Chapter 3 Flashcards
Importing
Buying products from another country
Exporting
Selling products from another country
Free Trade
The movement of goods and services among nations without political or economic barriers
Comparative Advantage Theory
A country should sell to other countries those products it produces most effectively and efficiently. It should also buy from other countries the products that it cannot produce effectively.
Absolute Advantage
When a country can produce a specific product more efficiently than all other countries.
Balance of trade
The total value of a nations exports compared to its imports measured over a particular period.
Trade Surplus
Occurs when the value of a country’s exports exceeds that of its imports
Trade Deficit
When the value of a country’s exports is less than that of its imports.
Balance of payments
The Difference between money coming into a country anf money leaving the country plus money flows from other factors such as tourism, foreign aid, military expenditures and foreign investment.
Dumping
Selling products in a foreign country at lower pirces than those charged in the producing country
Licensing
A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee.
Franchising
A contractual agreement whereby someone with a good idea for a business sells others the right to use the business name and sell a product or service in a given territory in a specified manner.
Contract Manufacturing
A foreign company produces private label goods to which a domestic company then attaches its own brand name or trademark.
Joint Venture
A partnership where two or more companies join to undertake a major project
Strategic allianmce
A long-term partnership between two or more companies established to help each company build competitive market advantages.
Foreign Direct invenstement
The buying of permanent property and businesses in foreign natinos.
Foreign subsidiary
A copmpany owned in a foreign country by another company, called the parent company.
Multinatinoal Corporation
One that manufactures and markets products in many different countries and has multinational stock ownership and management.
Sovereign Wealth Funds
Investment fuinds controlled by governements holding large stakes in foreign companies, real estate and other investments
Exchange Rate
The Value of one nation’s currency relative to the currencies of other countries
Devaluation
Lowers the value of a nation’s currency relative to other currencies.
Countertrading
A complex form of bartering in which several countries each trade goods or services for other goods or services.
Trade Protectionism
The Use of government regluations to limit the import of goods and services.
Tariffs
Taxes on imports
