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Eco 310, Week 2 notes

by: Tori Notetaker

Eco 310, Week 2 notes Eco 310

Marketplace > Murray State University > Economcs > Eco 310 > Eco 310 Week 2 notes
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About this Document

Key terms, brief chapter and class notes, and select critical thinking questions discussed in class from chapter 2.
Issues in the Global Economy
Mary Reed
Class Notes
Eco310, chapter 2, Economics




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This 7 page Class Notes was uploaded by Tori Notetaker on Monday February 1, 2016. The Class Notes belongs to Eco 310 at Murray State University taught by Mary Reed in Spring 2016. Since its upload, it has received 26 views. For similar materials see Issues in the Global Economy in Economcs at Murray State University.


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Date Created: 02/01/16
Week 2- Chapter 2 Key Terms Political Economy- The political, economic, and legal systems of a county. Political System- System of government in a nation Collectivism- A political system that emphasizes collective goals as opposed to individual goals Socialist- Someone who believes in public ownership of the means of production for the common good of society Communists- Those who believe socialism can be achieved only through revolution and totalitarian dictatorship Social Democrats- Those committed to achieving socialism by democratic means Privatization- The sale of state-owned enterprises to private investors Individualism- An emphasis on the importance of guaranteeing individual freedom and self-expression Democracy- Political system in which government is by the people, exercised either directly or through elected representatives Totalitarianism- For of government in which one person or political party exercises absolute control over all spheres of human like and opposing political parties are prohibited Representative Democracy- A political system in which citizens periodically elect individuals to represent them in government Communist Totalitarianism- A version of collectivism advocating that socialism can be achieved only through a totalitarian dictatorship Theocratic Totalitarianism- A political system in which political power is monopolized by a party, group, or individual that governs according to religious principles Tribal Totalitarianism- A political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolizes political power Right-Wing Totalitarianism- A political system in which political power is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts individual political freedom, including free speech, often on the grounds that it would lead to the rise of communism Market Economy- An economic system in which the interaction of supply and demand determines the quality in which goods and services are produced Command Economy- An economic system where the allocation of resources, including determination of what goods and services should be produced, and in what quantity is planned by the government. Legal System- System of rules that regulate behavior and the processes by which the laws of a country are enforced and through which redress of grievances is obtained Common Law- A system of law based on tradition, precedent, and custom; when law courts interpret common law, they do so with regard to these characteristics Civil Law System- A system of law based on a very detailed set of written laws and codes Theocratic Law System- A system of law based on religious teachings Contract- A document that specifies the conditions under whch an exchange is to occur and details the rights and obligations of the parties involved Contract Law- The body of law that governs contract enforcement United Nations Convention on Contracts for the International Sale of Goods (CIGS)- A set of rules governing certain aspects of the making and performance of commercial contracts between sellers and buyers who have their places of business in different nations Property Rights- Bundle of legal rights over the use to which a resource is put and over the use make of any income that may be derived from that resource Private Action- The theft, piracy, blackmail, and the like by private individuals or groups Public Action- The extortion of income or resources of property holders by public officials, such as politicians and government bureaucrats Foreign Corrupt Act- U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions Intellectual Property- Products of the mind, ideas (e.g., books, music, computer software, designs, technological know-how); intellectual property can be protected by patents, copyrights, and trademarks Patent- Grants the inventor of a new product or process exclusive rights to the manufacture, use, or sale of that invention Copyrights- The exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit. Trademarks- The designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products World Intellectual Property Organization- An international organization whose members sign treaties to agree to protect intellectual property Paris Convention for the Protection of Industrial Property- International agreement to protect intellectual property Product Safety Laws- Set certain safety standards to which a product must adhere Product Liability- Involves holding a firm and its officers responsible when a product causes injury, death, or damage Sweden U.S. Free education, Healthcare, and Key Concepts paid maternity leave  Understand how the political systems of countries differ Capitalism Socialism  Individual  Group  Market Economy  Command Economy  Private Ownership  Public Ownership  Less government intervention in  More government economy o Leads to incentives intervention in economy o Collectivism  “For the good of the society” or “The common good”  Restricts the right of the individual  Plato didn’t believe in equality; put society into classes with those who were best suited as its leaders (typically philosophers and soldiers)  Assets the primacy of the collective over the individual o Socialism  Brought from the ideals of Karl Marx  State ownership of production, distribution, and exchange  State makes sure laborers are compensated for their work  Communism  Communists believed socialism could only be achieved through violent revolution and totalitarian dictatorship  Now only China and a small handful of countries follow a (less strict) communist ideology  Social Democrats  Socialism achieved through only democratic means and turned their backs on violence  Private enterprises became state-owned