WGU D080 UNIT 2 - Study Guide Questions & Answers (GRADED A+)

What is globalization? - ANSWER the growing global economic, cultural, and political integration and interaction what business opportunities are presented by globalization? - ANSWER economic growth, spread of technology and innovation, lower cost of products, access to new markets what are the economic effects of globalization? - ANSWER reduces cost of manufacturing, consumers have a wider variety of goods what are the political effects of globalization? - ANSWER reduced importance of nation-state governments (global institutions often replace or extend national functions to facilitate international agreement) what are the cultural effects of globalization? - ANSWER increased cross-cultural contacts, decrease in the uniqueness of once-isolated communities, global domination of American culture, erasure of other cultures what are some favorable arguments for globalization? - ANSWER spread of technology and innovation, lowered rates of poverty in developing nations what are some arguments AGAINST globalization? - ANSWER unemployment due to jobs moving overseas for lower production costs, significant increases in inequality between business owners and common people in developed nations what are the different forms of international business? - ANSWER 1. organizations (any company, large or small) 2. governmental organizations (embassies, consulates, NAFTA, etc.) 3. NGO's (non-governmental organizations such as non-profits and volunteer organizations - UNICEF, Greenpeace, World Wildlife Fund) what is the first stage of entering a global market? - ANSWER market entry - companies enter new countries using business models similar to the ones deployed in their home markets. what is the second stage of entering a global market? - ANSWER (product specialization), companies transfer the full production process of a particular product to a single, low-cost location and export the goods to various consumer markets. what is the third stage of entering a global market? - ANSWER (value chain dis-aggregation) - companies separate the production process and focus on completing each activity in the most advantageous location. (a single product might be manufactured in several different places and assembled into final products elsewhere.) what is the fourth stage of entering a global market? - ANSWER (value chain re-engineering) - increase cost savings by redesigning processes to suit local market conditions by substituting lower cost labor for capital. what is the fifth (and final) stage of entering a global market? - ANSWER (creation of new markets) - market expansion (allows companies to substantially lower their sticker prices in both old and new markets and to expand demand.) what are the four drivers of globalization? - ANSWER market, cost, competition, government how does market drive globalization? - ANSWER As customers in different parts of the world increasingly demand similar products and services, opportunities for scale arise through the marketing of somewhat standardized offerings. (example: technology products are relatively the same no matter what location - but soft drinks may vary depending on region or culture.) how does cost drive globalization? - ANSWER efficiency and costs vary from country to country and global firms can take advantage of this fact; opportunity to build global scale economies and the high product development costs how does competition drive globalization? - ANSWER High levels of trade, competitive diversity, and interdependence increase the potential for industry globalization how does government drive globalization? - ANSWER the presence or absence of favorable trade policies, technical standards, policies and regulations, and government-operated or subsidized competitors or customers what is the difference between the world is flat view and the CAGE analysis? - ANSWER The world is flat view is a metaphor for the playing field being flattened with an increasingly globalized community, with competitors having equal opportunities. The CAGE analysis sees Culture, Administration, Geography, and Economics as barriers to global activity. how does (G)geography act as a barrier, according to the CA(G)E analysis? - ANSWER as distance goes up, trade goes down what are some (C)cultural barriers, according to the (C)AGE analysis? - ANSWER language, norms, national or ethnic identity, levels of trust, tolerance, respect for entrepreneurship and social networks, or other country-specific qualities how does (A)administration create trade barriers, according to the C(A)GE analysis? - ANSWER the greater the administrative differences (laws, regulations, institutions, and policies) between nations, the more difficult the trading relationship is to acquire what are some of the (E) economic barriers, according to the CAG(E) analysis? - ANSWER differences between the countries relating to income, the purchasing power of the target market, distribution of wealth, and disposable income levels what are the benefits of global expansion from MNC's perspective? - ANSWER multinational companies claim that global expansion spreads liberty and capitalism, makes companies more competitive, and lowers prices for consumers what are some of the costs (disadvantages) of global expansion? - ANSWER weakening cultural values, power to influence governments, deregulation of climate change and pollution standards, increasing unemployment and inequality in developed nations due to outsourcing for lower production costs what is the type of government where a monarch has unmitigated power? - ANSWER absolute monarchy (example: Oman) what type of government has a sovereign that either exercises authority in accordance with a written or unwritten constitution, or acts as a figurehead without making open political decisions? - ANSWER constitutional monarchy (example: United Kingdom) what type of government has a small, elite group that ascends to positions of power because of military might, economic power, or similar circumstances? - ANSWER oligarchy (example: There is a general agreement that Russia is an oligarchy because after the fall of communism, groups of business owners captured control of the nation's natural resources and have used the opportunity to expand their wealth and political influence.) what type of government is held by a single