Introduction to International Business David J. Boggs, Ph.D. Economic Environment

Some Acronyms EU European Union FDI foreign direct investment GDP gross domestic product GNP gross national product IMF International Monetary Fund MENA Middle East and North Africa MDF Mediterranean Development Forum NGOs non-governmental organization NICs newly industrialized countries OECD Organization for Economic Cooperation and Development PPP purchasing power parity VAT value-added tax WTO World Trade Organization

Economic Systems Capitalism laissez-faire, private, free-market economy Mixed Economy (Socialism) basic means of production, distribution and exchange controlled transportation, banking, goods and services, natural resources, communications, postal Communism theoretically classless society, government ownership, centralized planning

Factors that Measure Economic Freedom (Heritage Foundation) Trade policy Taxation Government intervention in the economy Monetary policy Capital flows and investment Banking Wage and price controls Property rights Black market activity

Country Economic Categories (World Bank Categories) High-income Middle-income upper-middle lower-middle Low-income Developing Geographic, Oil, non-market, and transition economies

Economic Transitions Rates of growth vary substantially around the world Many formerly communist countries are now mixed or market economies Rates of liberalization and privatization vary around the world

Economic Factors that Affect International Business GNI, GNP and GDP (gross and per capita) Private and public consumption and investment Discretionary income Income distribution Unit labor costs National economic and indicative plans

Other Important Economic Factors Public deficit and debt Domestic or external Percent of GDP or exports Interest rates and inflation Balance of Payments Goods, services, income, dividends, payments, and unilateral transfers (aid, gifts, etc.) Effect on currency values and trade policy

Economic Indicators Telephones Computers Passenger cars Trucks and buses Steel consumed Electricity consumed TVs VCRs Miles of paved roads Private consumption expenditures Airports

Socioeconomic Factors Population Population density and distribution Rural versus urban population Age distribution Family structures and divorce Working women Rates of change for all of the above

Quality of Life Human happiness Life expectancy Educational standards Individual purchasing power Health Sanitation Treatment of Women Canada United States Japan Netherlands Norway

Other Issues What is the appropriate balance between income equality and economic growth?

The Exam Map

To get a C or better on the exam, you should Attend classes regularly Take good notes Understand and give examples of all concepts Read all chapters before class Study for several days rather than cram Memorize geography Prepare/plan responses to essay questions Study practice questions