Chapter 3 Global Markets

Question 1

Importing

Answer 1

Buying products from another country.

Question 2

Exporting

Answer 2

Selling products to another country.

Question 3

Free Trade

Answer 3

The movement of goods and services among nations withoout political or economic barriers.

Question 4

Comparative Advantage Theory

Answer 4

Theory that states that a country should sell to other countries those products that it produces most effectively and effciently, and buy from other countries those products that it cannot produce as effectively or effciently.

Question 5

Absolute Advantage

Answer 5

The advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more effectively than all other countries.

Question 6

Balance of Trade

Answer 6

The total of a nation’s exports compared to it’s imports measured over a paticular period.

Question 7

Trade Surplus

Answer 7

A favorable balance of trade; occurs when the value of a country’s exports exceeds that of it’s imports.

Question 8

Trade Deficit

Answer 8

An unfavorable balance of tade; occurs when the value of a country’s imports exceeds that of it’s exports.

Question 9

Balance of Payments

Answer 9

The difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment.

Question 10

Dumping

Answer 10

Selling products in a foreign country at lower prices than those charged in the producing country.

Question 11

Licensing

Answer 11

A global stratagy in which a firm (the licensor) allows a foreign company (the Licensee) to produce its product in exchange for a fee (a royalty).

Question 12

Contract Manufacturing

Answer 12

A foreign country’s production of private-label goods to which a domestic company then attaches its company name or trademark; part of the broad catagory of outsourcing.

Question 13

Joint Venture

Answer 13

A partnership in which two or more companies (often from different countries) join to undertake a major project.

Question 14

Stategic Alliance

Answer 14

A long-term partnership between two or more companies established to help each company build competetive market advantages.

Question 15

Foreign Direct Investment (FDI)

Answer 15

The buying of perminent property and businesses in foreign nations.

Question 16

Foreign Subsidiary

Answer 16

A company owned in a foreign country by another company, called the parent company.

Question 17

Multinational Corporation

Answer 17

An Organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management.

Question 18

Sovereign Wealth Funds (SWFs)

Answer 18

Investment funds controlled by governments holding large sakes in foreign companies.

Question 19

Exchange Rate

Answer 19

the value of one nation’s currency relative to the currencies of other countries.

Question 20

Devaluation

Answer 20

Lowering the value of a nation’s currency relative to other countries.

Question 21

Countertrading

Answer 21

A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.

Question 22

Trade Protectionism

Answer 22

The use of government regulations to limit the import of goods and services.

Question 23

Tariff

Answer 23

A tax imposed on imports

Question 24

Import Quota

Answer 24

A limit on the number of products in certain catagories that a nation can import.

Question 25

Embargo

Answer 25

A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.

Question 26

General Agreement on Tariffs and Trade (GATT)

Answer 26

A 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions.

Question 27

World Trade Organization (WTO)

Answer 27

The international organization that replaced the General Agreement on Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations.

Question 28

Common Market

Answer 28

A regional group of countries that have a common external tariff, no interal tariffs, and a coordination of laws to facilitate exchange; also called BLOC. An example is the European Union.

Question 29

North American Free Trade Agreement (NAFTA)

Answer 29

Agreement that created a free-trade area among the United States, Canada, and Mexico.