Chapter 29 - Rodrigo Gamarra Flashcards
Business and the international economy
Define globalization
It is the term used to describe increases in worldwide trade and movement of people and capital between countries.
Mention reasons for globalization
- Increasing number of free trade agreements
- Cheaper and improved travel links and communications
- Countries becoming rapidly industrialised
- Improved technology
What is meant by protectionism and what is its purpose?
It refers to when governments protect domestic firms from foreign competition using trade barriers such as tariffs and quotas. Its purpose is to prevent foreign companies from making local companies be forced out of business due to competition.
Define Import quota
It is a restriction on the quantity of a product that can be imported
What is meant by import tariff?
It is a tax placed on imported goods when they arrive into the country.
Define multinational business
It is a business with factories, production or service operation in more than one country.
Outline the advantages of a business in becoming multinational
- Able to produce goods in countries with low costs
- Able to reduce transport costs
- Able to expand into different market areas
- Gain government grants
What is meant by exchange rate?
Exchange rate is the price of one currency in terms of another currency. For example $1 = 6.90 Bs.
Define depreciation in terms of exchange rate
It is when the exchange rate is worth less against the other currencies. This means that if the dollar falls from $1 = 6.90 Bs to $1 = 5 Bs it means that the currency ($) buys less than the other currency (Bs)
Define appreciation in terms of exchange rate
It is when the exchange rate is worth more against the other currencies for example if the Dollar rises from $1 = 6.90 Bs to $1 = 7 bs it means that the currency ($) buys more than the other currency (Bs)