person (or a very small group of people) who wields complete and absolute authority over a government and population? - ANSWER dictatorship (example: North Korea) (A totalitarian dictatorship is more strict and attempts to control all aspects of its subjects' lives.) what type of government strives to provide all citizens an equal voice, or vote, in determining state policy, regardless of their socioeconomic status? - ANSWER democracy (example: USA) what is the distinct difference between authoritarianism and totalitarianism? - ANSWER ideology. Authoritarian governments centralize all control in the hands of one strong leader or a strong small group of leaders Totalitarianism occurs when an authoritarian leadership is motivated by a distinct ideology, such as communism. what is the most common form of government around the world today? - ANSWER democracy what type of political system promotes a society in which all property is owned by everyone, private property doesn't exist, and the government controls the entire economy? - ANSWER communism When developing an economic system, what three questions must be answered? - ANSWER What to produce? How to produce it? Who gets it? what form of economy uses archaic methods of trade and exchange that are passed through generations, with little economic evolution or growth? - ANSWER traditional economy (example: Haiti—subsistence farming is widespread, and they rely on wood) what is one advantage of a traditional economy? - ANSWER All members understand their position in society and what they are expected to contribute. what is one disadvantage of a traditional economy? - ANSWER There is a lower standard of living. what type of economic system is devoted to goals passed down from a ruler or a ruling class? - ANSWER command economy (example: ancient Egyptians building pyramids for pharaohs) what is one disadvantage of a command economy? - ANSWER Following the rules, not innovation, is rewarded. In which type of economic system are goods and services are produced and distributed according to the rules of supply and demand? - ANSWER market economy what is one advantage of a market economy? - ANSWER Consumers pay for the things they want the most, and businesses produce the goods and services that will earn them a profit. what is one disadvantage of a market economy? - ANSWER There is a significant divide between the privileged and the underprivileged. Society must choose how to balance self-interest and protect the vulnerable. what type of economy borrows characteristics from different economic systems to bring about balance? - ANSWER mixed economies (mixed economies minimize the disadvantages of a market economy by having a more significant role for government intervention. This provides services such as public schools, mail systems, libraries, and banks.) which economic system adherents believe that the means of making, moving, and trading wealth should be owned or controlled by the workers? - ANSWER socialists (socialism also argues for redistribution of wealth through tax and spending policies that aim to reduce economic inequalities, and want social security plans in which workers contribute to a mandatory public insurance program.) what economic system advocates for minimum wages, employment protections, and trade union recognition rights for the benefit of workers? - ANSWER socialism what is a theoretical benefit of socialism? - ANSWER Socialism reduces disparity in wealth, not only in different areas, but also in all societal ranks and classes. Those who suffer from illnesses or who are too old to work are still provided for and valued by the government. what is a theoretical disadvantage of socialism? - ANSWER People lose the initiative to work and the enthusiasm to study because doing more is not rewarded. which economic system is based on private ownership of the means of production and on the creation of goods or services for profit by privately owned business enterprises? - ANSWER capitalism what is a theoretical benefit of capitalism? - ANSWER Prices are kept low by competition. what is a theoretical disadvantage of capitalism? - ANSWER Without any regulations, companies have significantly increased outsourcing of jobs to foreign countries for lower production costs, and subsequently caused unemployment rates to rise steadily in their home countries. Which type of law system is based on a code and focuses on how the law is applied to the facts? - ANSWER civil (The civil law system is an inquisitorial system where the judge investigates the facts of the case.) Which law is based on tradition and precedent given that judicial rulings can stand as precedents for future cases? - ANSWER common In common law systems, judges hear arguments from both parties and make a judgment. This judgment stands as precedent for future cases. Which law system can vary from community to community and is found in countries without strong formal justice systems? - ANSWER customary This is generally found at the tribal or local level, is based on longstanding local customs, and is often transmitted orally. In which law system does a judge decide the applicable law for the case as a jury determines the facts? - ANSWER common what is the form of international money, created by the International Monetary Fund, defined as a weighted average of various convertible currencies? - ANSWER special drawing rights (SDR) what international organization promotes global economic growth and financial stability, encourages international trade, and reduces poverty? - ANSWER International Monetary Fund (imf) Which activity of the International Monetary Fund (IMF) impacts policy-making? - ANSWER The IMF is owned and directed by the governments of the member nations. What is a characteristic of the International Monetary Fund (IMF)? - ANSWER The IMF is cooperative institution and is similar to a credit union for all member nations. What was the initial purpose of the International Monetary Fund (IMF) in phase one, prior to 1973? - ANSWER The initial purpose of the IMF was to regulate currency exchange between nations. what are some criticisms of the IMF? - ANSWER IMF remedies are not adequately tailored to each country's unique circumstances. These standard, austere (stern) loan conditions reduce economic growth and deepen and prolong financial crises, creating severe hardships