Understanding Business – chapter 3 – Flashcards
Unlock all answers in this set
Unlock answersquestion
importing
answer
buying products from another country
question
exporting
answer
selling products to another country
question
free trade
answer
the movement of goods and services among nations without political economic barriers
question
comparative advantage theory
answer
theory that states that a country should sell to other countries those products that its produces most effectively and efficiently, and buy from other countries those products that it cannot produce as effectively or efficiently
question
absolute advantage
answer
advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries
question
balance of trade
answer
total value of nation's exports compared to its imports, measured over a particular period of time
question
trade surplus
answer
favorable balance of trade that occurs when the value of a country's exports exceeds imports
question
trade deficit
answer
unfavorable balance of trade that occurs when the value of a country's imports exceeds exports
question
balance of payments
answer
difference between money coming into a country and money leaving the country, plus money flows from other factor such as tourism, foreign aid, military expenditure, and foreign investment
question
dumping
answer
selling products in a foreign country at lower prices than those charged in the producing country
question
licensing
answer
global strategy in which a firm allows a foreign company to produce its products in exchange for a fee
question
contract manufacturing
answer
foreign country's production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing
question
joint venture
answer
partnership in which two or more companies join to undertake a major project
question
strategic alliance
answer
long-term partnership between two or more companies established to help each company build competitive market advantages
question
foreign direct investment (FDI)
answer
buying of permanent property and businesses in foreign nations
question
foreign subsidiary
answer
one company that is owned in a foreign country by another company, which is the parent company
question
multinational corporation
answer
organization that manufactures and markets products, has stock ownership, and management in many different countries
question
sovereign wealth funds (SWF)
answer
investment funds controlled by governments holding large stakes in foreign companies
question
exchange rate
answer
value of one nation's currency relative to other nations'
question
devaluation
answer
lowering the value of a nation's currency relative to other currencies
question
counter-trading
answer
complex form of bartering in which several countries may be involved, each trading goods or services for services in order to avoid financial problems and currency constraints
question
trade protectionism
answer
use of government regulations to limit the import of goods and services
question
tariff
answer
tax imposed on imports
question
import quota
answer
limit on the number of products in certain categories that a nation can import
question
embargo
answer
complete ban on the import or export of a certain product or the stopping of all trade with a particular country
question
general agreement on tariffs and trade (GATT)
answer
1948 policy establishing an international forum for negotiating mutual reductions in trade restrictions
question
world trade organization (WTO)
answer
international group that replaced GATT and was assigned the duty to mediate trade disputes among nations
question
common market
answer
trading bloc; regional group of countries that have a common external tariff, not internal tariffs, and a coordination of laws to facilitate exchange (e.g. European Union)
question
north american free trade agreement (NAFTA)
answer
policy creating a free-trade area among the US, Canada, and Mexico
