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WGU C211 Global Economics for Managers Exam|114 Questions and Answers| Graded A
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WGU C211 Global Economics for ManagersExam|114 Questions and Answers| Graded A
Explain the New, Evolutionary, and Pendulum views of Globalization. How do these
differ from one another? - -New globalization is a new force sweeping through the
world in recent times. Pendulum globalization is a pendulum that swings from one
extreme to the the other from time to time. Evolutionary globalization is a long
historical evolution since the dawn of human history.
-What is Foreign Direct Investment? - -Investment in controlling and managing value-
added activities in other countries.
-What different political views exist on FDI? - -Radical - hostile to FDI, roots to
Marxism, treates FDI as an instrument of imperialism and as a vehicle for exploitation
of domestic resources by foreign capitalists and firms.
Free Market - suggests that FDI unrestricted by government intervention will enable
countries to tap into their absolute comparative advantages by specializing in the
production of certain goods and services.. win-win logic FDI friendly polices Brazil,
China, Hungary, India, Ireland, Russia.
Pragmatic Nationalism - Practiced by most countries. Viewing FDI as having both pros
and cons and only aprroving FDI when its benefits outweigh costs.
-What benefits exist to a country receiving FDI? - -Capital inflow - can help improve a
host country's balance of payments
Technology - can create technology spillovers that benefit domestic firms and industries
Advanced managment - know-how may be highly valued.
FDI creates jobs both directly and indirectly. Direct benefits arise when MNEs employ
individuals locally. Indirect benefits include jobs created when local suppliers increase
hiring and when MNE employees spend money locally resulting in more jobs.
Repatriated earnings from profits from FDI. Increased exports of components and
services to host countries. Learning via FDI from operations abroad.
-What costs exist to a country receiving FDI? - --Loss of sovereignty because of
decisions to invest, produce and market products and/or to close plants and lay off
workers in a host country are being made by foreigners.
,-Adverse effects on competiton. May drive some domestic firms out of business. Having
driven domestic firms out of business MNE's in theory may be able to monopolize local
markets.
-Capital outflow when MNE's make profits in host countries and repatriate (send back)
such earnings to headquarters in home countries, host countries experience a net
outflow in the capital account in their balance of payments.
-How do resources and capabilities influence the competitive dynamics of a business? -
-Strong resources and capabilities help to compete and/or cooperate more effectively.
-What is resource similarity and how does this impact competitive dynamics? - -Extent
to which a given competitor possesses strategic endownment comparable, in terms of
both type and amount, to those of the focal firm.
-Give a description of the classical theory of international trade. - -Mercantilism,
absolute advantage, comparative advantage
-How would the modern theory compare to the classical theory? - -Modern Trade
Theories are 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 instead of relying on simple factor analysis, modern
theories rely on more realistic product life cycles, first-mover advantages, and the
"diamond" to explain and predict patterns of trade.
-Compare absolute advantage to comparative advantage. What differences exist? - -
Absolute advantage is the ability of an individual, firm or country to produce more of a
good or service than competitors when using the same amount of resources. (WinWin)
Comparative advantage is the ability of an individual, firm or country to produce a good
or service at a lower opportunity cost than other producers. (Opportunity cost)
-What is mercantilism and why is this an important term? - -An economic theory that
advocates government regulation of international trade. It is an important tool in
creating more wealth for by reducing the trade deficit. (Zero-sum WinLose)
, -What are the critical features of the product life cycle? - -New, maturing and
standartdized
First theory to incorporate dynamic changes in patterns of trade. More realistic with
trade in industrial products in the 20th century.
-How would you describe strategic trade? - -A theory that suggests that stategic
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 supply
of a currency is determined by the domestic demand for imports from abroad.
-Which theory came first, mecantilism or modern-day protectionism? - -Mercantilism
-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 (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. - -
Currency hedging- the practices of protecting traders and investors from exposure to the
fluctuations of the spot rate.
Strategic hedging- spreding out activites in a number of countries in different currency
zones to offset any currency losses in one region through gains in other regions.
-What advantages exist with the first mover? - -Benefits that accure to firms that enter
the market first and that late entrants do not enjoy, propriety technological leadership
and preemption of scarce resources.
-What advantages exist with the late mover? - -Benefits that accrue to firms that enter
the market later and that early entrants do not enjoy, opportunity to free ride on first
mover investments and resolution of technological and market uncertainty.
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