99 TERMINOLOGIES Flashcards
is a national accounting system that records all receipts coming into the nation and all payments to entities in other countries.
balance of payments
is a national account that records transactions involving the purchase and sale of assets.
capital account
is a national account that records transactions involving the export and import of goods and services, income receipts on assets abroad, and income payments on foreign assets inside the country
current account
occurs when a country imports more goods and services and pays more abroad than it exports and receives from abroad.
current account deficit
occurs when a country exports more goods and services and receives more income from abroad than it imports and pays abroad.
current account surplus
states that firms undertake FDI when the features of a particular location combine with ownership and internalization advantages to make a location appealing for investment.
eclectic theory
the purchase of physical assets or a significant amount of the ownership of a company in another country to gain a measure of management control
foreign direct investment
Purchase of land in another country and construction of new facilities or an entire subsidiary from the ground up.
greenfield investment
Theory stating that a company begins by exporting its product and later undertakes foreign direct investment as the product moves through its life cycle.
international product life cycle
Theory stating that when an imperfection in the market makes a transaction less efficient than it could be, a company will undertake foreign direct investment to internalize the transaction and thereby remove the imperfection
market imperfection
Theory stating that a firm tries to establish a dominant market presence in an industry by undertaking foreign direct investment
market power
Investment that does not involve obtaining management control in a company
portfolio investment
System of production in which each of a product’s components is produced where the cost of producing that component is lowest.
rationalized production
Extension of company activities into stages of production that provide a firm’s inputs (backward integration) or that absorb its output (forward integration).
vertical integration
Economic integration by which countries remove all barriers to trade and to the movement of labor and capital among themselves and set a common trade policy against nonmembers.
common market
Economic integration by which countries remove all barriers to trade among themselves and set a common trade policy against nonmembers.
customs union
Economic integration by which countries remove barriers to trade and the movement of labor and capital among members, set a common trade policy against nonmembers, and coordinate their economic policies.
economic union
European Union plan that established its own central bank and currency
european monetary union
Economic integration by which countries remove all barriers to trade among themselves but where each country determines its own barriers against nonmembers.
free trade area
Economic and political integration by which countries coordinate aspects of their economic and political systems.
political union
Process by which countries in a geographic region cooperate to reduce or eliminate barriers to the international flow of products, people, or capital.
regional economic integration (regionalism)
Increase in the level of trade between nations that results from regional economic integration.
trade creation
Diversion of trade away from nations not belonging to a trading bloc and toward member nations.
trade diversion
System that allocates financial resources in the form of debt and equity according to their most efficient uses.
capital market
Process of aggregating the currencies that one bank owes another and then carrying out the transaction.
Clearing
Currency that trades freely in the foreign exchange market, with its price determined by the forces of supply and demand.
convertible currency
Practice of selling goods or services that are paid for, in whole or in part, with other goods or services.
counter trade
Instantaneous purchase and sale of a currency in different markets for profit.
currency arbitrage
Practice of insuring against potential losses that result from adverse changes in exchange rates.
currency hedging
Right, or option, to exchange a specified amount of a currency on a specified date at a specified rate
currency option
Purchase or sale of a currency with the expectation that its value will change and generate a profit.
currency speculation
Simultaneous purchase and sale of a currency for two different dates.
currency swap
Risk that an exchange rate change will affect a company’s longerterm earnings potential from international operations.
economic exposure
Bond issued outside the country in whose currency it is denominated.
Eurobond
Market consisting of all the world’s currencies that are banked outside their countries of origin
eurocurrency market
Rate at which one currency is exchanged for another.
exchange rate
Potential for adverse changes in exchange rates that could harm a business.
exchange rate risk
Bond sold outside the borrower’s country and denominated in the currency of the country in which it is sold.
foreign bond
Market in which currencies are bought and sold and their prices are determined.
foreign exchange market
