Please enter something

Understanding Business – chapter 3

question

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