Notes, summaries, assignments, exams, and problems for Economy

International Market Selection: A Systematic Approach

Expansive Approach

Firms gradually move into international markets, starting with markets similar to their domestic market. This approach reduces perceived risk and information requirements.

• Lower cultural distance: increased confidence
• Lower costs associated with unfamiliar markets

Screening Approach

Involves systematically filtering the global market using criteria to identify the most suitable market for the firm.

Aim: Identify the market with the greatest marketing opportunity.

Stages of Screening Approach

Stage 1: Initial Screening

Objective: Identify national markets for further analysis.

Stage 2: Analysis of Potential Sales for an Industry in Country

Consider:

• Forecast of future sales
• Minimum scale
• Transport

Financial Intermediation

1. In direct financing, the lender… Trades money for the financial claim of the borrower
2. Which of the following is an example of indirect financing? … An SSU purchasing a financial claim from a commercial bank
3. Denomination intermediation is best exemplified by… issuing five $3,000 CDs and making one $15,000 loan
4. Maturity intermediation is best associated with… receiving funds in six-month CDs and offering thirty-year mortgage loans
5. All of the following are benefits provided by financial intermediaries, except: elimination of default risk

The Federal Reserve

6. Which of the following is not one of the original goals of the Federal Reserve? Maintaining the value of the U.S. dollar relative to gold
7. Which of the following are

                 1.Describe the three functions of Money.

The three functions of money are:

a) medium of exchange: deposits in bank accounts from which depositors may make withdrawals by writing checks

b) unit of account: measures prices and value

c)  store of value: a means of holding wealth

                 2.Briefly describe how banks function and how they make a profit.

Banks remain in business by taking on deposits, and giving out loans from those deposits. The interest they receive on those loans has to be higher than the interest they pay on deposits in order to make a profit and continue to operate.

                 3.Briefly explain how banks make money.

In fractional reserve banking, money... Continue reading "eww" »

Does the Purchase of Government Debt by Monetary Authorities Enhance Macroeconomic Policy?

Yes, this is actually what happened in the aftermath of the financial crisis that led central banks (CBs) to buy large amounts of public debt. The explanation is as follows:

Impact of Central Bank Debt Purchases on Liquidity

When the CB buys a large amount of government debt, it implies a higher volume of liquidity injected into the economy. Once the volume of liquidity is such that the interest rate market hits the lower bound of the corridor (deposit rate), further injection of liquidity (quantity) allows them to also control the interest rate (price). The internal market will not fall further as the CB dominates all other aspects of the economy, and the... Continue reading "Central Bank Debt Purchases: Impact on Monetary Policy" »

Strategic planning setting long-term goals that may extend 5 to 10 years into the future. Long-term loosely detailed budgets are often created to reflect expectations for these long-term goals. After the goals are set, management designs key strategies for attaining these goals. Companies usually prepare a budget for every month of the fiscal year.

·A rolling budget is a budget that is continuously updated so that the next 12 months of operations are always budgeted.

Who is Involved in the Budgeting Process?

·Participative budgeting involves the participation of many levels of management. It helps create more realistic budgets and it has more acceptance by managers. It also has some disadvantages, such as higher complexity and it involves more... Continue reading "Strategic Planning and Budgeting Process" »

International Marketing Concepts

Sovereignty

Sovereignty refers to the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members.

Conciliation

Conciliation is a nonbinding agreement between parties to resolve disputes.

Ownership Under Common Law

Under common law, ownership is established by use and registration.

Litigation in International Disputes

When all else fails in an international commercial dispute, litigation is the final recourse.

Cybersquatting

Cybersquatters buy and register descriptive nouns, geographic names, names of ethnic groups and pharmaceutical substances, and other similar descriptors and hold them until they can be sold at an inflated price.

Islamic Law

Islamic law is known as... Continue reading "International Marketing Strategies: A Comprehensive Guide" »

The elasticity of demand refers to the degree of responsiveness of quantity demanded of a commodity to a change in its price or any other factor).
The concept of elasticity of demand is of great importance to producers, farmers, workers, and the Government. Lord Keynes considered this concept to be the most important contribution of Alfred Marshall.
The importance of elasticity of demand can be explained with the help of the following points:
1. Importance to a Producer: Every producer has to decide the price of his product at which he has to sell it. The concept of elasticity of demand becomes important for this purpose. If the producer is producing a commodity whose demand is relatively inelastic, then he can set a high price for it. Similarly,... Continue reading "Importance of Elasticity of Demand in Economics" »

Vertical Integration

The process in which several steps in the production and/or distribution of a product or service are controlled by a single company or entity, in order to increase that company's or entity's power in the marketplace.

Horizontal Integration

Much more common and simpler than vertical integration, Horizontal integration (also known as lateral integration) simply means a strategy to increase your market share by taking over a similar company. This take over / merger / buyout can be done in the same geography or probably in other countries to increase your reach.

Merger

An agreement by shareholders and managers of two businesses to bring both firms together under a common board of directors with shareholders in both businesses owning... Continue reading "Business Strategies: Integration, Mergers, Acquisitions & More" »

Network Economics and the Information Sector

Network Effects

Network effects occur when the value of a network increases as the number of users increases. A prime example is Facebook. Networks consist of nodes (e.g., firms, individuals) connected by links (e.g., roads, railway lines, cables).

Network Externalities

Network externalities arise when a decision-maker doesn't bear the full cost or receive the full benefit of their actions within a network. This leads to sub-optimal market outcomes.

The Choice of Standards

Autarky Value

Autarky value refers to the value a customer derives from a product when no one else uses it, meaning there's no network effect.

Synchronization Value

Synchronization value is the additional value gained when a product format... Continue reading "Network Economics and the Information Sector: A Comprehensive Guide" »