Study Questions for Chapters 1-2-3 (Introduction, Cultural Systems, Political Economy)

Remember: Questions from assigned cases listed on the syllabus, cases mentioned in the following study questions are "fair game" for the exams.

1. What does globalization of the world economy mean ... How is it defined?

2. What are the basic principles of a global philosophy?

3. What factors have helped to globalize the world economy? Why/How/Impact?

4.  What is democratization of technology, finance and information?  Give examples.

5.  What are the differences between the three stages of globalization: Globalization 1.0, 2.0 and 3.0?
 
6. How does a domestic business differ from international business?

7. Define/explain the international contextual analysis model.

8.  Describe/explain the basic political ideologies. Compare/contrast how they can influence a firm decisions.

9.  What types of policies can management formulate and implement to deal with the political environment?

10. What are the political risks that firms face and the impact on business firms?

11. What are the components of the political economy?

12.  What are the building blocks of democracy?

13.  As an analogy, how does a computer system compare to economic systems?

14.  What are the three parts of any economic system using the computer analogy?

15.  What are the components of the "golden straight jacket"?

16. What are the basic economic systems and what are the questions that the each economic system tries to address?

17.  Demonstrate a basic understanding of purchasing power parity.

18.  Identify and define the macroeconomic variables.  How do these variables affect business decisions.  How can a firm react to changes in these variables or guard against negative impacts?

19.  How do nations make a transition to a market economy?  What is required?  How successful have past transitions been relative to China and Russia?  What are the future issues for transitioning nations?

20.  What are the components of a cultural system?

21.  What is the difference between ascribed and acquired group membership? 

22.  Define the different ways in which a nation stratifies its population.  Give examples.

23. What are the main religions in the world? What are their main beliefs? How do these beliefs affect attitudes to work, entrepreneurial ability and the costs of doing business?

24. What are values, norms, folkways? How can they affect the costs of doing business for a firm outside its home country?

24. Explain the Social Organization/Social Stratification matrix. How do the various options affect the ability of business to operate? How does it affect productivity?

26. Explain Geert Hofstede’s cultural model and its components and results. What are the weaknesses of the model? What are the implications for business?

27. What strategies can firms use to deal with cultural differences?  What are the costs involved?

28. What are the components of the legal system? What are the differences between civil, theocratic and common law?

29. What are the key factors that determine the long run potential benefits of doing business in a country?

30. What are ethnocentrism/polycentrism/geocentrism and how may the practice of each of these impact businesses locating in countries outside of their home country? 

31.  What are the strategies that a firm can use to institute change in the global environment?
 

Study Questions for Chapters 4-9-10 (Trade Theories, Political Economy of Trade and Applications)

Remember: You need to be comfortable with terminology from your principles of economics courses:  shortage/surplus, economic rent, economies of scale, consumer surplus, producer surplus, dead weight loss, marginal social cost, marginal social benefit, game theory, prisoner's dilemma, externalities, market failures, elasticity and graphical analysis and applications.

1. Identify the trade theories including what are the components, how does the theory work to explain/predict trade patterns, what are assumptions upon which the theory is based, what are the advantages/disadvantages, etc. Look for similarities and differences among and between competing theories.

2. Interpret graphical representations of gains/losses from trade.

3. What are the reasons why countries don’t trade? Are there any economic justifications for not trading?

4. Identify the tools of protection/trade policy instruments and how they prevent or discourage trade.

5. Compare/contrast the  gains/losses, costs/benefits, welfare effects from tariffs, quotas, subsidies, VAR using graphical analysis (supply and demand), and local content requirements

6.  What is the case for free trade? 

7.  What is the political argument for free trade?

8.  Describe the national welfare arguments against free trade.

9.  What is the "theory of second best"?

10.  Why do specific groups get "protected"?

11.  What is the WTO and its structure and purpose and its impact upon global businesses?  What are some of the new issues facing the WTO?

