Lesson 2
2. Responses will vary according to the level of economic development and the economic basis of a student’s home country. Those students from industrialized nations may feel challenged and express the fear of a decline in their standards of living due to increased pressures in the labor market and the declining cost competitiveness of their countries’ firms. On the other hand, students from developing countries may be hopeful that their countries will be able to successfully generate and/or compete for the investment capital and those business activities that lead to significant economic growth and the increasing global competitiveness of their countries’ firms. However, there is ample room for exceptions to these feelings, given the present and future comparative advantages of particular nations.
3. Recency bias is the delusion that current trends will continue indefinitely and uninterrupted. History shows great mistakes made by companies, executives, investors, and officials who inferred the present into the future. Consistently, economic growth rates slow down as the base of activity expands. Also, advantages such as cheap labor or low-cost capital wane as growing demand increases marginal price pressures. There is also the possibility of an economic natural disaster, a large-impact, impossible to predict, rare event beyond normal expectations-such as the collapse of the Soviet Union, the emergence of the Internet, and the global financial crisis.
4.
6. Gross national income per capita (GNI per capita) represents the market value of all final goods and services newly produced in an economy by a country’s domestically owned firms in a given year divided by its population. Thus, GNI per capita serves as a very useful indicator of current individual wealth and consumption patterns; those countries with high populations as well as high per capita GNI are most desirable in terms of total market potential. Purchasing power parity (PPP)... [continues]
2. Responses will vary according to the level of economic development and the economic basis of a student’s home country. Those students from industrialized nations may feel challenged and express the fear of a decline in their standards of living due to increased pressures in the labor market and the declining cost competitiveness of their countries’ firms. On the other hand, students from developing countries may be hopeful that their countries will be able to successfully generate and/or compete for the investment capital and those business activities that lead to significant economic growth and the increasing global competitiveness of their countries’ firms. However, there is ample room for exceptions to these feelings, given the present and future comparative advantages of particular nations.
3. Recency bias is the delusion that current trends will continue indefinitely and uninterrupted. History shows great mistakes made by companies, executives, investors, and officials who inferred the present into the future. Consistently, economic growth rates slow down as the base of activity expands. Also, advantages such as cheap labor or low-cost capital wane as growing demand increases marginal price pressures. There is also the possibility of an economic natural disaster, a large-impact, impossible to predict, rare event beyond normal expectations-such as the collapse of the Soviet Union, the emergence of the Internet, and the global financial crisis.
4.
6. Gross national income per capita (GNI per capita) represents the market value of all final goods and services newly produced in an economy by a country’s domestically owned firms in a given year divided by its population. Thus, GNI per capita serves as a very useful indicator of current individual wealth and consumption patterns; those countries with high populations as well as high per capita GNI are most desirable in terms of total market potential. Purchasing power parity (PPP)... [continues]
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