C211 WGU- Global Economics for Managers
Final Exam – 2023/2024/880 Questions and
Answers/ Grade A.
Base of the pyramid (BOP) - -Economies where people make less than $2,000 per
capita per year.
-BRICA - -Brazil, Russia, India, and China.
-Emerging economies - -term that has gradually replaced the term "developing
countries" since the 1990s.
-Emerging markets - -A term that is often used interchangeably with "emerging
economies."
-Expatriate manager - -A manager who works abroad, or "expat" for short.
-Foreign direct investment (FDI) - -Investment in, controlling, and managing value-
added activities in other countries.
-Global Business - -Business around the globe.
-Gross national income (GNI) - -GDP plus income from non-resident sources abroad.
The term used by the World Bank and other international organizations to supersede
the term GNP.
-Gross national product (GNP) - -GDP plus income from non-resident sources abroad
-International business (IB) - -(1) A business (or firm) that engages in international
(cross-border) economic activities and/or (2) the action of doing business abroad.
-International premium - -A significant pay raise when working overseas.
-Liability of foreignness - -The inherent disadvantage that foreign firms experience in
host countries because of their non-native status.
-Multinational enterprise (MNE) - -A firm that engages in foreign direct investment
(FDI).
-Reverse innovation - -An innovation that is adopted first in emerging economies and
is then diffused around the world.
-Risk management - -The identification and assessment of risks and the preparation to
minimize the impact of high-risk, unfortunate events.
, -Scenario planning - -A technique to prepare and plan for multiple scenarios (either
high or low risk).
-Purchasing power parity (PPP) - -adjustment made to the GDP to reflect differences in
the cost of living
-The bottom billion - -Concentrated in Africa and Central Asia - 58 small countries,
stuck at the bottom in terms of growth, incomes and human development
-Enhance employability & advance career, better preparation to be expat, competence
in interacting with foreign suppliers/partners/competitors/employees - -Why study
global business?
-Formal rules - -requirements that treat domestic and foreign firms as equals enhance
the potential odds
for foreign firms' success or those that discriminate against foreign firms, would
undermine the chances for foreign entrants
-Informal rules - -cultures, ethics, and norms play an important part in shaping the
success and failure of firms around the globe
-Resource-based view - -A core perspective. Success and failure of firms is determined
by their environment
-New force in recent times, a long-running historical evolution, a pendulum swinging
between extremes - -What are the three views of globalization?
-"Four Tigers" - -Hong Kong, Singapore, South Korea and Taiwan
-Administrative policy - -Bureaucratic rules that make it harder to import foreign
goods.
-antidumping duty - -Tariffs levied on imports that have been "dumped" (selling below
costs to "unfairly" drive domestic firms out of business).
-Balance of Trade - -The aggregation of importing and exporting that leads to the
country-level trade surplus or deficit.
-Classical trade theories - -The major theories of international trade that were
advanced before the 20th century, which consist of (1) mercantilism, (2) absolute
advantage, and (3) comparative advantage.
-Factor endowment theory - -A theory that suggests that nations will develop
comparative advantages based on their locally abundant factors.
-Heckscher-Ohlin theory - -Another name for factor endowment theory
, -First-mover advantage - -Advantage that first movers enjoy and do not share with late
entrants.
-Free trade - -The idea that free market forces should determine how much to trade
with little or no government intervention.
-Import - -Buying from abroad.
-Import tariff - -A tax imposed on imports.
-Infant industry argument - -The argument that if domestic firms are as young as
"infants," in the absence of government intervention, they stand no chances of surviving
and will be crushed by mature foreign rivals.
-Modern trade theories - -The major theories of international trade that were advanced
in the 20th century, which consist of (1) product life cycle, (2) strategic trade, and (3)
national competitive advantage of industries.
-Opportunity cost - -Cost of pursuing one activity at the expense of another activity,
given the alternatives (other opportunities).
-Product life cycle theory - -A theory that accounts for changes in the patterns of trade
over time by focusing on product life cycles.
-Protectionism - -The idea that governments should actively protect domestic
industries from imports and vigorously promote exports.
-Resource mobility - -Assumption that a resource used in producing a product for one
industry can be shifted and put to use in another industry.
-Strategic trade policy - -Government policy that provides companies a strategic
advantage in international trade through subsidies and other supports.
-Strategic trade theory - -A theory that suggests that strategic intervention by
governments in certain industries can enhance their odds for international success.
-Subsidy - -Government payment to domestic firms.
-Tariff barrier - -Trade barrier that relies on tariffs to discourage imports.
-Theory of absolute advantage - -A theory that suggests that under free trade, a nation
gains by specializing in economic activities in which it has an absolute advantage.
-Theory of comparative advantage - -A theory that focuses on the relative (not
absolute) advantage in one economic activity that one nation enjoys in comparison with
other nations.
, -Theory of mercantilism - -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.
-Trade deficit - -An economic condition in which a nation imports more than it exports.
-Trade surplus - -An economic condition in which a nation exports more than it
imports.
-Agglomeration - -Clustering of economic activities in certain locations.
-Bargaining power - -Ability to extract favorable outcome from negotiations due to one
party's strengths.
-Demonstration (contagion or imitation) effect - -The reaction of local firms to rise to
the challenge demonstrated by MNEs through learning and imitation.
-Downstream vertical FDI - -A type of vertical FDI in which a firm engages in a
downstream stage of the value chain in a host country.
-Foreign portfolio investment (FPI) - -Investment in a portfolio of foreign securities
such as stocks and bonds.
-Free market view on FDI - -A political view that suggests that FDI unrestricted by
government intervention is the best.
-Horizontal FDI - -A type of FDI in which a firm duplicates its home country-based
activities at the same value chain stage in a host country.
-Intrafirm trade - -International transactions between two subsidiaries in two
countries controlled by the same MNE.
-Management control rights - -The rights to appoint key managers and establish
control mechanisms.
-Obsolescing bargain - -The deal struck by MNEs and host governments, which change
their requirements after the initial FDI entry.
-Pragmatic nationalism on FDI - -A political view that only approves FDI when its
benefits outweigh its costs.
-Radical view on FDI - -A political view that is hostile to FDI.
-Sunk cost - -Cost that a firm has to endure even when its investment turns out to be
unsatisfactory
-Upstream vertical FDI - -A type of vertical FDI in which a firm engages in an upstream
stage of the value chain in a host country.
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