The Global Economic Environment The Coming Boom Wealthy Industrial Countries Developing Countries East Asia South Asia Latin America Eastern Europe* Sub-Saharan Africa Middle East & North Africa *Includes former Soviet Union Real GDP growth, annual average % Source: World Bank, The Economist

Economic Systems Capitalist Socialist Mixed

Economic Freedom An economic index with consideration of:

Country Income Segmentation High Income (Advanced Countries) - Triad - Others Upper Middle Income (NIC's) Lower Middle Income (DC's) Low Income (LDC's) + $9,385 + $3,036 + $765 < $765

National Production GrossNational Product (GNP) GrossDomestic Product (GDP)

Drawbacks of GNP and GDP Problem of Averages UncountedTransactions Pitfalls of Comparison Question of Growth

Estimate of GNP Per Capita at PPP (Selected Countries) Selected Country GNP Per Capita PPP Estimate of GNP Per Capita (U.S. = 100) United States Switzerland Japan Canada Russia Mexico Nigeria India 26,980 40,630 39,640 19,380 2,240 3, ,980 25,860 22,110 21,130 4,480 6,400 1,220 1,400 Purchasing Power Parity

The Expanding Triad European Economic Area N. American Free Trade Area Japan and the Tigers Population (million) GNP (billion) GNP Per Capita 393$ 8,354$ 21, $ 19, $ 8,293$ 22,134 U.S., Canada, Mexico Hong Kong, Japan, Malaysia, Singapore, South Korea, Taiwan, Thailand 1997 figures % of World: 7%30% % of World: 5%21% % of World: 7%30% EU: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, U.K. EFTA: Iceland, Switzerland $ 5,638

Big Emerging Markets: 1997 BEM (Total)$4,248$1, CEA (Total)1,3181, China Taiwan26812,26311<1 Hong Kong16025,2251<1<1 Brazil5903, Korea, Rep.51211, India Mexico3183, Russian Federation3012, Argentina2978, Turkey1842, South Africa1343, Indonesia Poland1082,770<111 GNP (billion) GNP Per Capita % of World GNP % of World PPP % of World Population Market

Big Emerging Markets: 2010 BEM (Total)$7,673$2, CEA (Total)2,7241, China1,9521, Taiwan51221,11511<1 Hong Kong25934,8371<1<1 Korea92518, Brazil8774, India Mexico5454, Argentina50112, Russian Federation4662, Turkey3304, Indonesia South Africa2083, Poland2014, GNP (billion) GNP Per Capita % of World GNP % of World PPP % of World Population Market

BOP (Balance of Payments) 1. Definition 2. Double entry system + (inflow) –(outflow)

BOP (cont’) 3. Current Account vs. Capital Account 4. Trade Balance

Ex: U.S. BOP, (US$B) A. Current Account Goods: Export FOB Goods: Imports FOB Balance on Goods Services: Credit Services: Debit Balance on Goods and Services B. Capital Account Total A + B Trade Deficit Reserve