and ran for the public good  Eventually social democrats were voted out of office o Individualism  An individual should have freedom in his or her political and economic pursuits  Works in the interest of the individual over the state  Free market ideology  Aristotle  “Communal property receives little care, but an individuals will receive the greatest care and be most productive” → Speaking on the power of self-interest  Two Tennent’s of individualism  emphasis on the importance of guaranteeing individual freedoms and self-expression  Individualism that is the welfare of the society is best served by letting people pursue their own economic self- interest  Asserts the individual over the collective o Democracy  Citizens should be directly involved in decision making  Representative democracy  Citizens elect individuals to represent them o Those who were elected and failed their position get voted out in the next turn of elections  Democratic Safeguards: o An individual’s right to freedom of expression, opinion, and organization o A free media o Regular elections in which all eligible citizens are allowed to vote o Universal adult suffrage o Limited terms for elected representatives o A fair court system that is independent from the political system o Nonpolitical state bureaucracy o A nonpolitical police force and armed service o Relatively free access to state information o Totalitarianism  No individual rights  Political repression is wide-spread, free and fair elections are lacking, media are daily censored, basic civil liberties are denied and those who question the right of the rulers to rule find themselves imprisoned, or worse  Communist totalitarianism, Theocratic totalitarianism, Tribal totalitarianism, and Right-Winged totalitarianism make up the four different subcategories o Pseudo-Democracies  “Most of the world’s nations are neither pure democracies or iron-clad totalitarian states”  Understand how the economics systems of countries differ o Market Economy  All productive activities are privately owned  “Production is determined by the interactions of supply and demand and signaled by prices  No monopolies  Private ownership encourages competition and efficiency  Incentive to find the best way of serving what customers need  Major positive impact on economic growth and development o Command Economy  Government plans the goods and services produced quantity and prices  Allocate resources for “The good of the Society”  All businesses are state-owned to direct investments in the best interest of the state as a whole  Not very efficient in practice  No incentive to better serve customer needs o Mixed Economy  Governments tend to take into state ownership troubled firms and sell back to private investors ASAP  Examples of the AIG case in 2008 are represented on page 46  Understand how the legal systems of countries differ o Common Law  Tradition → Regards the countries legal history  Precedent→ Reviews cases from the past  Custom → Regards the ways in which laws are applied in specific situations  Judges have the power to interpret the law to apply it to an individual case o Civil Law  Unlike the power the judges have in Common Law, there is no flexibility to be applied with the law  Understood agreement, not detail oriented  Focused on relationships o Theocratic Law  Ex.  Islamic law has been blended with a common or civil law system o Differences in Contract Law  Contract law is very long and detailed specifically stating what is to be done in any and every situation the two parties could possibly meet  Civil Law is less specific due to already extensive codes written with in the law  Very expensive  Time consuming  Common law has the flexibility of the judges interpretation o Property Rights and Corruption  Private Action  Weak legal system is an encourager to corruption  Public Action and Corruption  Levying excessive taxation, requiring expensive licenses or permits, taking assets into state ownership without compensating the owners, or redistributing assets without compensating the prior owners  Corruption o Demanding bribes from businesses in return for the rights to operate in a country, industry, or location o Transparency International sets out to Fight corruption o High levels of corruption lower FDI and stunt economic growth in the country  Businesses may not enter a country due to the lack of transparency (however could sometimes translate into a cultural issue)  Creates less economic opportunity and ultimately adds to the falling of trade and economic growth  Foreign Corrupt Practices Act o Illegal to bribe a foreign government official to obtain or maintain business over which that official has authority  Corruption seen by students in other countries:  Road blocks in Thailand to catch people without proper documentation or speeding; let off with a small bribe  Sliding a crisp $10 bill into your passport in order to pass customs into Haiti  Blagojevich selling Obama’s senate seat o Companies have to keep records over all public transactions that would reveal whether or not the company is in violation of the act (this includes records of grease payments) o US and OECD law allows for grease payments  Aka facilitating or expediting payments  Reed told a story of an old student who was traveling from Saudi Arabia through Egypt with fans (products of the family company) and was stopped at customs for processing of his “baggage” and was told the process could be expedited if the student made it worth the workers “wild”  Protection of Intellectual Property and Safety and Liability o Laws are intended to reward the creator to stimulate innovation and creative work o How property rights are enforced makes a difference on how well the company does o Companies can respond to violations of Intellectual property if they’ve agreed to WTO and TRIPS Class Responses to Critical Thinking Questions p56 2. Individuals having preferences creates a capitalist market through ownership and rights; giving them the incentive to work harder to own more. Transparency appeals to trust and stability. See Pseudo- Democracy on page 44. 3. Tipping can contribute to economic growth by creating a relationship through grease payments and providing the waiter/waitress with incentive to create a happy customer. 6. Yes, they bribed a foreign government official to not facilitate something that was already going to happen, but to completely change the lines of a property for their use. The Walmart de Mexico executives should be fired, along with the city official.


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