1. Both affect the power of the dollar in the world & grocery store

2. Both affect you base purchasing power

3. We have little influence over either; We have a little power over the Fiscal policy

1. Fiscal is controlled by the gov't, pres. & congress.

2. Fiscal uses taxing & gov't spending as it's tools.

3. Monetary is controlled by the Federal Reserve Board & its banks.

4. Monetary is concerned with the flow of money.

1. president

2. congress

1. Submits a budget

2. recommends how the federal gov't should tax, spend and borrow for the year

1. helps the Pres. in overseeing the preparation of the budget

2. supervises its admin. in Executive Branch agencies

3. evaluates the effectiveness of agency programs.

4. sets funding priorities

1. Office of management & budget

2. Council of Economic Advisors

3. Department of the Treasury

1. assist the Pres. in the preparation of the economic report

2. gathers info concerning the economic development, both current and prospective.

3. develops national economic policy 

1. collects taxes

2.borrows money

3. pays the bills

4. prints the money

5. governor of to the IMF, IBRD, Inter-American Development Bank, The Asian Development Bank, and The African Development Bank.

1. more influence over the budget

2. more accountability of funds in each administrative department

1. manages the nation's supply of money and credit and operates at the center of the nation's financial system.

2. monitors currency transaction, electronic payments and check clearing services.

3. serves as the banker for the fed. gov't

4. supervises and regulates a large share of the nation's banking and financial systems.

What are the three parts of the Fed Reserve?

1. Board of Govenors 

2. Federal Reserve banks

3. Federal Open Market Committee

1. hostilility of americans to centralized authority

2. fear that a central bank would be in the pocket of wall street

1. has longer run objectives

2. avoids political business cycle

3. won't spend money right then to buy themselves out of debt

1. may not be accountable

2. hinders coordination of monetary & fiscal policy

3. bad performance

1. 14 year terms

2. fed is financially independent

1. congress can amend fed legislation

2. president appoints chairmen & board and can influence legislation

1. ability to set monetary policy instruments

2. ability to set monetary policy goal

1. poor planning by the gov't

2. natural disasters

3. war

4. pork barreling policies

5. corruption in the gov't

6. increase in plant & base closure

1. lower cross-border trade and investment barriers

2. smaller geographic time zones and distance.

3.fewer national gov't regulations

4. less idiosyncratic business systems

5. lower impact on national culture differences

1. multi national coorporation - produce in 1 country and sell in multiple

2. trans national coorporation - produce in 1 country and sell in 1 country

3. multi national enterprise - produce in mult. countries and sell globally

1. national advantage of factors of produce

2. global web of suppliers and consumers

3. stake of foreign gov'ts in MNC operations

1. labor

2. land

3. capital

4. energy

5. expertise

6. transferability

1. high power/low cost computing

2.increase in information processing capacity

1. Free Trade Area

2. Customs Union

3. Common Market

4. Economic Union

5. Political Union

1. removes tariffs among members

2. members retain own trade policies toward others

1. free trade

2. free FDI

1. interdependencies and less war

2. more political clout

1. painful adjustments to economy

2. threat to sovereignty

3. imbalanced economic systems

Bolivia, Ecuador, Colombia and Peru.

Common Market

1. brazil, argentina, uruguay and paraguay

2. FTA

3. southern cone

Who is the largest trading relationship? Who is the Mexico's largest trading partner?

Who is the US's 2nd largest trading partner?

1. USA & Canada

2. US

3. Mexico

1. tariffs reduced across all sectors by 99%

2. FDI unrestricted (oil & railways = mexico, culture = canada, airlines & communication = USA)

3. no free movement of labor

4. protection of property rights

5. cross-border flow of services unrestricted

6. application of environmental standards

7. US & Canada have penalities for health/safety, child labor & minimum wage

1. less protectionism, higher economic growth

2. lower cost of doing business

1. cultural differences

2. price competition increased

3. across-trading-block rivalry

4. improvement of competitiveness of many local firm w/in the blocks

1. restriction of imports

2. promotion of exports

3. trade promo and FDI incentives

1. tariffs

2. subsidies

3. import quotas

4. voluntary export restraints

5. local content requirements

6. anti-dumping policies

7. administrative policies

1. compete against cheaper imports

2. gain export markets

3. increase domestic employment

4. first-mover advantage

1. artificially keeps prices high

2. they may be threatened

1. national security

2. individual industries and jobs protected

3. retaliation

4.consumer protection

5. furthering foreign poily

1.infant industry protection

2. strategic trade policy

1. trade barriers affect firm strategy

2. gov't policy has direct impact on firm business

3. nationalization of foreign plants

4. intergration may aid in preventing wars but it increases economic colonialism