Kelley School of Business - D270 Final Exam
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
CASE: Emerging Economies: Comeback or Collapse? - CORRECT ANSWER - By
2050, China, India, Japan, and Russia will be in greater Asia and their growth will create a
second tier of robust economies for their neighbors like Singapore, The Philippines, South
Korea, Indonesia, Taiwan, etc. Countries in sluggish parts of the world like Africa and South
Africa will also develop.
- These are known as emerging economies, and one day, they will be stronger than the
economies in power right now
- Sometimes they face downfalls however (Ex: political revolution in Brazil due to
corruption, Russia tries to deal with collapse of energy prices, Saudi Arabia dealing with oil
prices dropping, South Africa dealing with drop in commodity prices, China's debt hitting 30
trillion, etc.)
Managers look at the following when determining where to do business: - CORRECT
ANSWER 1) The type of economic environment in terms of its state of development.
2) The economic freedom managers have to make investments and run operations.
3) The orientation of the economic system that shapes its path of development, performance,
and potential.
4) The drivers of economic change, particularly the moderators of productivity, innovation,
and competitiveness.
Describe a developed vs. developing economy. - CORRECT ANSWER 1) Developed
Economies:
• A developed economy has a robust economic environment marked by wide-ranging
activities, efficient capital movement, stable institutions, extensive infrastructure,
international trade and investments, advanced technologies, and higher economic freedom.
• Examples: the US, the UK, Japan, France, Germany (5 largest)
• economies typically champion political freedom, practice multiparty democratic
governance, enforce the rule of law, and support free markets. In turn, these anchor a stable,
productive economic environment. Residents enjoy a high standard of living, long lives,
diverse educational opportunities, adequate nutrition, broad health care, comprehensive
public hygiene, and a variety of goods and services.
,• Have skilled workers, also known as "knowledge workers" or the "creative class"
• Still have problems (i.e. the minimum wage isn't livable)
• Most developed countries outsource manufacturing jobs to developing countries (lower
cost, higher productivity)
2) Developing/Emerging Economies:
• Typically has an uneven economic environment that is marked by narrow market activities,
inefficient capital movement, resistance to foreign ownership, trade restrictions, imperfect
competition, unstable institutions, limited infrastructure, sketchy technologies, and lower
economic freedom.
• Most are agrarian (work on a farm)
• Top 5 examples: China, India, Russia, Brazil, and Indonesia.
*Economic + Political Freedom, Rule of Law/Rule of Man?
=>every economy is different, but many of these countries have found that moving towards
economic freedom has helped their growth (China is the only country that has decided not to
increase economic freedom, but rather manage it - state capitalism)
=>Political Freedom as well, with the exception of China
=>Rule of Law, typically - with the exception of
BRICS - CORRECT ANSWER • When one speaks of the emerging economies, many
point to Brazil, Russia, India, and China (referred to as the BRICs); officially, emerging
economies are developing countries, but the pace of their performance leads to distinguishing
them.
• Used to gauge the success of other developing countries; they believe where the BRICS go,
others will follow
• Aim for low-cost resources, productive labor, expanding consumption, pro-business
policies, and enterprising conglomerates power their emergence.
The base of the pyramid theory - CORRECT ANSWER =>represents 4 billion of the
poorest people in the world, but it also represents a lot of consumption.
=>the most economic prosperity can come from developing products aimed at the poor.
, Outline economic freedom - CORRECT ANSWER DEFINITION: the "absolute right
of property ownership, fully realized freedoms of movement for labor, capital, and goods, and
an absolute absence of coercion or constraint of economic liberty beyond the extent necessary
for citizens to protect and maintain liberty itself."
• Thought of as the police force that protects property rights, market regulators that ensure
fair competition, monetary authorities that monitor a sound currency, or an impartial judiciary
that enforces business contracts. Each, as an agent of the state, safeguards economic freedom.
• Hence, protecting economic freedom requires government regulation, but, ideally, only to
the degree needed to transparently protect and legitimately sustain it. Excessive regulation, by
substituting political judgment in place of individual choice, constrains entrepreneurialism
and reduces market efficiency.
• Measured by the Economic Freedom Index
o Most Free: Australia, Hong Kong, Singapore, Switzerland
o Least Free: Cuba, Venezuela, North Korea
• The fall of the Berlin wall represented ... - CORRECT ANSWER capitalism over
communism.
• State Capitalism: - CORRECT ANSWER * Political officials shape how assets are
valued and when and where they are used
* State owns "national champion" businesses
* Forces financial system to provide low-cost capital
* Trade relations (promotes exports / limits imports)
* Reduces political freedom to expand economic prosperity.
*China example: actually less economic freedom, but they control it more to drive economy
=>they'll decide what companies can produce, what they produce, etc. but will let the stores
set their own prices.
