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1. Briefly discuss the Great Recession of 2009 making reference to the property bubble, mortgage backed securities and the role of the Central Bank.
A lot of the .com companies attracted a lot of investments,
Then came the recession, in a period of slow doen a company can benefit by lowering interst rates
Banking: fractional reserve banking
Investment banks vs. commercial banks
In terms of Central bank role:
Federal reserve controls the money supply or how much money is in circulation, so then the fedela govement and the commercial banks borrom from federal resever by bonds, inverstors help with this as well. The federal reseve’s main policy tool is lowering interest rates.
Mortgage backed securities – chase takes your mortgage and 999 other ones, puts them in a package and then is sold to inverstors, when you send it to chase, they make the fee and sends it to the inverstors..
This all keeps working as long as people keep paying their mortages and is property keeps going up.
I know a bubble is like something that doesn’t cost you anything but makes money from ways like adverstisement.
2. Briefly describe the gini coefficient. How does the gini coefficient differ both among developed countries and between developed and under-developed countries? Briefly discuss the factors that account for the significant increase in the gini coefficient in the United States.
It shows where the wealths at in the countrys economy, like the percentage of wealth; the people
Wealth: assets- liabilities
Rent seeking: what often happens is that powerful political figures get ahold of that mineral wealth
^ this is why we are concerned about this and also quality of life
Aggregate Demand: overall level of demand in the economy
A large portioin of the economy doesn’t have control over spending, can’t buy anything over their basic needs, they don’t have buying power
3. Briefly define the terms balance of payments, current account, capital account, and balance of trade. What is a balance of payments of crisis? Explain the role of the IMF, including SAP's (structural adjustment programs), in a balance of payments crisis.
Balance of payments crisis- (IMF intervenes) a record of all economic transactions between 1 country and all other countires in a year, it’s made up of two different accounts, 1 = currect account, 2 = capital account. 1 is a measure of a nations income and expendatures, and 2 is a measure of a nation’s borrowing and lending. If you’re a company that’s exporting more than importing you’re gaingin surplus and cam become a lender. So therefore 1, the current, would have a surplus and 2, the capital would have a deficit
Balance of payments transactions, or trade? – inflow and outflow of the accounts make a balance of trade, if you’re lenging money out you’re lending capital, so exports vs. imports.
(you can’t keep borrowing bc then youll face a Balance of payments crisis )
the role of the imf – steps in as a lender of a last resort, the sap, structural adjustment programs helps to break the relationship with the banks and the government (bank reform), devaluation of the cirrencey, austerity measures, significant cust in social welfare spending
Neo- mercantilism: new mercantilism is the perfectionist measures the state uses to exmapnd exports, and internal state efforts to develop targeted areas of the ecnomimy
5. Distinguish between the classical and Keynesian approaches to political economy.
Classical approach: it’s like early classical theory, Adam Smith – walth of nations and free market caplitalism which is each individual pursuing his own self interest will create optimaly efficient economic putcomes. The “producer” seeking profit, consumer seeking best qualify for lowest price. Supply and demand, price equilibrium
Keynesian believed in managed capitalism, stimulate vs. slow the economy
Stimulate with fiscal policy and government taxing and spending, to lower taxes, borrowing, public projects, social welfare spending, mometary policy, central bank lower intl rates and to print money
Slow the economy down with fiscal policy by monetary policy and the central bank raising international rates, and removing money
6. Define and discuss the issue of a “lack of countervailing powers” as Marxists use the term (in reference to underdeveloped nations confronting large MNC’s). How does this notion relate to the manipulation if transfer prices?
Lack of counterveiling powers deals with lack the legal framework, the courts, the personell and enforcement agencies to effectively challenge mulit national corporations, lik exxon mobile.
In regards to transfer prices, the price of a good or service when it crosses and international boundary, manipulating it increses profit and reduces revenues to under developed countires.
So basically the country never gains power
7. Briefly discuss the four main principles comprising the basic purpose of GATT (now the WTO). List and briefly explain the new trade issues that analysts believed would provide serious difficulties to GATT (WTO) during the Uruguay Round. What issues did activists participating in the “Battle of Seattle” want to add? Explain.