12.  What was GATT?  What were the major provisions of the "rounds" of trade negotiations?  What were the costs/benefits?

13. What is the "specificity rule" and how does this apply to answering the question: Is trade policy the best option for achieving macroeconomic goals?

14. How does trade affect the distribution of income and factor prices?

15. What are the major issues involving government trade policy? Why might they fail?

16. What are the pros/cons surrounding protectionism?

17.  What is meant by levers, ratchets and binding agreements relative to trade?

18.  Explain the theory of country size and the country similarity theory.

19,  What role does natural and acquired advantage have in trade?

Study Questions for Chapter 13-14 (Regional Economic Integration)
 

1. What are the differences/similarities between/among a free trade association (FTA) , customs union, common market, economic union and economic integration? What are the benefits/disadvantages?

2. What is the historical development of the EU including the Treaty of Rome (1958), Customs Union (1967), Single European Act (1986), EMS/ERM (1979) and the Maastricht Treaty (1994)? What were the objectives of each? What were the problems?

3. What is the institutional structure and functions of the EU?   What are the proposed changes?

4.  Describe the deepening and widening process of the EU.

5. What are the issues regarding expansion of membership into the EU?

6. Define trade creation and trade diversion with respect to regional economic integration? What is the evidence of success of trade integration considering trade creation/diversion relative to the EU?

7. What are the concerns, issues, problems for the EU as it goes into the final stage of economic integration?

8. What are the macroeconomic and microeconomic effects triggered by EU market integration?

9. What is the historical development of the NAFTA?

10.  How does intra-industry trade with Canada affect productivity?

11.  Who were the supporters? Who opposed the treaty? Gainers?  Losers? ... for NAFTA

12. Who are the member nations of the NAFTA? What did each country expect to gain? Lose?

13.  What did Canada/Mexico hope to gain from NAFTA?

14. What were the objectives of the NAFTA?

15. If GATT’s explicit goal is the removal of trade barriers, why do countries enter into free trade area agreements?

16. What has been the results of NAFTA trade-related employment?

17. What are the environmental and immigration issues relative to NAFTA?

18.  What are the issues relative to expansion for both NAFTA and the EU?

19.  What's the significance of the DeLors report? 

20.  What is the 1992 Initiative and it's significance relative to the EU's formation?

21.  Explain subsidiarity and give examples.

Study Questions for Chapters 5-6 (Foreign Direct Investment - FDI)
 

1. How is FDI defined?

2. Why/how do firms go about investing directly in other countries? What form can it take?

3. What are the theories that would explain the nature of FDI?  What are the basic components of the model, what are the advantages/disadvantages, etc? How useful are they to business?

4. How does FDI stack up against exporting, licensing/franchising, joint ventures as a way to participate in the global economy? What are pro/cons of each of these alternatives? How do each of these options affect the costs of doing business?

5. How does FDI affect employment in host/source countries? How does it differ in the long run vs the short run?

6. What is the Balance of Payments? Explain its components and how it operates.

7. What is the impact of FDI on the host/source country’s balance of payments? Are there long and short run implications?

8. How does FDI affect resource transfer for both host and source countries?

9. What’s the implication for national sovereignty for host/source countries relative to FDI?

10. What the implication for taxation and transfer pricing relative to FDI for both host and source countries?

11. What types of strategic policy can government implement to limit or encourage inward or outward FDI? What forms can it take?  What are the consequences for the macro economy? What are the tradeoffs?