Outline the (3) types of economic systems. - CORRECT ANSWER 1)
Market/Capitalist Economies:
• Limited government intervention, extremely free
• Hong Kong, the US, Singapore, Switzerland, Australia
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
CASE: Emerging Economies: Comeback or Collapse? - CORRECT ANSWER - By
2050, China, India, Japan, and Russia will be in greater Asia and their growth will create a
second tier of robust economies for their neighbors like Singapore, The Philippines, South
Korea, Indonesia, Taiwan, etc. Countries in sluggish parts of the world like Africa and South
Africa will also develop.
- These are known as emerging economies, and one day, they will be stronger than the
economies in power right now
- Sometimes they face downfalls however (Ex: political revolution in Brazil due to
corruption, Russia tries to deal with collapse of energy prices, Saudi Arabia dealing with oil
prices dropping, South Africa dealing with drop in commodity prices, China's debt hitting 30
trillion, etc.)
Managers look at the following when determining where to do business: - CORRECT
ANSWER 1) The type of economic environment in terms of its state of development.
2) The economic freedom managers have to make investments and run operations.
3) The orientation of the economic system that shapes its path of development, performance,
and potential.
4) The drivers of economic change, particularly the moderators of productivity, innovation,
and competitiveness.
Describe a developed vs. developing economy. - CORRECT ANSWER 1) Developed
Economies:
• A developed economy has a robust economic environment marked by wide-ranging
activities, efficient capital movement, stable institutions, extensive infrastructure,
international trade and investments, advanced technologies, and higher economic freedom.
• Examples: the US, the UK, Japan, France, Germany (5 largest)
• economies typically champion political freedom, practice multiparty democratic
governance, enforce the rule of law, and support free markets. In turn, these anchor a stable,
productive economic environment. Residents enjoy a high standard of living, long lives,
diverse educational opportunities, adequate nutrition, broad health care, comprehensive
public hygiene, and a variety of goods and services.
,• Have skilled workers, also known as "knowledge workers" or the "creative class"
• Still have problems (i.e. the minimum wage isn't livable)
• Most developed countries outsource manufacturing jobs to developing countries (lower
cost, higher productivity)
2) Developing/Emerging Economies:
• Typically has an uneven economic environment that is marked by narrow market activities,
inefficient capital movement, resistance to foreign ownership, trade restrictions, imperfect
competition, unstable institutions, limited infrastructure, sketchy technologies, and lower
economic freedom.
• Most are agrarian (work on a farm)
• Top 5 examples: China, India, Russia, Brazil, and Indonesia.
*Economic + Political Freedom, Rule of Law/Rule of Man?
=>every economy is different, but many of these countries have found that moving towards
economic freedom has helped their growth (China is the only country that has decided not to
increase economic freedom, but rather manage it - state capitalism)
=>Political Freedom as well, with the exception of China
=>Rule of Law, typically - with the exception of
BRICS - CORRECT ANSWER • When one speaks of the emerging economies, many
point to Brazil, Russia, India, and China (referred to as the BRICs); officially, emerging
economies are developing countries, but the pace of their performance leads to distinguishing
them.
• Used to gauge the success of other developing countries; they believe where the BRICS go,
others will follow
• Aim for low-cost resources, productive labor, expanding consumption, pro-business
policies, and enterprising conglomerates power their emergence.
The base of the pyramid theory - CORRECT ANSWER =>represents 4 billion of the
poorest people in the world, but it also represents a lot of consumption.
=>the most economic prosperity can come from developing products aimed at the poor.
, Outline economic freedom - CORRECT ANSWER DEFINITION: the "absolute right
of property ownership, fully realized freedoms of movement for labor, capital, and goods, and
an absolute absence of coercion or constraint of economic liberty beyond the extent necessary
for citizens to protect and maintain liberty itself."
• Thought of as the police force that protects property rights, market regulators that ensure
fair competition, monetary authorities that monitor a sound currency, or an impartial judiciary
that enforces business contracts. Each, as an agent of the state, safeguards economic freedom.
• Hence, protecting economic freedom requires government regulation, but, ideally, only to
the degree needed to transparently protect and legitimately sustain it. Excessive regulation, by
substituting political judgment in place of individual choice, constrains entrepreneurialism
and reduces market efficiency.
• Measured by the Economic Freedom Index
o Most Free: Australia, Hong Kong, Singapore, Switzerland
o Least Free: Cuba, Venezuela, North Korea
• The fall of the Berlin wall represented ... - CORRECT ANSWER capitalism over
communism.
• State Capitalism: - CORRECT ANSWER * Political officials shape how assets are
valued and when and where they are used
* State owns "national champion" businesses
* Forces financial system to provide low-cost capital
* Trade relations (promotes exports / limits imports)
* Reduces political freedom to expand economic prosperity.
*China example: actually less economic freedom, but they control it more to drive economy
=>they'll decide what companies can produce, what they produce, etc. but will let the stores
set their own prices.
Outline the (3) types of economic systems. - CORRECT ANSWER 1)
Market/Capitalist Economies:
• Limited government intervention, extremely free
• Hong Kong, the US, Singapore, Switzerland, Australia
