purchasing power
-GNIs are traditionally both converted to US dollar to compare purchasing power; this
method is used instead of comparing based on demand for currency
-different than the official exchange rate
Atlas conversion factor - Answer-the arithmetic average of the current exchange rate
and the exchange rates in the two preceding years, adjusted by the ratio of domestic
inflation to the combined inflation rates of the euro zone, Japan, the United Kingdom
and the United States
-developed to reduce the impact of exchange rate fluctuations
-generally more stable over time
Underground Economy - Answer-The part of a nation's income that, because of
unreporting or underreporting, is not measured by official statistics
-goods and services that are legal (unreported income or assets)
-illegal goods and services (drugs, pirated copies of copyrighted music or video,
gambling, use of undocumented workers, human trafiicking, and prostitution)
-the higher the level of taxation and the more oppressive the government red tape, the
bigger the underground economy will be
Gold Standard - Answer-A monetary system that defines the value of a currency in
terms of a fixed amount of gold
-price of gold since AD 1200 has been generally going up
-Sir Isaac Newton established the price of gold in terms of British currency first
-simplicity of gold standard was its appeal
-discipline; does not allow governments to increase money supply
Bretton Woods System - Answer-The international monetary system in place from 1945
to 1971, with par value based on gold and the US dollar
-Bretton Woods, New Hampshire: post WWII monetary arrangements discussion.
Decided that stable exchange rates were desirable: established International Monetary
Fund (IMF)
-AKA gold exchange standard, fixed rate system
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