12. What are the implications for business when pursuing FDI?

13. Why doesn’t the market work well for selling know-how?

14.  Why is control a major issue in FDI?  What options to firms have to maintain control?

15.  What are the 3 main objectives of FDI and how do firms achieve these goals?

16.  What is the significance of rationalized production?

Study Questions for Chapter 16 ( Worker Mobility: Migration and Immigration)

1.  What are the determinants of worker mobility?

2.  What explains the direction of human capital?

3.  Explain the human capital theory.

4. What has happened to the cost of migration over time?  Why?

5.  How does the personal characteristics of those who migrate affect a firm's location decisions?

6.  What are the costs and benefits of immigration to the host and source nations?  Who are the winners/losers?

7.  What is the impact of immigration on standards of living and economic growth?  Why?

8.  What are the supply side effects of immigration for the host and home countries?

9.  What are the immigrants' effect on the demand for labor?

10.  How do immigrant remittances effect the winners/losers?

11.  What effect does the brain drain have on home and host countries?

12. What are the push, pull, stay and stay-away factors that affect the immigration decision?

13.  What are the exit and entry barriers?

Study Questions for Chapter 12 (Euro and Monetary Union)

1. Why a single currency?   How did it evolve?

2.  How did the EMS work?  What were the advantages/disadvantages?

3.  What was the 1992 Initiative? 

4.  What was the motivation for dropping the EMS and adopting a single currency?

5. Is there a theoretical foundation for a single currency? What is it?

6. For a single currency to be successful, what’s needed according to Robert Mundell?  How do these concepts apply to the EU?

7. What are the benefits/costs of having one currency? 

8. How will the euro affect the micro/macro economies?

9. What is be the structure, role, responsibilities, benefits/costs of the central bank?

10. What are the five criteria for entry into the single currency?

11.  What's the future outlook for the Euro?  What are the potential problems?

12.  How is Norway used as an example of the costs/benefits of joining the one currency area?

13.  What are the anticipated economic effects of the Euro?
 

Study Questions for Chapter 7-8 (Foreign Exchange Market)

1. Define: exchange rate, foreign exchange market, appreciation, depreciation, spot exchange rate, forward exchange rate, currency speculation, currency swap, arbitrage, efficient market?

2. What are the attributes of a foreign market?

3. Why do international businesses use foreign exchange markets?

4.  Who are the major players in the foreign exchange markets?

5.  What are the major foreign exchange instruments?

6. What is the Law of One Price? What is the Theory of Purchasing Power parity? How do these affect the exchange rate in the long run? What other factors can affect the exchange rate in the long run?

7. What factors affect the exchange rate in the short run?

8. What is the primary difference between an efficient and inefficient market and how does this affect a firm's decision to invest in an exchange rate forecasting service?

9. What will happen to a currency if the foreign exchange markets believe that a currency is over-valued? Undervalued?

10. What is a vehicle currency? What is the purpose, importance of being one?

11. What is the relationship between inflation (price level) and the exchange rate?

12. What is the relationship between interest rates and exchange rates?

13. What is the relationship between economic growth and the exchange rate?

14. What is the relationship between a country’s budget deficit and exchange rates?

15. What is the relationship between a country's money supply and the interest rate and the exchange rate?

16. What is the Fisher equation/effect? What is the application of the International Fisher Effect?

17. What does convertibility of currency mean? Why would governments impose convertibility restrictions on its currency?

18. What is the relationship between a country’s money supply and the growth in the price level (inflation) and the growth in productivity?

19. What is the role of the central bank in foreign exchange?

20.  What is the impact of foreign exchange markets on the firm and the macro economy?
 

Study Questions for Chapter 11 Global Capital Markets (GCM)

1. Define: Eurocurrency, international bonds, equity, euro banks

2.  What is intertemporal trade?  How is it affected by the GCM?

3.  Who are the main players/institutions in the GCM?

4.  What mechanisms provide safety nets for US banks?  Why don't the same safety nets work in international banking?

5.  What is the Basle Accord and what role does it play in the GCM?

6.  What are the risks that banks face both domestically and internationally?

7. How are the global capital markets divided?

8. What's the role of risk aversion and portfolio diversification?

9.  What's the role for banks in these markets?

10.  What role does regulation play in these markets?  What types of regulation has been suggested and passed? Has it been successful? 

11. What are the factors that have increased the growth of these markets?

12. What are similarities and differences between international and domestic capital markets?

13. What is the impact on rate of return and interest rates when global capital markets are well-functioning?

14. What is purpose of the Eurocurrency markets? How did it develop? What are the financial implications? What makes them attractive?

