Macro And Microeconomics

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Macro and Microeconomic Concepts and Global Expansion
When a business owner is contemplating entering the global market, its imperative the have a strong knowledge of micro and macroeconomic concepts. Microeconomics is the study of supply and demand as related to individual businesses. The basic concepts of microeconomics enables business owners to determine how much of a product to produce and what to charge for it. Macroeconomics concentrates on the national economy as a whole and provides a big picture as to the mechanisms of the business world. Today I will define several macro and macroeconomic concepts and how they apply to supply and demand principles when deciding to expand a business globally. First, lets discuss the World Bank
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It is calculated using the formula GDP = C + G + I + NX where: C = consumer spending, G = government spending, I = sum of business spending on capital, NX = total net exports (exports – imports). It is regularly used as an indicator of the economic growth of a country. (Gross Domestic Product, 2014) When a company exports goods that money increases the exporting country’s GDP. When they import products it decreases the country’s GDP. If there are more exports than imports, net exports will be positive. The opposite is true if there are more imports than…show more content…
It is not a literal market in a centralized location, but a network operated via modern technology. In 2004, the daily global turnover at exchange markets reached $1.9 trillion (Frankel, J., 2008). The exchange rate is the price of foreign currency. This price fluctuates daily. This can create a potential problem depending on the market you’re dealing with. It would be wise for a company to compare costs of exchanging currency through a local bank versus a foreign bank to receive the best deal.
Labor Theory of Value The Labor Theory of Value (LTV) is a concept proposed by Adam Smith that connects labor to price. He believed that the value of goods and/or services is based on the labor used to produce it. Those that oppose this theory feel it is severely flawed and the value of goods and services should be a function of supply and demand.
Marginal Rate of Transformation Marginal Rate of Transformation (MRT) is a tool used to determine the cost of stopping production of one item to produce more of another. MRT relates to the production possibility frontier, which is the quantity of out put obtainable for a specific quantity of inputs using available technology. For example, if my company produced Toyotas and there was an overstock of Camry’s with a demand for Corolla’s, I would calculate the cost of changing production to

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