Understanding Business–10th Edition–Chapter 3

Flashcard maker : Lily Taylor
buying products from oanoter country
selling products to another country
free trade
the movement of goods and services amon ations without political or economic barriers
comparative advantage theory
theory that states that a country should sell to tother countries those products that it produces most effectviely and efficiently and buy from other countries those products that it cannot produce as effectively/efficiently
absolute advantage
the advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more effciently than all other countries
balance of trade
the total value of a nation’s exports compared to its imports measured over a particular period
trade surplus
a favorable balance of trade, occurs when teh value of a country’s exports that of its imports
trade deficit
an unfavorable balance of trade, occurs when the value of a country’s imports exceeds that of its exports
balance of payments
difference between money coming into a country (from exports) and money leaving the country (from imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment
selling products in a foregin country at lower prices than those charged in the producing country
a global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (royalty)
contract manufacturing
foreign country’s production of a private label goods to which a domestic company then attaches its brand name or trademark, part of the broad category of outsourcing
joint venture
a partnership in which two or more companies (often from different countries) join to undertake a major project
strategic alliance
long term partnership between two or more companies established to help each company build competitive market advantages
foreign direct investment (FDI)
buying of permanent property and businesses in foreign nations
foreign subsidiary
company owned in a foreign country by another company, called the parent company
multinational corportation
an organization that manufactures and markets products in many countries and has multinational stock ownership and multinational management
sovereign wealth funds (SWFs)
investment funds controlled by governments holding large stakes in foreign companies
exchange rate
value of one nation’s currency relative to the currencies of other countries
lowering the value of a nation’s currency relative to other currencies
a complex form of bartering in which several countries may be involved, each trading goods for goods or services for services
trade protectionism
the use of government regulations to limit the import of goods and services
a tax imposed on imports
import quota
a limit on the number of products in certain categories taht a nation can import
a complete ban on the import or export of a certain product, or stopping of all trade with a particular country
General agreement on tariffs and trade (GATT)
1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions
World trade organization (WTO)
international organization that replaced the GATT and was assigned te duty to mediate trade disputes among nations
common market
regional group of countries that have common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange, also called a trading bloc. (European Union)
North American free trade agreement (NAFTA)
agreement that created free trade area among US, Canada, and Mexico

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