chapter three

Question 1

international business

Answer 1

all business activities that involve exchanges across national boundaries

Question 2

absolute advantage

Answer 2

the ability to produce a specific product more efficiently than any other nation

Question 3

comparitive advantage

Answer 3

the ability to produce a specific product more efficiently than any other product

Question 4

exporting

Answer 4

selling and shipping raw materials or products to other nations

Question 5

importing

Answer 5

purchasing raw materials or products in other nations and bringing them into one’s own country

Question 6

balance of trade

Answer 6

the total value of a nation’s exports minus the total value of its imports over some period of time

Question 7

trade deficit

Answer 7

a negative balance of trade

Question 8

balance of payments

Answer 8

the total flow of money into a country minus the total flow of money out of that country over some period of time

Question 9

licensing

Answer 9

a contractual agreement in which one firm permits another to produce and market its product and use its brand name in return for a royalty or other compensation

Question 10

letter of credit

Answer 10

a legal document issued by a bank or other financial institution guaranteeing to pay a seller a stated amount for a specified period of time

Question 11

bill of lading

Answer 11

document issued by a transport carrier to an exporter to prove that merchandise has been shipped

Question 12

draft

Answer 12

issued by the exporter’s bank,, ordering the importer’s bank to pay for the merchandise, thus guaranteeing payment once accepted by the importer’s bank

Question 13

strategic alliance

Answer 13

a partnership formed to create competitive advantage on a worldwide basis

Question 14

trading company

Answer 14

provides a link between buyers and sellers in different countries

Question 15

countertrade

Answer 15

an international barter transaction

Question 16

multinational enterprise

Answer 16

a firm that operates on a worldwide scale without ties to any specific nation or region

Question 17

import duty

Answer 17

a tax levied on a particular foreign product entering a country

Question 18

tariff

Answer 18

a tax levied on a particular foreign product entering a country

Question 19

import quota

Answer 19

a limit on the amount of a particular good that may be imported into a country during a given period of time

Question 20

International Monetary Fund

Answer 20

an international bank that makes short term loans to developing countries experiencing balance-of-payment deficits

Question 21

currency devaluation

Answer 21

the reduction of the value of a nation’s currency relative to the currencies of other countries

Question 22

economic community

Answer 22

an organization of nations formed to promote the free movement of resources and products among its members and to create common economic policies

Question 23

World Trade Organization (WTO)

Answer 23

powerful successor to GATT that incorporates trade in goods, services, and ideas

Question 24

embargo

Answer 24

a complete halt to trading with a particular nation or in a particular product

Question 25

dumping

Answer 25

exportation of large quantities of a product at a price lower than that of the same product in the home market

Question 26

General Agreement on Tariffs and Trade (GATT)

Answer 26

an international organization of nations dedicated to reducing or eliminating tariffs and other barriers to world trade

Question 27

nontariff barrier

Answer 27

a nontax measure imposed by a government to favor domestic over foreign suppliers

Question 28

multilateral development bank

Answer 28

an internationally supported bank that provides loans to developing countries to help them grow

Question 29

Export-Import Bank of the United States

Answer 29

an independent agency of the U.S. government whose function is to assist in financing the exports of American firms

Question 30

foreign-exchange control

Answer 30

a restriction on the amount of a particular foreign currency that can be purchased or sold