4 main principles:
1- multilateralism: you don’t make trade deals with just a few, you make with many; non discrimination
2- trade liberalization: reduce tarrifts (takes on imports) and non tarrif trade barriers, to trade you need a marketing agreement, is your product safe? They need to prove that the machine is safe (product), and lincensing agreement
3- reciprocity: give and take, must lower your own tarrifs
4- transperancy and mulitateral surveillance, business, banks, stock markets, bond markets, need to open up their books, so that their investors can have ssurance.
If a country has resolution of trade disputes, forein countries would say you’re keeping out competition, they would take it to the WTO
If youre a wto memer you get MFN trade status, like most favored nation and you pay the lowest possible tarrif rates
Battle in seattle – the agenda would deal with trade in servies, these services were financial services, accounting services, medical services and they would become internationalized customer services. They came to seattle in 1999 with protests from labor unions present, anarchists, environmentalists, and democrazy adovattes,
8. Distinguish between the fixed currency regime set up by the IMF at Breton Woods and the floating exchange currency regime that is currently in place.
Breton woods in 1944 insitutions is the world bank reconstruction. So the process called sustainable development is the idea of trying to have industrialized nation without industrialized destruction, we want countries to develop but without all the destruction that comes with it,
9. Briefly discuss the domestic political system as developed by David Easton. Discuss three basic differences between a domestic political system and the international system.
International system is defined as a system assemblage of interconnected units that are integrated thru a regular form of interaction, the change in one part or unit affects other parts of the system
Domestic political system – imputs or demands, so when ppl are engaging it’s like a demand, citizens are saying do this or don’t do that, election outcomes, we want them to do x, y, and z
3 basic differences ???
10. Draw a model of the international system indicating the main actors and the key relationships between them. This model reflects which theory? Explain.
As far as how the MNC system works you have 3 nation states around connected all by the MNC with the MNC (decipter drawing in notes)
13. Using the handouts from class or other appropriate sources, select a country other than the U.S. and explain its level of power making reference to natural, synthetic and social-psychological dimensions of power.
Annual Defense Budget : 130 billion
Military Personnel: 2,275,000
Planes & Helicopters: 2,800
Tanks & Armored Vehicles: 26,500
Naval Crafts: 725
Total Nuclear Warheads: 240
Active Nuclear Warheads: 180
Proven Oil Reserves: Not on the top 10
Proven Natural Gas Reserves: Not on the top 10
Percieved Power of China in 1980
Critical Mass: 75
Economic Capability: 23
Military Capability: 41
Partial Total: 139
Stategy and Will: .6
Total:: 83 (compared to US at 304)
Percieved Power of China in 1990
Critical Mass: 75
Economic Capability: 30
Military Capability: 45
Partial Total: 150
Strategy and Will: 1
Relying on coal it makes their position very difficult because of global warming from their reliance
Since they’re a growing economy from population they have a high demand for cars and since there isn’t a good supply of natural resources they use coal
15. Define the term "perceived power." Explain in general terms the formula used by Ray Cline to assess perceived power (Pp) Pp= (C + E = M) x (S + W), and explain how the perceived power of one of the nations he refers to changed between 1980 and 1990.
Percieved Power – a nation states power, increased or decreased by its clarity strategic purpose and it’s willingness to take action/willingness to act
Two people: one weighs 150 and one weighs 250, more scared of the 250 and cut (by perception?)
In terms of how clearly it acts on the meaning of his actions
The worst thing is to bluff and get called out on it, don’t make threats you can’t carry through on a nation state
(P: population & territory (critical Mass) + E: economy + M: Military) x S: strategic purpose + W: willingness to act = PP Percieved Power
change: 1990 the difference is their vietnam, transitions in government,
in 1980 you had carter administration, crazy rescue attempt with the oil crisis etc. and long gas lines from opec
16. Briefly discuss the "continuum" of diplomatic techniques from least to most aggressive.
Diplomacy – influence the behavior of an international actor through the means of war (negotiation by talking)
Economic state craft – (negotiating by economically) we will lower tarrifs if you x or we will highter tarrifs if you x
Sanctions, investments, spending, the bigger economy you have the more infl you have
LEAST TO MOST THREATENING:
1. signaling – slight changes in words that might indicate a different negotiating position
2. negotiation – might be secret, public, actual discussions
3. public diplomacy – public statements derived to enhance ones own or diminish a rivals public image
4. Withdraw Ambassadors – or kick ambassadors out, withdraw recognition of the state
5. Saber – rattling – placing troops on the border, military manouvers, sailing ships into the waters
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