for the poorest people in borrowing countries and strengthening local opposition to the IMF. How does the International Monetary Fund (IMF) impact international organizations and governments? - ANSWER It reduces funding for social programs. (The conditions put on the IMF loan require the recipient country to have a policy of austerity (stern quality). This policy usually results in a cut in funding for social programs.) What is a common name for the International Bank for Reconstruction and Development? - ANSWER World Bank is the common name for the International Bank for Reconstruction and Development. What was the first loan that the World Bank made after the end of World War II? - ANSWER The first loan made by the World Bank after World War II was used to rebuild the infrastructure of France. Which criticism is associated with the World Bank? - ANSWER The developed countries of U.S. and Europe have too much control over its decisions. Which criticism is made about the World Bank? - ANSWER One of the criticisms of the World Bank is it does not consider how funding projects will affect the environment. what are the two arms of the world bank? - ANSWER The International Bank for Reconstruction and Development (IBRD and the International Development Association (IDA). The IBRD was designed to finance economic development among its member countries. The IDA is funded by donations from member countries and is used to loan money to the poorest countries in the world. what international institution prioritizes building sustainable economic growth, investing in people, and building resilience for shocks and threats? - ANSWER the world bank Which organization was formed after World War II to encourage international commerce? - ANSWER The World Trade Organization was formed after World War II to encourage international trade by creating a mechanism to negotiate trade agreements. Which criticism is made about the World Trade Organization (WTO)? - ANSWER One of the criticisms of the WTO protects developed countries more than developing countries. Which strategic network was established to work towards decreasing tariff rates and protecting commerce and intellectual property globally? - ANSWER The WTO was established to work towards decreasing tariff rates and protecting the trade of goods, services, and intellectual property. what trade theory states that a country's wealth is determined by the amount of its gold and silver holdings? - ANSWER mercantilism In its simplest sense, mercantilism believes that a country should increase its holdings of gold and silver by promoting exports and discouraging imports. what revived theory of mercantilism emphasizes trade restrictions and commercial policies as means of increasing domestic income and employment? - ANSWER neo-mercantilism Country A exports more goods to Country B than it imports from Country B. Country A receives more monetary gain by using this practice. Which relationship does Country A have with Country B? - ANSWER Trade surplus is when a country exports more than it imports from another country. Country A has been criticized by other countries for giving generous tax credits to its corn farmers, which in turn, enables the country's farmers to sell corn on the international markets cheaper than all other countries. Which term is used by other countries to describe this practice? - ANSWER Government subsidies The farmers are getting payment in the form of tax credits. This creates an unfair advantage to the farmers of Country A. which trade theory focuses on the ability of a country to produce a good more efficiently than another nation? - ANSWER absolute advantage A farmer knows that it takes 100 hours of labor to produce 100 bushels of corn. It only takes 50 hours of labor to produce 100 bushels of soy. Currently, a bushel of corn is selling at three times a bushel of soy. Which type of cost should the farmer use to determine what to plant? - ANSWER Opportunity what occurs when one country can produce a good or service at a lower opportunity cost than another? - ANSWER comparative advantage what economic theory that proposes that countries export what they can most efficiently and plentifully produce, based on a country's production factors—land, labor, and capital? - ANSWER Heckscher-Ohlin Theory what theory is based on the idea that countries with similar qualities are most likely to trade with each other.? - ANSWER country similarity theory what obstacles make it difficult for a firm to enter a given market. (these may arise naturally because of the characteristics of the market, or they may be artificially imposed by firms already operating in the market or by the government.) - ANSWER barriers to entry A country produces goods more efficiently than all other countries in the same industry. Which type of advantage does this country have? - ANSWER absolute Which policy can a country implement to make another country's products more expensive than their own products? - ANSWER Tariffs An airplane manufacturer outsources the manufacture of some its parts and subassemblies. They are then returned to the manufacturer's main plant for final assembly. Which term describes the activity of this manufacturer? - ANSWER value chain Country A exports farming equipment to Country B, while Country B exports car manufacturing equipment to Country A. Both countries are highly developed and could develop these industries separately but instead made the decision to export and import these products from each other. Which unique condition caused this practice between the two countries? - ANSWER skill specialization A company produces the same product over and over, and it has caused the manufacturing cost of the product to become cheaper and more competitive in international markets than similar products in the industry. Which approach is this company using to achieve this ability? - ANSWER Economies of scale As the company repeatedly produces the same product, the scale (numbers of products produced) allows the company to make the products cheaper than competitors. what kind of tariffs are taxes on goods that are imported into a country? - ANSWER import tarriffs what kind of tariffs are taxes on goods that are leaving a country? - ANSWER export tariffs what kind of tariffs are tariffs levied to reduce imports of a product and protect domestic industrie