15. What is the purpose of the international bond market? What are the types of bonds? Why is it expanding?

16. What is the international equity market? What are the affects/impact? What’s the advantages/disadvantages of listing a firm’s stock on a foreign stock exchange?

17. What is the systemic risk that an investor faces?

18. What’s the difference between foreign bonds and Eurobonds?

19. Why are international capital markets needed? What functions do they perform beyond what is available in the domestic market?

20.  Evaluate how well the GCM have performed relative to intertemporal trade, off- and in-shore banking, portfolio diversification.
 

Study questions for Chapter 15 (Financial Crisis and Contagion)

1.  Define a financial crisis.  What are the various types?

2.  Describe/explain the 2 types of international financial crisis.

3. When did the Asian crisis occur?

4. What were the common elements that led to the crisis?

5. In which country did the crisis occur and how did the "domino effect" spread throughout the other Asian nations: Malaysia, Indonesia, South Korea, Japan?

6. What is meant by the Asian economic model?

7. What was the response of the IMF?

8. What was the implication for exchange rate policy?

9.  What is moral hazard?  How does the IMF contribute?

10.  Evaluate the advantages and disadvantages of capital controls

11.  How can nations solve financial crisis both domestic and international?

12.  How do global governance systems need to change to prevent future financial crisis?

13. What was the implication for business?

14.  What was the implication for governments?

15. What were the "tigers" faults that were glossed over in explaining their apparent early success?

16. How did the Asian crisis get transmitted to Russia, Brazil, and the US markets?
 

Study questions for articles on reserve (Backlash Against Globalization)

1.  Define what is meant by the "Lexus and the olive tree".

2.  Give examples of the "Lexus and the olive tree" working together, working against each other, etc.

3.  What are the four types of backlashes against globalization?  Why are they "upset"?  How will these groups respond? What are their solutions?

4.  What are the potential seeds of destruction for globalization?

5.  What are the negative employment effects of globalization?  How do previous theories/discussion either support or disagree with the backlashers' views?

6.  How have protesters against globalization influenced government discussion/policies?

7.  How has the World Bank been influenced by the protesters?

8.  How have corporations changed their ways to appease the activists?

9.  Evaluate the protesters solutions to globalization.  What are the strengths and weaknesses of their arguments/programs?

10.  What are the arguments being made to shift food production from the national to the local level?

11.  What should be done at the international level to promote a shift to locally produced food?  At the national level?  At the local level?

12.  Explain the impact of transport, energy and agricultural subsidies on the production of food at the global level.  How should these subsidies be changed restructured to focus on local food production?

13.  Explain the programs that have been implemented at the local level to shift food production to that level.

14.  Evaluate the stumbling blocks to shifting food production from the global to the local level.  Are the stumbling blocks insurmountable or can they be addressed?

15.  Identify the two problems  that impede the suggested alternative to globalization.

16. What are the real world consequences of the globalization process?

17.  What is the major critique of globalization?

18.  What is enlightened humanism?

19.  What upsets the anti-globalizers the most?

20.  What do anti-globalizers offer as an alternative?

21.  What do the anti-globalizers focus on relative to capitalism?

22.  How is capitalism defined?

23.  What is meant by the "commons" in India?

24.  How do views on biodiversity differ between the northern and southern hemispheres?  Why?

25.  What role did GATT play in patents and biodiversity and the Neem Tree in India

26.  What the relationship between the W. R. Grace Co. and the Neem tree?

27.  What was India's solution to protecting its bio-life forms?

28.  What are the arguments for and against patenting bio-life forms?

29.  Was the W. R. Grace Co. participating in plagiarism or innovation?  Why or why not?

30.  What has been the EU's response to the Neem Tree patent?

31.  What has been the fate of the W.R. Grace Co. since their attempted patent of the Neem tree?