Book3 Flashcards
What is international trade?
International trade refers to the exchange of goods and services between countries, typically across international boundaries.
How does international trade differ from domestic trade?
Domestic trade occurs within a country, while international trade involves transactions between two or more countries.
What are the key components of international trade?
The key components include the exchange of goods, services, and factors of production (like labor and capital) across national borders.
How is international business defined?
International business includes all commercial transactions (sales, investments, logistics, etc.) that take place between two or more countries, often for profit or political reasons.
What are some examples of international business activities?
Examples include cross-border trade of goods, services, and resources like capital, skills, and labor.
Why do countries engage in international trade?
Countries trade due to differences in natural resources, climate, human resources, production techniques, foreign exchange needs, and consumer tastes.
How do differences in natural resources influence international trade?
Countries with abundant resources (e.g., oil, minerals) export them to countries that lack these resources, creating a basis for trade.
What role does climate play in international trade?
Climate affects agricultural production, leading countries to trade crops they cannot grow domestically (e.g., wheat in the U.S., rice in Thailand).
What are the similarities between domestic and international trade?
Both involve the production, buying, and selling of goods and services, and both use currency for transactions.
What are the key differences between domestic and international trade?
International trade involves imports/exports, occurs across borders, uses different currencies, and is typically more costly due to tariffs, delays, and cultural differences.
What are the benefits of international trade?
Benefits include economic growth, job creation, foreign exchange earnings, market expansion, and fostering global economic and political relationships.
How does international trade encourage specialization?
Countries focus on producing goods they are most efficient at, leading to increased productivity and economic welfare.
What is protectionism in international trade?
Protectionism refers to government policies that restrict international trade, such as tariffs and quotas, to protect domestic industries.
What are the main goals of protectionism?
The goals include achieving national security, supporting infant industries, and preventing dumping (selling goods below cost to drive competitors out of business).
What is a tariff?
A tariff is a tax imposed on imported goods when they cross a country’s border, often used to protect domestic industries.
What is a non-tariff barrier?
Non-tariff barriers include quotas, import licensing, and outright bans, which restrict trade without using tariffs.
What are some risks companies face in international trade?
Risks include political instability, regulatory changes, exchange rate fluctuations, commercial risks (e.g., non-payment), and natural disasters.
What is exchange rate risk?
Exchange rate risk refers to the potential loss due to unfavorable movements in currency exchange rates, affecting the value of international transactions.
How can companies protect against risks in international trade?
Companies can use methods like hedging (e.g., forward contracts), insurance, matching receipts with payments, and borrowing in the currency of eventual receipts.
